Ikea’s Third-Party Marketplace Experiment is Historic First

Need to Know

• Ikea is offering its home goods and furniture for the first time ever on a third-party marketplace.
• Alibaba’s Tmall will test out Ikea’s wares for six months to determine product-market fit.
• Ikea is the latest retailer tapping into third-party marketplaces where it doesn’t have high market penetration or recognition.
• Third-party marketplaces are doing well—revenue from third-party sellers on Amazon Marketplace accounted for 20% of all sales for Amazon in Q4 2018 and increased 30% by Q4 2019 to $17.5 billion.
• Overall, third-party Amazon sellers account for more than 58% of Amazon’s sales (and are continuing to grow by 30% YoY from 2018 to 2019, from $42 billion to $53 billion).

Analysis

Headlines have the impact to shift, increase, or totally derail bottom lines for not just small businesses, but big box stores. In order to survive, these retailers need to adapt to changes in different environments, countries, and conditions. 

Ikea is a professional chameleon in today’s digital-first, consumer-oriented world of retail. In line with its flexibility, for the first time ever in 77 years, Ikea is selling its iconic furniture and home goods through third-party retailer Tmall, a Chinese e-commerce platform operated by Alibaba.

Ikea has 30 outlets in China but also knows that the Chinese consumer is a bigger fan of multi-brand marketplaces than others in different parts of the world. 

“We see this as a good opportunity to become accessible for many more in China, especially in light of what the Chinese digital environment looks like,” Tolga Oncu, head of retail at Ingka, which owns most Ikea stores worldwide, told Reuters.

“In other markets there are other conditions. So we don’t see this as a starting point for a full roll-out, or a full commitment to this type of channel,” said Jon Abrahamsson Ring, incoming CEO at brand owner Inter Ikea.

The digital store rolled out for six months on Tmall in three provinces across China but was accompanied by physical stores, IKEA’s own online stores, and app. It will offer about one-third of IKEA’s 9,500 products, as well as delivery and assembly. 

“We are testing this to see ‘how does this impact our brand, how does this impact our infrastructure, our own stores and e-commerce, do we reach new segments … and of course also what will the result look like’,” said Oncu. 

Ikea is not the only retailer going the third-party route to cater to the changing needs of its customers: Best Buy has transformed into a huge market for third-party retailers, and Loblaw is hot on the heels of Amazon and Walmart digital expansions with its own marketplace. 

Ikea is also expanding into different markets in completely customized ways, taking into account the different cultural and customer preferences in every new region it reaches. As an example, Ikea entered into India through innovative store formats and digital stores, and into Russia with templated design options.