IKEA Netherlands
‘Anytime, anywhere, anyhow’
Author: H.C. Bouius Student number: 1284886 Groningen, August 2003 University of Groningen
Faculty Management and Organisation First supervisor: Drs. J.H. van Uitert
Second supervisor: Drs. T.L.J. Broekhuizen IKEA BV Nederland
Supervisor: Ir. P. van der Poel
The author is responsible for the contents of this thesis, copyrights are with the author
EXECUTIVE SUMMARY
Today, we are witnessing a revolution in commerce and society primarily due to an explosion in information technology and the resulting rapid emergence of electronic commerce (e- commerce). E-commerce has changed technology-based businesses and has greatly affected traditional businesses in the way they manage their suppliers, customers and internal
operations. To stay competitive and to meet consumer needs, IKEA Sweden initiated e- commerce as a pilot project in Scandinavia in the year 2000. Based on this pilot project, IKEA Sweden developed guidelines and recommendations for the other IKEA countries.
IKEA Netherlands is planning to introduce e-commerce on the Dutch market over the next years. However, as Dutch online consumer characteristics, including their product preferences might be different from that of other countries, and IKEA Netherlands has to deal with a limited logistical capacity, it is questioned whether IKEA can adopt IKEA’s worldwide e- commerce strategy, or adaptations have to be made.
For this reason, the aim of this research is: “ To advise IKEA Netherlands on the implementation of their future e-commerce strategy. It provides recommendations whether the worldwide IKEA e-commerce strategy can be adopted or adaptations have to be made”.
In this research, not all aspects related to e-commerce strategy are analysed. The focus in this research lies on the following aspects: online consumer characteristics, motivations and product preferences. It is assumed that differences between IKEA consumers in the Netherlands and in Sweden, regarding these aspects will influence the degree of adopting IKEA’s worldwide e-commerce strategy in the Netherlands. In case there are differences between IKEA consumers regarding these aspects, IKEA Netherlands should adapt IKEA’s worldwide e-commerce strategy, particularly in the field of marketing. To examine the above mentioned aspects, both secondary data and primary data were used.
Based on the research’s background, the following research question was formulated:
‘To which degree can IKEA Netherlands adopt IKEA’s worldwide e-commerce strategy when implementing its e-commerce strategy on the Dutch market?’
Secondary data were used to describe IKEA’s worldwide e-commerce strategy and to analyse online consumer characteristics of IKEA consumers in Sweden. To collect primary data on the Dutch market, a survey was carried out among 249 IKEA consumers, by the use of a questionnaire. A sample at random was pulled, of which two/third of all respondents appeared to be females. However, as two/third of IKEA visitors are females as well, it can be noticed that a representative sample was pulled of the total group of IKEA consumers. The research results from the questionnaire were processed with the statistical computer program SPSS.
Based on the research results, the following conclusions are made: (1) IKEA introduced a quite ambitious Internet strategy, namely ‘expansion of their existing business’, which requires many investments in the field of company processes and systems. However, for the time being, e-commerce has only contributed to a very small share (less than 0.41%) of total
Executive summary store sales. This means that IKEA’s e-commerce strategy is still in an experimental phase, and many problems still have to be overcome. (2) IKEA developed e-commerce objectives,
however it is unclear by which tools IKEA wants to achieve these objectives. It appears that the worldwide quantitative objective of a 25% e-commerce share of total home shopping sales can’t be adopted on the Dutch market, as IKEA Netherlands does not offer other home
shopping channels. (3) With regard to IKEA’s worldwide qualitative objectives, it appears that IKEA is still working on achieving these objectives. For this reason, it is concluded that IKEA Netherlands can adopt these qualitative objectives, however on the condition that their website excels in the field of user friendliness, product presentation and purchasing security.
(4) Online consumer characteristics between Dutch IKEA consumers and Swedish IKEA consumers differ. In Sweden, it are mainly women, between 26 and 45 years old, with
children and a job, who have to travel half an hour or more to visit an IKEA store, who make use of online shopping. On the contrary, research results among Dutch IKEA consumers show that it are mainly men, who have experience with online buying, and/or have visited IKEA’s website, who are likely to buy online. The variables ‘geographical distance’, ‘age’, ‘children’
and ‘job’ do not have influence on online shopping in the Netherlands. (5) Motivations to shop online do not differ among Dutch IKEA consumers and Swedish IKEA consumers. The most important reasons for consumers to shop online is that: ‘it saves time’ and ‘it is
convenient’. Moreover, the most important reason among IKEA consumers for not shopping online is the inability to see and test the products. (6) IKEA consumers in both Sweden and the Netherlands prefer to buy ‘satellite’ products online such as accessories, lighting, filing systems and textiles. For this reason, it is concluded to adapt the worldwide product range objective of 90% furniture and 10% ‘satellite’ products, into an objective of 80% furniture and 20% satellite products at the start of e-commerce.
Based on the above results, it is concluded that IKEA Netherlands should not adopt IKEA’s worldwide e-commerce strategy, but instead develops a new e-commerce strategy, based on Dutch consumer needs. This conclusion is made as IKEA’s worldwide e-commerce strategy is still in an experimental phase, and many improvements have to be made, before the e-
commerce objectives are achieved. The most important recommendations are: (1) Reconsider whether e-commerce will be profitable at IKEA Netherlands, based on an internal and
external analysis of IKEA Netherlands, in the field of e-commerce. In case, IKEA wants to introduce e-commerce on the Dutch market, it is recommended to set an e-commerce objective between approximately 0.3% and 0.5% of total store sales, within two years from start. (2) In the Netherlands, IKEA should communicate their e-commerce activities in the first place to men, as men are more likely to buy products online than women. Moreover, IKEA Netherlands should focus on consumers who visit IKEA’s website and/or consumers who have experience with online buying. Particularly those consumers will be interested in online buying at IKEA’s website. (3) Adapt the worldwide product range objective to an objective of 80% furniture and 20% ‘satellite’ products, with the emphasis on accessories, textiles, filing systems and lighting.
