This past Wednesday, a top executive at IKEA announced that the company will begin to build stores in central locations. This announcement by the Swedish company was due to research that has emerged which shows 70% of the world's population will live in cities by 2050. Currently the company has stores that are built outside of urban centers because of their incredibly large size. The new store design that IKEA wants to embrace is a retail store that is also a hotel, and a commercial and residential living space. IKEA says that it will be able to afford the expensive real estate in major cities by transforming their property into a multi-functioning space. The high land costs will be offset by the hotel revenue, as well as the commercial and residential space. IKEA already owns 66 retail centers in 15 different countries.
IKEA announced that their net profit for the year ended on August 31 rose 20% to $4.5 billion. Their large increase in net profit was a result of the 14% rises the company experienced in the German and U.S. markets. Germany and the United States are IKEAS two largest markets; Europe made up 69% of their sales, and the U.S. made up 18% of their sales. The company has began to store their products closer to customers so that they can deliver faster and less expensively. They have also began to build multifunctional distribution centers that are capable of directly delivering to their retail locations as well as customer's homes.
This article is relevant to our marketing class because it relates to the place aspect of the marketing mix. The IKEA company is trying to increase their profits by increasing the efficiency of how they deliver their products to consumers.
http://www.wsj.com/articles/ikea-adapts-to-growing-urban-populations-1481112341
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