IKEA’s Foodservice Overhaul Entices Diners and Boosts Retail Sales in the US
IKEA has long utilised food to maximise the time that consumers remain in its stores. IKEA’s restaurants offer customers a refreshing break from a long day of shopping, but they also promote the company’s brand and Swedish origin, as well as drive overall foot traffic. IKEA’s foodservice offerings are evolving, however, in response to increased competition from other large discount retailers that have largely found success by moving their goods online. IKEA, conversely, is committed to increasing brick and mortar sales where profit margins are highest. To do this, the company has invested in improving the foodservice experience by targeting a wider range of consumers, including consumers that increasingly come solely for the food. The in-store experience is IKEA’s bread and butter, and although IKEA looks to experiment with its own digital platform, improving the company’s foodservice offerings represents a fundamental shift in approach and a sure sign of commitment to brick and mortar in the face of increased competition.
Lingonberries for all
With IKEA’s typically remote, suburban locations and vast, labyrinthine retail floors, the company recognises the need to feed its customers, just as it always has. Recently, however, a trend has emerged in which foodservice sales at IKEAs across the US have outpaced retail sales overall, meaning American consumers are increasingly coming solely for the food.
While this might be a relatively novel concept in the US, it is not all that uncommon in markets where food at IKEA is considered to be more premium, but still affordable. This is certainly the case in China, a market in which IKEA’s foodservice sales have experienced rapid growth. Chinese consumers can enjoy both Swedish classics as well as a fresh take on local dishes, such as roasted pork neck in mango sauce and shrimp cakes. Total foodservice value sales in China grew by 23% in 2014, compared to 18% growth in overall retail.
In response to this growing demand in foodservice in the US, IKEA plans to remodel its US-based cafeterias in 2016 to create three distinct spaces that reflect the diverse needs of its customers, including a family-friendly dining zone with play areas for children and a specific zone for on-the-go customers looking for a quick recharge. IKEAs in the US, however, will soon offer an additional, more relaxed dining space IKEA calls “Fika”, a traditional Swedish concept that simply means “coffee break”, which will serve as an outlet for customers that may indeed come solely for the food.
In addition to making its cafeterias more hospitable, IKEA has improved upon its classic menu of Swedish cuisine to include alternative options that will satisfy the needs of a wider band of consumers, such as chicken-based and vegan varieties of its popular Swedish meatballs dish. IKEA also recently partnered with the Marine and Aquaculture Stewardship Councils, global regulatory organisations, to offer sustainably sourced salmon, a nod to the importance of food sustainability and responsible sourcing that consumers increasingly demand.
An all-inclusive IKEA experience
The foodservice concept is critical to IKEA’s success as the company seeks to find ways to attract consumers to its physical stores, as competition in the online space is fierce. The expense of shipping large items has largely kept IKEA from expanding the brand’s online presence. With the convenience, speed, and low cost of shopping within the digital marketplaces of major retailers such as Amazon and Walmart, and newcomers, such as Wayfair, IKEA increasingly needs to attract consumers to its brick and mortar outlets in which sales for the company are more profitable. Excelling in foodservice, while maintaining the high quality and low prices of its mix of Swedish and local offerings, has become a tool for getting consumers in the door.
As a result, while IKEA emphasises quality, it also remains committed to ultra low prices; so low, in fact, that each outlet boasts the cheapest price of any given item within a 45km radius, according to a former foodservice employee quoted in Business Insider. IKEA, he continues, uses consistently low pricing to get consumers in the door, even if the outlet sells some items at a loss, banking on the notion that any losses in food sales will be made up in the net value of overall retail.
Even if consumers come to IKEA solely for the food, they are more likely to make impulse purchases of higher margin items, such as items in the Swedish food market upon exiting, or at the very least, consumers will leave with an overall positive impression of the brand and will eventually return to make larger purchases.
IKEA is improving upon the semi-captive shopping experience of most retailers by recreating the atmosphere and convenience of the experience for a fully captive audience. In turn, this internalised, inclusive brand promotion reinforces IKEA’s profitability and attracts consumers to the company’s physical stores where profit margins are highest. As IKEA looks to thrive in the highly competitive US retail industry, it will have to capitalise on its strengths. Emphasising a commitment to foodservice as a means to draw in consumers will likely have a positive impact on overall sales.