PREFACE
In front of you, the research report ‘IKEA Netherlands, ‘anywhere, anytime, anyhow’ can be found. During the final phase of my study ‘Management and Organisation’ at the University of Groningen, I conducted a research project for IKEA Netherlands. This research report contains the results of my research.
The last seven months have been a real challenge for me, in which I learned several valuable lessons. Not only have I learned to think more structured and more analytical, I also learned how to conduct a research in practice. Moreover, I learned to work with the statistical program SPSS, and how to write a scientific research report. Today, I feel satisfied about having completed this research project, and hopefully it will contribute to IKEA’s success on the Internet.
Hereby, I would like to thank several people who supported me during this research. First of all, I would like to thank Peter van der Poel of IKEA Netherlands, for giving me the
opportunity to complete a research project for one of world’s largest furniture retailers.
Besides, I would like to thank him for his support on content as well as process related issues.
I would also like to thank both my supervisors at the University of Groningen, Hans van Uitert and Thijs Broekhuizen for their comments and suggestions. Hans van Uitert particularly assisted me in the field of research design and research methodology. His suggestions regarding the structure and lay-out of this research report were very useful.
Thijs Broekhuizen particularly advised me, in the field of the used theories in this research.
Besides, I would like to thank him for getting the opportunity to apply his conceptual model in practice, which appeared to be very useful in this research.
Moreover, I would like to thank my family, in particular my father for his assistance. Finally, I would like to thank my friends for their moral support and ‘last but not least’ my beloved Derk Jan, for listening to all my research ‘adventures’.
Henny Bouius 17 August 2003
TABLE OF CONTENTS
EXECUTIVE SUMMARY PREFACE
1. INTRODUCTION... 7
§1.1 INTRODUCTION IKEA... 7
§1.2 BACKGROUND TO THE RESEARCH... 8
§1.2.1 Home shopping at IKEA ... 8
§1.2.2 Evaluation Home Shopping ... 9
§1.2.3 IKEA’s multi-channel strategy... 9
§1.2.4 IKEA’ e-commerce strategy... 10
§1.2.5 Evaluation e-commerce strategy... 14
§1.2.6 E-commerce at IKEA Netherlands ... 15
§1.3 OUTLINE OF THE REPORT... 16
2. RESEARCH DESIGN ... 17
§2.1 PROBLEM STATEMENT... 17
§2.2 SUB QUESTIONS... 18
§2.3 ROLE SUB QUESTIONS... 18
§2.4 FOCUS OF RESEARCH... 19
§2.5 METHODOLOGY... 20
§2.5.1 Research characteristics... 20
§2.5.2 Method of data collection ... 21
§2.6 CONCEPTUAL MODEL ‘MOTIVATIONS’ ... 21
3. DESIGN OF QUESTIONNAIRE ... 24
§3.1 TRANSLATION RESEARCH QUESTION(S) ... 24
§3.2 CONSTRUCTION QUESTION LIST... 28
§3.3 PRE-TEST OF A SURVEY... 28
§3.4 SAMPLE PROCESS... 29
§3.5 ANALYTICAL METHOD... 30
4. CHARACTERISTICS OF ONLINE CONSUMERS... 33
§4.1 GEOGRAPHICAL CHARACTERISTICS... 33
§4.1.1 Internet access ... 33
§4.1.2 Geographical distance... 34
§4.1.3. Climate ... 34
§4.2 DEMOGRAPHICAL CHARACTERISTICS... 35
§4.2.1 Gender... 35
§4.2.2 Other variables ... 35
§4.3 LIFESTYLE CHARACTERISTICS... 36
§4.4 BEHAVIOURAL CHARACTERISTICS... 36
5. CONSUMER’S EVALUATION OF A CHANNEL ... 37
§5.1 EASE OF USE... 37
§5.2 AVAILABILITY AND CONTENT OF INFORMATION... 38
§5.3 CONSUMER CONTROL... 38
§5.4 PERCEIVED ENJOYMENT... 38
§5.5 TRUST... 39
§5.6 PERCEIVED RISK... 40
§5.6.1 Monetary risk... 40
§5.6.2 Product risk ... 41
6. ONLINE PRODUCT PREFERENCES... 42
§6.1 NATURE OF PRODUCTS... 42
§6.2 FAMILIARITY AND CONFIDENCE... 42
§6.3 ONLINE PRODUCT RANGE IKEA... 43
7. RESULTS... 45
§7.1 RESPONSE... 45
§7.2 GENERAL CHARACTERISTICS... 45
§7.3 INTERNET RELATED CHARACTERISTICS... 48
§7.4 FACTORS TO CHOOSE FOR A PARTICULAR CHANNEL... 51
§7.5 RESULTS WITH REGARD TO NEXT PURCHASE... 59
§7.6 REGRESSION ANALYSIS CONCEPTUAL MODEL... 66
§7.6.1 Efficiency ... 66
§7.6.2 Efficiency and perceived enjoyment ... 67
§7.6.3 Outcome quality ... 68
§7.7 CONCLUSION RESULTS... 69
8. CONCLUSION ... 70
§ 8.1 ANSWERS TO RESEARCH SUB QUESTIONS... 70
§ 8.2 ANSWER TO RESEARCH MAIN QUESTION... 73
§ 8.3 RECOMMENDATIONS... 75
§ 8.4 EVALUATION RESEARCH... 76
BIBLIOGRAFY... 78 APPENDIX 1 IKEA’S HOME SHOPPING STRATEGY... ERROR! BOOKMARK NOT DEFINED.
APPENDIX 2: QUESTIONNAIRE... ERROR! BOOKMARK NOT DEFINED.
APPENDIX 3: ANSWERS TO OPEN QUESTIONS IN QUESTIONNAIRE .. ERROR! BOOKMARK NOT DEFINED.
