Sweden’s legendary flat-pack furniture giant is making waves in the department store food court niche. IKEA is cutting its Food Court menu prices in half to ensure everyone can afford to eat there…
Some IKEA locations offer mammoth eat-in or takeout food operations…
IKEA has always had a soft spot for its Food Court. Folks are always comparing it with COSTCO’s in-store eatery. And the balance of dining ‘power’ between the two is constantly shifting to maintain the hold each player has on it’s accustomed share of consumer loyalty…
Breaking the system
Then, along comes IKEA, with an initiative to, “inspire a better everyday life through food that is healthier, more sustainable, and affordable.”
How are they doing that?
It’s pretty simple for an organization the size of IKEA. The executive suite has decided to take a hit, and cut food court menu prices in half. Just like that.
They’re re-edefining their food services operation from a profit centre, designed to make money directly for the store, to a cost centre. That’s a service that attracts customers or supports their visit to the store – such as advertising, snow removal from the parking lot in the winter, or heating and air conditioning the store as the season dictates.
Best case, the benefits generated by providing those services are offset by, or exceed the costs to fund them. Most retailers are happy to break even on the actual costs of cost centres.
Rare exceptions
IKEA is one of only a very few mega-stores today to maintain its own in-store dining facilities. Many years ago, most of the traditional ‘department’ stores had lunch counters. Ditto the ‘drugstores’. But now, even the biggest – witness Walmart – simply invite third parties such as McDonald’s or other fast/casual eateries to bring their brands into dedicated dining space.
The fast-casual restaurant market space is so crowded, and it’s so costly to establish and maintain your own brand, that the vast majority of stores – whatever their identity – are staying within their own territories. Focusing on their ‘core competencies’. No frills.
Legendary status
But IKEA and COSCO enjoy almost legendary status among retailers. And they pride themselves on their customer dining services. And so popular, in fact, is the COSTCO food court that the brand has had to restrict access to registered ‘members’ who’ve paid a ‘membership fee’ for the priviledge of entering and and shopping at the stores.
COSTCO, of course, sells a whole host of products under their own house brand, Kirkland. While COSTCO actually contracts with name-brand manufacturers to make their Kirkland products for them, to COSTCO specifications, It’s up to COSTCO to decide whether they’re going to make the Kirkland brand a profit centre or a cost centre, as the rest of their operations dictate.
IKEA’s house-brand Lingonberry products and other proprietary food court offerings – such as their famous Swedish meatballs – are made in the company’s own plants scattered across Europe. A number of IKEA-branded products are actually sold in retail space attached to the food courts. Whether they elect to build profits into their retail prices, and how much, is up to IKEA.
My take
‘Taking the customer’s side’ in the current food price war is a great way to further endear the IKEA brand name to their fan base. Consumers will remember that the retailer stood up for them when the government and the supermarket chains abandoned them.
If you can create brand value like that without incurring further hard costs, it’s a win-all-round situation. But mostly, it’s a win for IKEA…
In addition, after incurring criticism for excluding non-members from dining at its food court, it will be VERY interesting to see how COSTCO reacts!
~ Maggie J.