Retailers of furniture, floor coverings and household textiles are the players of the home furnishing retail sector and the main buyers are taken as end-users, and manufacturers of furniture, floor coverings and household textiles as the key suppliers.
Regardless of the presence of IKEA's big competitor like Bed Bath & Beyond, Federated Department Stores or Linens 'n' Things, the home furnishings retail industry continue fragmented (MarketLine, 2009). These companies defend themselves from possible future fluctuations in prices or any rise in competition through economies of scale and by offering diverse services.
Moreover, the Internet has helped new businesses to enter the market and enabled the development of a more informed consumer, making it more difficult for retailers to raise prices (Datamonitor, 2009).
Although retailers are not easily persuaded by brand loyalty, customers' preferences are important and greatly decide what goods such companies are likely to sell. Furthermore, brand name has helped to create a strong reputation and recognition of leading companies resulting in highly visible store locations.
Retailers tend to purchase merchandise from numerous foreign and domestic manufacturers and importers, reducing reliance on any one supplier. Moreover, smaller companies may compete by focusing on a particular segment of the market and offering greater depth of products.
Low-cost companies like IKEA can deliver low margin products to the market, which, whilst yielding lower profits, still generates sufficient sales to cover the company's fixed costs and provide a substantial profit margin. Substitutes to home furnishing retailers exist in terms of department stores, discount and mass merchandise stores.
However, stores that specialise in home furnishing retail have typically a larger selection of items within the home furnishings category (Datamonitor, 2009).