APPENDIX 4: OVERVIEW SIGNIFICANCE BETWEEN VARIABLES... ERROR! BOOKMARK NOT DEFINED.
APPENDIX 5: SPSS RESULTS: GENERAL CHARACTERISTICS ... ERROR! BOOKMARK NOT DEFINED.
APPENDIX 6: SPPS RESULTS: MOTIVATIONS TO ENGAGE IN A PARTICULAR CHANNEL ... ERROR! BOOKMARK NOT DEFINED.
APPENDIX 7: SPSS RESULTS: NEXT PURCHASE... ERROR! BOOKMARK NOT DEFINED.
APPENDIX 8: SPPS RESULTS: REGRESSION ANALYSIS... ERROR! BOOKMARK NOT DEFINED.
1. INTRODUCTION
‘People’s lives are getting busier. People demand higher levels of service, quality and
stimulation. Alternative ways of shopping and buying are available, such as e-commerce, mail order and 24-hour phone service (IKEA Intranet).
§1.1 Introduction IKEA
IKEA was founded by Ingvar Kamprad in Sweden. The name ‘IKEA’ is derived from the founder’s initials (I.K.) plus the first letters of Elmtaryd and Agunnaryd, the farm and village where he grew up. From the start in 1954 up to now, IKEA has expanded its retail activities into 175 outlets employing 75 500 co-workers in 31 different countries (www.ikea.com).
Over the year 2002 a total of 286 million people visited the IKEA stores around the world, which means that the number of visitors has almost tripled within the last decade. With annual sales worldwide of 11.997 billion Euro (2002), IKEA is world’s largest furniture retailer.
The IKEA business idea1can be best explained by the words of its founder Ingvar Kamprad.
IKEA seeks to provide customers with ‘affordable solutions for better living’. Young buyers desiring style at a low cost make up IKEA’s market segment (Björk, 1998: p.39). For these customers, the firm offers home furnishings that combine good design, function and quality with low prices. Although a cost leader, IKEA offers some features that appeal to customers in addition to product’s low prices. Among these features are in-store childcare and extended hours. These services, it is argued ‘are uniquely aligned with the needs of IKEA’s customers, who are young, are not wealthy, are likely to have children (but no nanny), and, because they work for a living, have a need to shop at odd hours (Björk, 1998: p.42).
The IKEA stores are located near major inroads into town, where land is relatively cheap and sufficient parking place is available. Instant delivery and take away service have become the driving forces behind the success of IKEA. Furthermore, IKEA home furnishing items are well recognised for their original, Scandinavian, design, which attract a large group of customers, especially young people. The clear focus on modern design furniture has given IKEA products a strong branding in the market. Nowadays, the IKEA label serves as a trade mark which enables the furniture retailer to distinguish itself from their competitors. Although the catalogue is an important vehicle for the offering of product information, the IKEA store is a channel that plays a central role in the actual purchase, transaction and delivery of goods.
The typical IKEA store is designed to attract and entertain large amounts of customers. In the average IKEA store a restaurant and a kindergarten can be found (Björk, 1998: p.65). Besides the consumer market IKEA operates in the business market with a special business catalogue.
1 IKEA’s business idea: "We shall offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them" (www.ikea.com).
Chapter 1: Introduction
§1.2 Background to the research
In the next paragraphs, the background to this research becomes clear. First of all, in §1.2.1 the Home Shopping strategy of IKEA is described, followed by an evaluation of this strategy in §1.2.2. In the next paragraph, a description of IKEA’s multi-channel strategy is given, followed by an analysis of IKEA’s worldwide e-commerce strategy in §1.2.4. In the next paragraph, IKEA’s worldwide e-commerce strategy is evaluated. Finally, in §1.2.6, the introduction of an e-commerce strategy at IKEA Netherlands is discussed.
§1.2.1 Home shopping at IKEA
IKEA began life as a mail order company. Between 1943 and 1958, mail order was the only way of shopping at IKEA. The first store opened in Sweden in 1958 and since then, IKEA has focused on their store operations-a strategy that has been highly successful (IKEA Intranet).
However, due to changes in society, influencing consumer behaviour, IKEA’s Group Management in Sweden decided to start a two-year2 pilot project, called ‘IKEA Home
Shopping’, to reactivate its mail order operations in Scandinavia. Home Shopping is a concept used at IKEA to indicate shopping from home, through mail order3, telephone ordering or e- commerce. The main objective of the IKEA pilot project Home Shopping was to develop guidelines and recommendations for the other countries, with regard to Home Shopping.
Taking IKEA’s Home Shopping pilot project as a guideline, each country should be able to decide if and when they want to implement Home Shopping (IKEA Pilot Project: 2002).
Home Shopping product range
With regard to IKEA’s Home Shopping product range, IKEA does not have an overall strategy on which products should be made available for Home Shopping. It has also been unclear who is responsible for deciding whether or not a product is suitable for Home Shopping. For this reason, an ‘anything goes’ mentality has prevailed at IKEA Sweden. All products can be ordered remotely at IKEA, with IKEA sending products to customers without knowing if these are ‘clean and intact’ when they arrive at the customer’s door.
Today, IKEA Home Shopping product range is divided into: 90% furniture4 and 10%
satellite5 articles. In contrast, in Scandinavia and Germany, competitors show the complete opposite product range. Satellite ranges, in particular textiles6, dominate the home shopping furnishing market in these countries (IKEA Pilot Project: 2002).
Quantitative objectives with regard to the product range mix from the start of Home Shopping can be noticed in table 1.1.
Product range Start Short term (2 years) Long term (5 years)
Furniture 90% 80% 60%
Satellite 10% 20% 40%
Table 1.1: IKEA’s home shopping product range.
2 Starting September 2000, ending September 2002
3 Mail order is a type of remote selling, by which consumers send or fax an order form, from the catalogue to order their desired products (IKEA Intranet).
