Understanding Ikea’s acquisition of TaskRabbit

The online marketplace for odd jobs, TaskRabbit, has been acquired by Ikea. To truly understand the significance of this acquisition, its important to understand both sides;

• Ikea’s Motivations – Why would it want to acquire a gig marketplace?
• TaskRabbit’s Motivations – Why would a startup’s founder and investors accept a relatively early exit (only after Series C)?

Let me try to expand on each of the above. Please do share your thoughts and feedback.

IKEA’s Motivation to Acquire TaskRabbit

Ikea is and has been a very successful furniture retailer in almost every measure – sales growth, product innovation, catalogue marketing, ikea restaurant, and their own innovation lab. To continue this success, they want to focus on;

1. Targeting non-consumers of Ikea Products – This includes people who either would have bought from an ikea’s competitor or would not have made the purchase at all. Imagine an amazon-prime like experience of purchasing furniture with delivery and assembly included. For it to continue its aggressive growth, this only seems like the logical next step. (Disclaimer: I am amazon-prime customer).
2. Changing the Positioning of their Products – Ikea has enjoyed the “DIY” (do-it-yourself) positioning of their products. However, for people who do not want to “DIY”, Ikea wants to position an up-sell (of assembly service).
3. Cheap Labour for Assembly Service – Ikea has been testing assembly services in the US. The Ikea delivery starts at $59 and assembly starts at $89. With Taskrabbit, they can significantly reduce the assembly fee (remember that shipping also drops after a certain purchase amount).
4. Outsourcing of Assembly Service – Ikea, like Apple, is known to outsource parts of their business that are not their core competence. For example, it recently outsourced online fulfillment to amazon. With TaskRabbit, it can let them focus on furniture assembly while Ikea matains its focus on its core.
5. Preparing for the Online Furniture Buying World – Ikea has had its augmented reality app, Ikea Place, to better enable online/mobile purchases. With furniture assembly (and possibly maintenance), it is preparing itself to better equip itself for the world of online furniture purchases. Taskrabbit could help with things like customer inquiries, customer service (deliver a missing part), or to simply delight a customer (customer marketing).

TaskRabbit’s Motivation to seek an Acquisition

It is important to understand that the gig economy has had a handful of failures that could provide insights into TaskRabbit’s motivation to seek an acquisition.

1. Sustaining the Supply and Demand of the Marketplace – From my exposure to an early stage TaskRabbit-like startup, I know its difficult to keep up a marketplace (demand and supply) of gig workers. This new-yorker article sheds some light on how its like to be on either sides.
2. Other Struggles of Gig or On-Demand Economy Startups – Homejoy, a home cleaning services with $64 million in funding failed due to not being able to handle nuisances of its business model. Sidecare, a ride-sharing service (as well as my brief attempt with eCarpool) failed due to similar reasons. Case in-point, it is not easy or cheap to handle the unique problems and nuisances for a demand or gig economy startup. Thus, it prevents many startups to scale (profitably).
3. Ability to Focus on Niche Target Services – My assumption is that now TaskRabbit can focus on a more standardize service to Ikea’s clients. A customer will be much happier if they receive a service that is provided by a trusted brand of Ikea.
4. Ability to Provide their Workforce with More Security – Before, as a gig worker you had little control over your income. Now, image a gig worker for ikea that owns certain geographical areas and fulfills all furniture assembly there. I think this would be a win-win for both the supply and demand side of TaskRabbit. If things go well, maybe they will even have some benefits or guaranteed income vs no benefits or insurance.

Did I miss an insight that you have about ikea and taskrabbit? Please do share it in the comments below.