Ikea could be next in a long list of retailers to move into the electricals market after Anders Dahlvig, chief executive, said that the company is considering adding electricals to its iconic furniture. In light of electricals’ positive market outlook, Ikea’s brand strength and its vast store footprints, selling electricals could prove a sound move by Ikea.
Ikea is considering a move into the electricals market as part of its global expansion plan.
The strong growth in the electricals market in the past year, fuelled by high demand for flat-panel TVs and the introduction of High Definition ready TVs to stores has made the electricals market highly attractive to non-specialists. Grocers, in particular Tesco and Asda and also catalogue-based showroom retailer Argos, have been quick to ramp up their electricals ranges to capitalize on these opportunities. In addition M&S recently launched trial electricals divisions in a handful of stores.
The continual introduction of new products to market such as next generation DVD players and full HD TVs will keep the market stimulated and maintain growth for the coming years – helping to make this a longer-term opportunity.
However, not all is rosy, and the market should be approached with caution. The UK electricals market is characterized by intense rivalry from specialists, non-specialists and pureplay online players. It is also plagued by perpetual price deflation caused by the continual introduction of new products to market and innovation.
Despite this threat, the sale of electricals would prove complementary to Ikea’s authoritative range of furniture. It would be able to use its vast store footprints to showcase room sets, enhanced further by complementary products, allowing it to present full living room displays.
Crucially, this is about exploiting existing footfall and increasing average transaction values. Ikea has an existing audience with a mindset to improve their homes and to buy into the Ikea concept. Being able to buy additional items from room sets would be a compelling proposition and a useful additional revenue stream for Ikea.
With a strong brand reputation, plentiful space for storage and no need to stock wide ranges, there are few reasons to dissuade Ikea from pursuing this opportunity.
Source: Verdict Research