4 Furniture: With furniture is meant all ‘showroom products’, ranging from kitchens to sofa’s.
5 Satellite articles are furnishing accessories such as accessories, textiles and lighting. IKEA also calls these products ‘market place’ products.
6 Textiles are articles such as curtains, carpets and bed linen.
Chapter 1: Introduction
Within five years from the start of Home Shopping, the product range mix should be similar to that of the IKEA stores (60% furniture, 40% satellite products).
§1.2.2 Evaluation Home Shopping
In appendix 1, the objectives with regard to ‘Home Shopping’ formulated in September 2001, can be found. Looking at recently published sales figures7, it appears that no country has achieved the objective that home shopping turnover should make up for 5% of total store sales, after two years from the start. It appears that worldwide, home shopping only makes up for 0.41% of total store sales. This means that a 5% Home Shopping share of total store sales is a too optimistic and unrealistic objective to be achieved within two years. Moreover, it appears that worldwide ‘Home Shopping’ sales, has declined by 16.2% over the last half year.
However, worldwide e-commerce sales has increased by 99.8% over the last half year8. This could mean that e-commerce sales has ‘cannibalised’ sales of the other two Home Shopping channels: telephone and catalogue. From the above can be concluded that home shopping does not grow so positively, as IKEA expected three years ago, as it only contributes to a very small share of total store sales. Apparently, consumers still prefer shopping the IKEA store, instead of buying products from home. However, e-commerce sales has started to increase rapidly.
§1.2.3 IKEA’s multi-channel strategy
The Internet makes part of IKEA’s multi-channel strategy9, in which the Internet is a
complement to IKEA’s other channels; the store, call-centre, and catalogue. IKEA mentions that the store should always remain IKEA’s core business, which is the fundament of their success. The other channels should support the store as the main sales channel (IKEA Intranet). On the next page, a model of a ‘multi-channel approach’ can be noticed. The red- made line between consumers and the Internet in figure 1.1 indicates the focus of this research, namely the sales of products, through the Internet channel, which is called e- commerce (see §1.2.4).
7 Financial figures September 2002 till May 2003.
8 September 2002 till May 2003.
9 Multi channelling: Selling of products through more than one distribution channel in the retail industry. A new combination of distribution channels is that of the traditional store channel and the Internet. (Hoofdbedrijfschap Detail Handel, 2002).
Chapter 1: Introduction
CONSUMERS
Figure 1.1: Multi-Channel Approach10 Source: Boddy and Boonstra (2000: p.184).
A multi-channel strategy means that IKEA customers can choose a particular channel to fulfil their information- or buying needs. An advantage of a multi-channel strategy is that existing (traditional) customers can become used to the new medium gradually, while the company hopes to attract new customers (Boddy and Boonstra, 2000: p.184). Moreover, it allows traditional companies to experiment and learn in order to come up with a balanced mix.
However, a possible disadvantage is that Web businesses have a tendency to cannibalise their company’s existing business (Hitt, 2001: p.142). On the contrary, Porter (2001: p.73), argues that the risk that the Internet would replace all conventional ways of doing business is far overstated. According to Porter (2001: p.64), many of the companies that succeed will be ones that use the Internet as a complement to traditional ways of competing, not those that set their Internet initiatives apart from their established operations. At IKEA, the Internet is a
complementary channel to the IKEA store that facilitates the consumer’s actual purchase.
§1.2.4 IKEA’ e-commerce strategy
E-commerce can be defined as: the process of selling or buying products or services over the Internet- commonly referred to as ‘Business to Customer’ applications (Boddy and Boonstra, 2000: p.84). This definition of e-commerce is used, as the focus of this research will be on the actual ordering and purchase of products by IKEA consumers on the Internet, although IKEA’s website can also play an important role during the pre-sales and post-sales phases of the buying process.
In management literature, there are strongly different opinions on what ‘strategy’ actually is.
However, to remain simplicity and clarity in this context, the definition of strategy of Hitt (2001: p.144) is used, with regard to e-commerce. An e-commerce strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage (Hitt, 2001: p.144) by the process of selling products on the Internet. However, the definitions of e-business strategy and Internet strategy are also often mentioned in literature, instead of the term e-commerce strategy. For this reason, also the term
‘Internet strategy’ is used in this research. To analyse IKEA’s e-commerce strategy, first of all
10 In case of IKEA, also the catalogue should be added as a sales channel as orders can also be made through means of sending in a voucher from the catalogue, which is called mail order.
FRONT OFFICE
Internet Call-centre Physical location
BACK OFFICE
Chapter 1: Introduction the overall objectives are described. Secondly, the Internet strategy of IKEA is characterised, followed by the type of services that IKEA offers to its online consumers, in order to achieve their e-commerce objectives. By describing these aspects, it should become clear which goals IKEA wants to achieve with the implementation of e-commerce, which Internet strategy IKEA maintains to achieve their e-commerce objectives, and what role the Internet fulfils to its consumers.
Strategy-implementation
According to Tiggelaar, 1999: p.250), management should develop the following four stages, with regard to the development and implementation of an Internet strategy:
1. Development of mission and vision 2. Strategic analysis
3. Strategic choice
4. Strategy-implementation
However, due to a lack of information, it appears that IKEA Sweden implemented e-
commerce, without having developed a mission-and vision. Moreover, it is not clear whether IKEA has made an internal analysis of their strengths and weaknesses, and an external analysis of the opportunities and threats in their environment, before implementing e-
commerce. This means that it is not clear what IKEA´s long term ambition is in the field of e- commerce.
E-commerce objectives
Although it is unclear what IKEA’s mission and vision is in the field of e-commerce, IKEA has developed the following e-commerce objectives:
• To create the opportunity for customers, who like IKEA- but due to different reasons (distance to store, lack of time, other interests) do not visit the IKEA store- to be able to shop at IKEA in a simple manner.
