IKEA cuts prices by 22%: why an SME can't copy it
Volumes, economies of scale, power over suppliers: IKEA can afford a price war. An SME can't, and has to aim for the premium segment.
IKEA has decided to lower the prices of hundreds of products permanently.
In Italy the average cut will be 22%.
The move is backed by a €1.2 billion investment across Europe.
A small or medium-sized business cannot simply copy this strategy.
IKEA can cut prices thanks to huge volumes, economies of scale, bargaining power over suppliers and control of the supply chain.
An SME that tries to compete on price against companies of this size only risks cutting its own margins.
And it often ends up working more and earning less.
That's why, in my view, an SME has to give up on being the cheapest
and position itself in the premium segment of the market.
Build a high-end brand.
Raise perceived value.
Target customers who don't choose on price alone.
And generate higher margins to invest, improve the product and grow the company.
IKEA can win on volume and by lowering prices.
An SME has to bet on the brand and on premium positioning.
What do you think?
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