The business is experiencing problems in one or two home markets. For example in the European market of the United Kingdom, IKEA has recently opened more stores which means that the number of visitors is divided by a greater number of retail outlets. So in the past the consumers would travel many miles to visit stores and each store had a large number of visitors, now these consumers have not really increased in number, but are now able to visit a more local store. This has reduced the footfall per store and any sales density.
One problem experienced by IKEA is that its flagship stores are not located in city centres, or even secondary locations near large populations. They are out-of-town stores. So consumers have to travel large distances to visit the stores. Their customers have to not only cost their travelling expenses, but they also have to collect large packages and take them home. This would be a competitive disadvantage.
Weaknesses
Negative publicity. The company has been criticized many times for issues like poor treatment of employees, questionable advertising practices or lobbying government authorities. Negative publicity decreases brand reputation and customer loyalty.
Low quality of products and services. IKEA is unable to find compromise between continuous cost reductions while maintaining the same quality of products. According to UK Customer Insights report on IKEA by Verdict, IKEA’s customers are less satisfied with its product and services quality than the average customer in UK buying at other stores. Firm’s cost reductions lead to decreasing product quality, which was followed by higher number of products returned and damaged brand.
Standard products. IKEA’s main competitive advantage derives from low costs, which in part are achieved due to standardized products. Standardized products attract fewer customer segments. Therefore, the business inability to offer better quality more customized products allows its competitors to fill that niche and fortify their position in it.