IKEA perceives the Internet as the biggest, most important and cheapest channel for the future. It appears that IKEA perceives the Internet a cost-effective alternative, as one internet order only costs a tenth of what an order by phone costs (IKEA Pilot Project: 2002). For this reason, IKEA developed the following objective:
• To offer the most cost-effective way for ‘the many people’ to shop from home.
IKEA has set the following quantitative goals for each country:
• To increase our market share both within and outside our trading area.
• To generate a 25% e-commerce share of total turnover of IKEA Home Shopping within two years from the start.
Moreover, e-commerce should make shopping easier for customers, provide customers greater accessibility to IKEA, and should function as a highly efficient sales tool.
These objectives can be summarized in IKEA’s qualitative goals;
• To make IKEA more accessible.
• To offer a wider/deeper range of information to customers in order to simplify their decision to buy.
• To make a purchase simpler, quicker and more secure.
Chapter 1: Introduction However, today appears that there are still many issues to be improved on. Although there is a global IKEA website, and consumers in 22 countries have access to a local website, it appears that there are particularly problems in the field of the ‘ease of use’ of the IKEA website (see
§ 5.1). Moreover, IKEA made an evaluation of their e-commerce experiences, and will strive to improve in many fields related to e-commerce (see appendix 1).
Type of e-commerce strategy
It appears that IKEA implemented e-commerce for the following reason. Consumers already used the IKEA website to gather information, however expected to be able to actually purchase IKEA products on the Internet. To stay competitive and not to loose consumers, IKEA introduced e-commerce on the Swedish market in July 2000. Moreover, IKEA hopes to attract new customer groups by introducing the Internet as a sales channel. It appears that only 0.5 per cent of 60.000 website visitors weekly, actually make a purchase on IKEA’s website.
For this reason, converting more website visitors to buyers is still one of IKEA’s biggest challenges (IKEA Pilot Project: 2002). Today, IKEA head offices in the following nine countries have implemented e-commerce on their local markets: Denmark, Sweden, Finland, the United States, Canada, France, Germany, Austria and Switzerland.
To find out what type of Internet strategy, IKEA maintains, the three Internet strategies of Oosterhaven (2000: p.70) are taken into account (see figure 1.3).
New business
Expansion existing markets
Strengthen existing markets
1. Self-realising 2. Take-over 3. Merger with (with help) e-commerce ISP/portal
company
Figure 1.3: Realisation strategies Source: Oosterhaven, 2000: p.76
The three Internet strategies can be distinguished by an increased level of ambition. An Internet strategy with a high level of ambition requires more actions and more investments to keep up with the competition, in a short time. At the start of introducing a website at IKEA, the Internet mainly functioned as a tool to inform consumers, with the purpose to facilitate the relation between IKEA and its consumers. This indicates that in the beginning, IKEA
implemented the Internet to strengthen the existing business in the existing channels.
However, today IKEA has chosen for the ‘expansion of their existing business’ strategy.
IKEA wants to expand their distribution (existing business) with the introduction of a new, direct (Internet) channel, however based on existing products. This Internet strategy requires many changes in the field of existing processes and systems, as the Internet will not only be used in the front-office but also in the back-office. It can be concluded that IKEA
Increased ambition
IKEA
Chapter 1: Introduction implemented their e-commerce strategy carefully at the start of e-commerce, and gradually moved on to a more ambitious Internet strategy.
As IKEA wants to expand the reach of IKEA and accelerate sales, by offering existing
products to existing (and new) markets, it appears that IKEA maintains a ‘market penetration’
strategy11 to achieve their e-commerce objectives. According to the researcher Jansen (Tiggelaar, 2001: p.484), who carried out a worldwide research to the most successful e- commerce formulas among 1200 companies, ‘product development’ appears to be the most successful growth strategy. This means that companies that focused on traditional markets, but adapted their product range to this specific market, were most successful on the Internet.
Besides, it appears that the most successful companies on the Internet, were companies that supported the buying process at many different customer contact moments. Consumers should be able to contact the website, for all wished contacts. On the next page, the position of
IKEA’s website with regard to the different phases of the buying process12 is analysed.
Positioning of Internet
To find out which services IKEA focuses on, to achieve its objectives and market penetration strategy, the following three services are applied to IKEA’s website: ‘information’, ‘contact’
and ‘transaction’ services (see figure 1.4). The Internet can offer three types of services during all phases of the buying process (Tiggelaar, 2001: p.99).
Pre-sales phase Sales phase Post-sales phase
Time
Figure 1.4: The role of information, contract and transaction services in the buying process Source: Tiggelaar (2001: p.492)
E-commerce services are often advised during the pre-sales phase, while the actual purchase takes place in an other channel (Tiggelaar, 2001:p.495). Due to IKEA’s multi-channel strategy, consumers are able to choose if and when they want to use the Internet during the buying process.
Information services: focus on offering information to Internet users. Information services play an importance role during the entire buying process. When IKEA introduced a website
11 Derived from the growth strategy model of Ansoff (Tiggelaar, 2001: p.484).
12 These are: Problem recognition, Search for information, Evaluation of alternatives and Product choice (Engel, 1995).
Information Contact
Transaction
Chapter 1: Introduction
on the Internet, online shopping was not prioritized. For this reason, the website was mainly considered a tool to provide information about products, stock availability and general store information (IKEA Intranet). Today, one of ten customers (NIPO: 2003) visits the Internet to find (product) information, prior to their visit to the IKEA store.
Contact services: focus on the interaction between people/organizations. Contact services become more important when customers come closer to the actual buying moment. It often appears that before ordering the goods, customers want personal contact, to ask some final questions. In particular, with regard to buying high-involvement13 goods such as furniture on the Internet (see §6.1), IKEA consumers are likely to spend much time and effort in the pre- sales phase and the post-sales phase, as they want to be sure about the size, colour and
material of the products. For this reason, it is of importance that IKEA offers online customer support and/or a telephone service, to interact with consumers. Otherwise, consumers are likely to cancel the buying process online. IKEA offers an e-mail response system in several countries, by which consumers are able to ask questions or make suggestions. However, there is no direct interaction with the consumers, as IKEA does not provide online customer support and/or a call-back facility. Moreover, the Internet is an excellent means for IKEA to register consumer details, for managing relationships with its customers. However, IKEA is still working on a customer database.
