(Image credit: AFP/Getty Images via @daylife)
Operating in 41 countries, IKEA is a global destination store for home furnishing, appliances, ready-to-assemble furniture, home accessories and kitchen products. It is the world’s largest furniture retailer with more than 301 stores and 30 franchised units. The largest market for the company is Germany with 44 stores followed by the United States with 37 stores. Sales volume of the privately held company is estimated at over $24 Billion with $3 Billion coming from the US according to recent reports. According to the company 533 million people visited its stores last year. IKEA’s products are exclusive to IKEA and typically reflect its Swedish heritage with modern architectural design.
Ingvar Kamprad founded IKEA in 1953 and opened the first store in Almhult, Sweden. Stores were opened in neighboring countries Norway and Denmark before the company opened in Switzerland (1973) and Germany (1974). After further expansion in Europe the first store was opened in The United States (Philadelphia in 1985). The name IKEA is an acronym representing the founder’s first and last name (Ingvar Kamprad), his place of birth (Elmtaryd), and a village nearby (Agunnaryd in Southern Sweden).
The world’s five largest IKEA stores are:
- 552,000 square feet in Stockholm, Sweden
- 494,000 square feet in Shanghai, China
- 470,000 square feet in Shenyang, China
- 457,000 square feet in Tianjin, China
- 450,000 square feet in Berlin, Germany.
IKEA has an intricate corporate structure, which means the company is not likely to go public. Most of the operations, management of the stores, design and manufacture of furniture is run by a trust, INGKA Holding, headquartered in Delft, Holland. While most of the designs of IKEA products are made in Sweden, manufacturing has been outsourced to China and other Asian countries.
The Kamprad family (one of the richest in the world), is very focused on key values surrounding quality, heritage, market differences, customer loyalty, and sustainability. One way these values manifest are in the food service area. The family still controls the food service, making sure that Swedish meatballs, cream sauce and lingonberry jam is served in most stores. Their hands-on-approach ensures that the food is authentic and high quality which is very important for the store’s image. Simultaneously reflecting respect for local tastes, most of the restaurants serve local food selections for breakfast often with a twist. For example, Swedish pancakes or French toast can be found on the menu in the United States.
Food is not the only way IKEA connects with its local audience to compete with well run local competitors. For example, in the US the company competes directly with powerhouses Home Depot and Lowe’s in some appliance and a few wood classifications. However, in my opinion, IKEA’s strength is in furnishing the entire home while the others do not. IKEA is also good at making necessary adjustments to reflect local market tastes. One lesson learned in the American division was adjusting the size of the beds and sheets to conform to American standards. The company has also developed a strong loyalty program called IKEA family. It enables members to enjoy special discounts plus they receive a private newsletter on a quarterly basis.
As a closing note, I think it is significant that IKEA is a pioneer in sustainability. The company has recently announced the construction of a wind farm to insure it will operate 100% on renewable energy in the future. Having a long-term vision that focuses on delivering what really matters to its global customers, in a uniquely IKEA way, has paid off since 1953 and will continue to pay off as I see it.
