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WIth Ikea's purchase of TaskRabbit, have they figured out a solution to the 'Amazon problem'?

3Jan

One was established in 1943, is the largest furniture retailer in the world, and has 411 stores in 49 countries as of 2017.

The other is a 10-year-old app which connects consumers with handymen.

They are from different eras of commerce, yet, as of September 2017, these two entities became one. Multinational Ikea Group purchased the gig-economy app, TaskRabbit for an undisclosed amount, retaining both their CEO, Stacey Brown-Philpot and, all 60 members of their internal staff.

Another interesting detail about the buyout is TaskRabbit retains the ability to still formulate partnerships with other companies, independently. They currently have a deal with Amazon in the U.S and with the increase in capital TaskRabbit will garner from the buyout, it will likely attract even more partnership offers from similar enterprises.

As with most things these days, this move was heavily driven by Amazon. Amazon revolutionized the entire world's retail economy by prioritizing growth over profits and aggressively innovating through tech. This has left every other company reeling in the dust trying to figure out how to compete, or just exist, within this new paradigm.

Unlike a lot of Amazon's closer competitors like eBay or Sears, Ikea is still very profitable with revenues over $36 billion last year. Even then, Amazon's recent shift towards the home-goods market did not go unnoticed. They had begun to feel pressure due to their inability to financially compete with Amazon's delivery and assembly offers. However, Instead of ignoring the problem or impulsively reacting to it, they instead decided to embrace innovation and strategic thinking. Ikea has presented us with a case study for how to fittingly react to industry changes.

And this isn't their first tech innovation in recent years either. They recently released a well-received iPhone app called 'Ikea place' which uses augmented reality and the phone camera to show users how Ikea furniture would look in a room. They also announced that they will be shifting to electric with regards to its stores and cars worldwide.

In this latest buyout, Ikea has beautifully illustrated the two core adjustments all retailers need to make in order to remain relevant in the coming decade:

1. Lower profit expectations

2. Reinvest in the customer experience

By offering TaskRabbit an amicable deal where they were able to retain their staff, CEO, and independence, Ikea would have almost definitely lost some money/value. A company as large as Ikea normally wouldn't need to make such concessions to another so small. But by learning from the mistakes from the likes of the infamous Blockbuster CEO who turned down an offer to buy Netflix in 2000 for $50 million, Ikea understood that the potential for growth tomorrow is much more valuable than a bit more profit today.

'In a fast-changing retail environment, we continuously strive to develop new and improved products and services to make our customers’ lives a little bit easier. Entering the on-demand, sharing economy enables us to support that,” Ikea chief Jesper Brodin commented after the deal was confirmed. 'We will be able to learn from TaskRabbit’s digital expertise, while also providing Ikea customers additional ways to access flexible and affordable service solutions to meet the needs of today’s customer.'

This transitions the relationship between retailers and tech start-ups into a new phase. Win-win deals like this will only increase in time as start-ups and established brands look to each other to find their perfect match. In order to deal with its so-called 'Amazon problem', Ikea lowered its immediate profit expectation in its purchasing of TaskRabbit in order to reinvest in their customer's experience - via TaskRabbit.

It will allow Ikea to add value to their customer's lives as TaskRabbit connects people and will give Ikea a face. In an age when most companies are moving away from humanity and barrelling eyes closed towards automation, Ikea has formulated a much more nuanced response. They understand that people don't want less human contact, they want more. But they also want the efficiency and immediacy tech has now afforded us all.

Now, Ikea will be able to combine their corporate-like efficiency to ship disassembled furniture parts to anywhere in the world with the friendly personal touch of local gig-economy workers who can deliver and assemble them in customer's houses. 

And that is but the first step in a partnership with near limitless potential. 

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