Transaction services: focus on realizing agreements between consumers. Transaction services are essential to actually make a purchase. A more excessive stage of the Internet is
‘transaction’. In nine countries, it is possible to order products on the local IKEA website.
This means that consumers can order products on IKEA’s website by sending an electronic order form or e-mail. In return, IKEA takes care of the delivery of the goods. Payment takes place at a later moment, as electronic payment on the Internet is not yet possible at the IKEA website.
According to Tiggelaar (2001: p.491), companies should not focus on only one of these services, but on all three Internet services simultaneously to be successful. IKEA mainly focuses on both information and transaction services. However, as contact services are often vital to stimulate customers, particularly in case of ‘high-involvement’ products such as furniture, in making a transaction online, IKEA should consider to introduce contact services as well. This means that the Internet channel at IKEA is already implemented at an excessive level (transactions), while IKEA could improve their services on a less excessive level, namely the interaction level.
§1.2.5 Evaluation e-commerce strategy
It appears that IKEA formulated a couple of e-commerce objectives. The quantitative
objective is to obtain an e-commerce share of 25% of total home shopping turnover after two years from start. However, as IKEA Netherlands does not offer other home shopping
channels, it is not possible for IKEA Netherlands to meet this objective. With regard to the qualitative objectives, it appears that there is still much to improve on, so these objectives are not fulfilled yet. According to Hitt´s definition of strategy, IKEA would not have an e-
13 High-involvement products are products in which the consumers has a high interest in. With furniture it is likely that consumers first get a feeling about a product when seeing it, than think about it (information gathering), and finally buy the product (do). Low involvement means that the information about a products or service is rather insignificant and does not interest the consumer (Burnet & Moriarty, 1998).
Chapter 1: Introduction commerce strategy as it is not clear by which resources and capabilities, IKEA wants to exploit its core competencies in order to achieve its e-commerce objectives in the long term.
However, according to Jacob’s (2001: p.62), strategy is nothing else than ‘muddling with a purpose’ 14. Strategy can be seen as a reflexive process of exploration, in which companies should learn from their experiences. Also Oosterhaven (2000: p.65), confirms that it is very hard for companies to make reliable analyses and to estimate costs and time when starting with e-commerce. This can be explained by the fast environmental developments, and a lack of ‘body of knowledge’ and experience in the field of e-commerce. For this reason, most companies are ‘learning by doing’ through means of experimentation. IKEA is a good example of a company that did not have an e-commerce strategy at forehand, but is ‘learning by doing’. IKEA has a Home Shopping Project Team that consists of employees from
different departments that evaluate the home shopping results, including e-commerce. Based on these evaluations, IKEA is able to think about their direction in the long term, and
develops or adapts the e-commerce strategy (see appendix 1). IKEA is aware that they have to improve many e-commerce issues, such as the ‘user friendliness’ and ‘purchasing security’ of IKEA’s website, and the integration of their internal company processes and systems. From the above can be concluded that IKEA is still in an experimental phase with regard to the development of a unique, strategic position on the Internet.
§1.2.6 E-commerce at IKEA Netherlands
In the Netherlands, IKEA Nederland B.V. runs a chain of eleven large-scale, self-service outlets. This number will even increase over the next years (IKEA Intranet). IKEA is a matrix organisation which means that there is a two-sided authority structure within the organisation.
IKEA Nederland B.V. is on top of the formal authority in the Netherlands, and is located in Amsterdam. IKEA Netherlands is also called IKEA Service Office as it ensures all supportive tasks to other IKEA outlets. Although, the research was mainly carried out at IKEA
Groningen, the research is done in order of the Sales Department of IKEA Netherlands.
Besides the Sales Department, IKEA Netherlands consists of six other departments:
Marketing, Finance & Administration, Human Resources, Logistics, Operations and Property.
Today, it is only possible for consumers to buy products in the IKEA stores in the
Netherlands. For this reason, IKEA Netherlands has decided to implement e-commerce on the local IKEA website over the next years. IKEA Netherlands wants to offer an e-commerce possibility to conquer higher market share (more customers) and to obtain a bigger share of each present customer’s wallet (IKEA Intranet).
However, the Sales Department of IKEA Netherlands, lacks information about potential consumers and their buying behaviour in the online channel. For this reason, people at the Sales Department, started wondering whether the worldwide e-commerce strategy set by IKEA Sweden should be adopted or not, due to the following reasons;
First of all, there may be differences in online buying behaviour between the Netherlands and other countries. Dutch IKEA consumers may have different characteristics and motivations to engage in online shopping, and prefer other products to buy online than their counterparts abroad. For this reason, examining characteristics of online buyers at both IKEA Netherlands and IKEA Sweden is important, as it influences that part of the worldwide e-commerce-
14 Derived from Haselhoff, 1987:p.13).
Chapter 1: Introduction strategy, that is related to consumers and their product preferences. This research is done to provide information on these topics.
A second reason to carry out this research is that IKEA’s central warehouse in the
Netherlands has a limited logistics capacity of 3500 articles, whereas a normal size store has the capacity to sell a product range of 8500 articles15. As delivery to customers takes place from this central warehouse, the online product range can only make up for 3500 articles at maximum. This means that IKEA should make a selected choice out of the total product range of 8500 articles. For this reason, it is essential to find out which products consumers prefer to buy online.
Apart from the previous two reasons, consumers in the online channel may have different buying needs and product preferences than consumers visiting the store. If consumers prefer to buy other products than the available products in the store’s central warehouse, this will have consequences for the logistics at the central warehouse.
