The year is 1940 and the world has stumbled across an entrepreneurial genius by the name of Ingvar Kamprad. Ingvar’s innovative attitude to do what has not been yet been done shot him straight to the top of the furniture retailing market with his business IKEA. The business model of IKEA at the time was like no other, dominating the market in terms of its packaging, pricing structure and retailing.
The most significant innovation by IKEA was sparked as an employee removed a leg off a table to enable the product to more easily fit into the customers vehicle. This simple task acted as the catalyst for what has become the worldwide phenomenon of flat packed furniture, requiring self-assembly by the customer.
IKEA’s entire product range all come flat packed, mostly utilising one simple tool, the Allan key, which is included with every product. This simple strategy has allowed IKEA to significantly reduce manufacturing and distribution costs which leads to the next innovation of its pricing structure.
The ability to mass produce and distribute its product range at only one third of its leading competitors’ costs, is the key to IKEA’s success. Rather than price its items with an insanely high mark-up, IKEA chose to offer its low cost advantage to its customers and ultimately take advantage of selling mass quantities at lower prices.
But why was IKEA so successful in selling high quantities of stock? Low prices played a large role in IKEA’s success, however its innovation in retailing was second to none during its growth period. IKEA understood the importance of emotional attachment and customer experience and thus it developed the showroom strategy. IKEA successfully incorporated the direct to consumer warehouse style model and the customer experience model to create showrooms where consumers are able to experience products for themselves before picking the flat packs out of the warehouse themselves.
Through its direct to consumer, low cost strategy, IKEA has become one of the world’s most unique and largest furniture retailers in over 29 country groups offering over 12000 different products.
Source
IKEA /AU/EN. (2019). About the IKEA group – IKEA. [online] Available at: https://www.ikea.com/ms/en_AU/this-is-ikea/about-the-ikea-group/index.html [Accessed 5 Sep. 2019].
eBay – An Analysis on Business and Revenue Models
eBay is an online marketplace powered by e-commerce that uses the ‘first mover’ approach to reinvent itself and stay ahead of the status quo. eBay’s transactional business model includes both business to consumer, where 3rdparty businesses often use the platform as a means of reaching a customer base and consumer to consumer where consumers are able to use the platform to sell their private items to other consumers.
Hang on a minute; That means eBay doesn’t really have to do anything?
Correct! This very factor is what speaks to eBay’s success. Its business model allows it facilitate millions of transactions a day, without the need to own any inventory – its genius and it works!
So if eBay doesn’t own the stock being sold, then how does it make money?
It’s pretty simple really!
eBay charges sellers on the site a fee to list their products once they list more than 40 items a month it doesn’t seem like much, but when you multiply it by the thousands of listings by regular sellers it quickly adds up!
eBay however places a larger focus on commissions. In Australia, eBay charges sellers 10.9% of the final sale price on each item. This model is the core revenue generating part of the business and is highly successful when applied to regular sellers.
Finally, eBay generates revenue form sellers who wish to further promote their products on the site. This includes ‘featured’ sales on eBay’s homepage and higher page rankings when key words are searched. Similarly, eBay allows advertisers to access their audience and display advertisements throughout the site.
eBay has a highly successful business and revenue model, however one recommendation can be made in an attempt to increase revenue. eBay should remove or lower the free listing fees period for casual sellers as many casual sellers are taking advantage of eBay’s customer base. The sales generated by casual sellers are often of low value thus the commission model is ineffective in generating high returns for eBay in this scenario. The introduction of this model would see eBay revenue raised substantially for casual sellers.
Source: eBay. (2019). Selling on eBay | Electronics, Fashion, Home & Garden | eBay. [online] Available at: https://www.ebay.com.au/sl/sell?sr=wnstart [Accessed 5 Sep. 2019].
The Weekly Digital 
Very detailed & interesting!
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