Ikea invests in kitchen planning company Traemand

Dive Brief:

Ingka Group, (whose business operations include Ikea Retail, Ingka Investments and Ingka Centres), has acquired 49% of U.S. kitchen planning and installation company Traemand, with an option to buy the remaining shares. The investment will allow Traemand to expand its kitchen service concept beyond the U.S. and Canada, Ingka Group said in a press release.
Traemand has been a partner of Ikea Retail U.S. since 2005 and more recently in Canada, providing tools and systems to simplify kitchen projects, the company said. Traemand will maintain its current management, according to the release.
The move expands Ikea's suite of services. Ikea Group (wholly owned by Ingka) in September 2017 acquired U.S. odd-job service TaskRabbit and has since expanded its services to 40 U.S. cities and into the U.K.

Dive Insight:

The difficulty of assembling Ikea furniture was scathingly mocked in the movie "Deadpool," and Ikea proved to have a sense of humor about it. But its investments in TaskRabbit and now Traemand indicate that the Swedish furniture retailer has come to see that as a pain point for customers that must be eased.

Indeed, Ikea has been putting more of its resources to that than to upgrading the quality of its furniture, something that had been a priority of former chief executive Peter Agnefjall but hasn't been discussed much since his departure a little over a year ago. Instead, the company is likely angling for millennial consumers who appreciate the Euro design and price points of its furniture but have no patience with the task of putting it together, according to Bob Phibbs, CEO of retail consultancy The Retail Doctor.

Plus, Traemand's planning services enable millennial customers to turn the sometimes bland feel of some Ikea furniture to a more custom look, Phibbs told Retail Dive in an interview. "This seems to be a right play when I read it — it's getting away from the reality that they are a generic furniture company," he said. "It's fast fashion taken to home goods."

Even without the infamously convoluted instructions that come with Ikea goods, a third to 40% of kitchen and bathroom renovations in general are abandoned because the choices are overwhelming, Phibbs also said, so services like Traemand's can feel like a lifeline to save such projects.

But quality is an issue for many millennials, and the investment doesn't move the needle all that much, according to Erik Gordon, professor at University of Michigan's Ross School of Business. "The acquisition creates no value for Ikea's customers. They already have access to Traemand services," he told Retail Dive in an email in which he referred to Ikea's popular cafeteria concessions. "It might be a good financial investment for Ikea, but the best investment Ikea could make would be in increasing the satisfaction and loyalty of its customers. That requires improving the quality of the products that customers live with and notice long after they have left the store and the meatballs."