Taking the previous mentioned reasons into account and the fact that IKEA Netherlands has no information available about Dutch buying behaviour on the Internet, this research has to be done.
§1.3 Outline of the report
In this introduction chapter, the background to this research was described. IKEA’s e- commerce strategy was described, based on e-commerce objectives, type of e-commerce strategy and the positioning of the IKEA website. It became clear that IKEA is still in an experimental phase with e-commerce, and makes improvements, based on ‘learning by doing’
experiences.
In the next chapter, the research design can be found, followed by an explanation of the questionnaire’s design in chapter 3. In chapter 4, characteristics of online buyers inside and outside the Netherlands are described based on geographic, demographic, lifestyle and behavioural variables. In chapter 5, consumer’s motivations to engage in a particular channel are described. In the following chapter, an overview of the products that are most suitable for e-commerce at IKEA are described. Moreover, an overview of online product preferences at IKEA Sweden can be found. The research results of the questionnaire are described in chapter 8, followed by a final conclusion and recommendations, in chapter 9.
15 Groningen and Sliedrecht sell 6500 articles, Amsterdam sells 9500 articles.
2. RESEARCH DESIGN
Based on the previous chapter, a problem statement is developed, to indicate what the purpose is of this research and the research main question. Moreover, this chapter deals with the focus of the research and the research methodology.
§2.1 Problem statement
The problem statement consists of a research objective, a research question and limiting conditions (Leeuw, de, 1996: p.85). The research objective indicates for whom the research is carried out, what the resulted product will be and why the research is done. The research question indicates the desired content of the research and shows what is examined.
Finally, a problem statement consists of limiting conditions with regard to the research method and research results.
Research objective
The goal of this research is to advise IKEA Netherlands on the implementation of their future e-commerce strategy. It provides recommendations whether the worldwide IKEA e-
commerce strategy can be adopted or adaptations have to be made.
Research question
To which degree can IKEA Netherlands adopt IKEA’s worldwide e-commerce strategy when implementing its e-commerce strategy on the Dutch market?
The concept ‘e-commerce strategy’ needs a further explanation. In this research, not all aspects of e-commerce strategy will be dealt with. The following variables with regard to e- commerce strategy are being analyzed: online consumer characteristics, motivations and product preferences. IKEA Netherlands is mainly interested in these aspects, as they want to know who their online consumers are, which motivations they have, and which products they will buy online. First of all, these variables are applied on IKEA consumers in Sweden.
Secondly, characteristics, including motivations and product preferences of online consumers.
at IKEA Netherlands are examined. Thirdly, an evaluation is made whether there are any differences between online consumers inside and outside the Netherlands. By evaluating the differences between online consumers including their product preferences, it becomes clear whether IKEA should focus on a different market segment, with different products than in Sweden. For this reason, it is assumed that differences between online consumers will
particularly effect the Dutch e-commerce strategy, in the field of products, promotions, place (logistics) and price. Based on the differences between IKEA consumers in the Netherlands and in Sweden, it is determined whether IKEA Netherlands should adopt IKEA’s worldwide e-commerce strategy in order to meet Dutch online consumers and their product preferences.
This means that there is an assumed relation between online consumer behaviour and the degree of adopting IKEA’s worldwide e-commerce strategy, in this research (also see § 2.3).
On the next page, a conceptual model of this research can be found, in which the relationships between e-commerce strategy and online consumer behaviour should become clear.
Chapter 2: Research design
Figure 2.1: Conceptual model of research.
Based on this conceptual model, the following sub questions are developed;
§2.2 Sub questions
1. How can IKEA’s worldwide e-commerce strategy be described?
2 a. What are the characteristics of online buyers outside the Netherlands?
b. Which motivations do consumers have to buy online?
3. Which products are IKEA consumers abroad most interested in to buy online?
4. How can the lifestyle of the potential online consumers of IKEA Netherlands be described?
5. Which products will they purchase online?
6. Which consequences will the expected online buying behaviour of Dutch online consumers have on their store visits to IKEA?
§2.3 Role sub questions
To answer the first sub question, IKEA’s worldwide e-commerce strategy was described in the introduction chapter, based on the type of Internet strategy (Oosterhaven, 2000) and the type of service the IKEA website offers to its visitors (Tiggelaar, 2001: p.484). Moreover, the e-commerce objectives were described. Considering the main research question, it is essential to analyze IKEA’s e-commerce strategy as this is the fundamental base of the research.
In this research, the central issue is an assumed relationship between online consumer behaviour and the formulation and implementation of an e-commerce strategy. In case,
Consumer characteristics Motivations
Product preferences
Evaluation adoption e-commerce strategy IKEA Netherlands
Consumer characteristics Motivations
Product preferences
Evaluation differences
Dutch IKEA consumers E-commerce strategy
IKEA
Chapter 2: Research design
characteristics of online IKEA consumers in the Netherlands differs from that of Swedish IKEA consumers, the implementation of IKEA’s worldwide e-commerce strategy in the Netherlands should be adapted in order to meet Dutch consumer needs. For this reason, to answer the second sub-question, characteristics of online buyers inside and outside the Netherlands are described by applying the market segmentation variables of Kotler (1999).
These variables are applied to find out whether there are geographical, demographic, lifestyle and behavioural differences within countries.
Moreover, motivations to shop online are described to find out why people, in general, engage in e-commerce activities or what prevents them from doing this. As there are still barriers against consumers using the Web for retail shopping (see: chapter 5), it is vital that IKEA understands its potential online consumers. Based on a general literature study, it is possible to find out which motivations consumers have for shopping in the store, and for shopping online. The purpose of the third sub question is to find out which products IKEA consumers abroad, prefer to buy online. First of all, on the base of the ES-test of de Kare-Silver (1999) it becomes clear which products are most suitable for online selling. Secondly, consumer’s product preferences at IKEA Sweden are being examined to find out whether there are differences with Dutch IKEA consumers. In case product preferences differ between these countries, IKEA’s e-commerce strategy will be effected, in particular with regard to the product range of IKEA Netherlands online.
The purpose of the fourth and fifth question is to find out what the characteristics are of Dutch online buyers at IKEA, their motivations to shop online, and their product preferences on IKEA’s website. For this reason, field research, through means of a survey, is carried out. At this stage it becomes clear whether there are differences between worldwide IKEA consumers with regard to online buying. It also becomes clear whether IKEA’s worldwide e-commerce strategy, in particular, the online product range, should be adapted for the Dutch market. The final sub question is of importance to find out whether the store remains the most important sales channel for IKEA in future. As IKEA wants the Internet to be a supportive channel to the IKEA store, it is essential to find out what impact the introduction of e-commerce will have on the store visits of IKEA consumers in the Netherlands.
§2.4 Focus of research
To the research, four focuses are identified.
1. The research is executed from a marketing perspective in which e-commerce and
psychological variables and concepts play a central role. Within this scope, characteristics of online consumers both inside and outside the Netherlands can be examined.
2. The problem statement will be elaborated from a (private) consumer’s perspective. This means that suppliers, business customers, distributors and management are excluded from this research. This focus is made as IKEA also serves business customers.
3. This research focuses on IKEA consumers both inside and outside the Netherlands, who visit the IKEA store regularly (at least one to two times a year) and who are familiar with the concept ‘website’.
4. This research only focuses on the Internet as a sales channel, in comparison with the IKEA store. The other channels ‘store’, ‘catalogue’ and ‘call-centre’ are excluded from this research.
Chapter 2: Research design
Limiting conditions
According to de Leeuw (1998: p.213) there are two sorts of limiting conditions. First, there are product limitations regarding the research results and secondly there are process
conditions which relate to the research process.
Product conditions:
• This research should make clear what the differences are in the characteristics of online consumers at IKEA Netherlands and IKEA Sweden, including their motivations to shop online and their online product preferences.
• This research should lead to clear recommendations about IKEA’s online product range in the Netherlands.
• The results have to fit within IKEA’s vision and business philosophy.
Process conditions:
• The research will be carried out in the months January till July 2003.
§2.5 Methodology
This paragraph describes the research methodology. An understanding of how and why the selected research methods are chosen as a guide in collecting and analysing data is created. In
§2.5.1. the research characteristics of this research are described, followed by the method of data collection in §2.5.2.
§2.5.1 Research characteristics
This research is characterised in terms of type of objective and is related to the research strategy that is used to collect data. As the type of research is an important condition for choosing a research strategy, the research type will be described first (Baarda en de Goede, 1997: p.86-87).
Research type
Leeflang (1993: p.284) classifies research based on research objectives. He makes a
distinction in explorative, explanatory, and descriptive research. Saunders (2000: p.97) makes a similar distinction and classifies research in terms of their purpose as well as by the research strategy used. Explorative research is about the exploration of a problem and about the
identification of relevant variables that play a role in the problem. In explanatory research, causal relations are established between variables. Descriptive research portrays accurate profiles of persons, events or situations (Saunders, 2000: p.97).
This research can be classified as both descriptive and explanatory research. The object of descriptive research is to have a clear picture of phenomena on which you collect data prior to the collection of data (Saunders, 2000: p.97). In this research, prior to the collection of data, IKEA’s worldwide e-commerce strategy is described. Moreover a general description is given about the characteristics, motivations and product preferences of online consumers at IKEA Sweden. Furthermore, this research has an explanatory character as the assumed causal
Chapter 2: Research design
relations between variables mentioned in the conceptual model (see §2.6), are tested among IKEA consumers.
Research strategy
The research strategy concerns the concrete steps that a researcher undertakes to come to the
‘production’ of research data (Baarda en de Goede, 1997: p.86-87). Den Hertog (2000: p.58) distinguishes five research strategies. One of these strategies is a survey, in which the
researcher collects data by asking respondents questions that are determined beforehand.
According to Saunders (2000: p.93), the survey method allows the collection of a large amount of data from a sizeable population in a highly economical way.
The reason for using a survey in this research is that it enables the researcher to collect information about the characteristics, motivations and product preferences of Dutch online consumers at IKEA.
§2.5.2 Method of data collection
Both secondary and primary data were used in this research to answer the research sub- questions. Secondary data or desk research is the gathering and analysis of data that have already been published for some other purpose. Primary data are new or yet unpublished data (Saunders, 2001: p.188).
Secondary data
To answer the first three sub-questions in this research, literature will be reviewed. For this purpose, secondary data will be of use in this research to provide insight in IKEA’s e- commerce strategy and the characteristics and product preferences of IKEA consumers abroad. In particular, the research report ‘Pilot Project Home Shopping Report Scandinavia 2002’, published by IKEA Sweden, appeared to be very useful in this research. Besides, IKEA manuals and IKEA’s Intranet were relevant in this research. Moreover, books, journals, and the Internet related to e-commerce issues and online consumer behaviour were very useful in this research. As secondary data were insufficient to answer the main research question, primary data were collected.
Primary data
In this research, the questionnaire was used in order to collect additional data, and to answer the final three sub questions. The questionnaire is one of the most widely used survey data collection techniques (Saunders, 2000: p.279). Advantages of using a questionnaire in this research is that it keeps costs low and many respondents can be reached within a short time.
However, a disadvantage of questionnaires is that it provides relatively superficial data and results with low validity (De Leeuw, 1996: p.107). How the questionnaire was designed is described in the next chapter.
§2.6 Conceptual model ‘motivations’
A tool to answer both the second and fifth sub question, is the conceptual model, developed by Broekhuizen16 (2002). His conceptual model is not yet published but was very supportive to this research. As consumers are able to shop in both the IKEA store and the IKEA website
16 Drs Broekhuizen of the University of Groningen is currently working on a dissertation about consumer’s motivations to engage in a particular channel (online versus offline). His conceptual model is based on a thorough literature study.
