09 Oct Furniture Retailer to the World
IKEA in 2013: Furniture Retailer to the World
Charles W.L. Hill
IntroductIon
IKEA is one of the world’s most successful global retailers. By 2012 IKEA had 320 home furnishing superstores stores in 40 countries and was visited by some 776 million shoppers. IKEA’s low-priced, elegantly designed merchandise, displayed in large warehouse stores, generated sales of €27.5 billion in 2012, up from €4.4 billion in 1994, and €4.2 billion in net pro t. Although the privately held company refuses to publish detailed nancial data, its net pro t margins were rumored to be around 10%, high for a retailer. The founder, Ingvar Kamprad, now in his 80s but still an active “advisor” to the company, is rumored to be one of the world’s richest men.
company Background
IKEA was established by Ingvar Kamprad in Sweden in 1943 when he was 17 years old. The edgling com- pany sold sh, Christmas magazines and seeds from his family farm. It wasn’t his rst business—that had been selling matches which the enterprising Kamprad had purchased wholesale in 100 box lots (with help from his Grandmother who nanced the enterprise) and then resold individually at a higher mark-up. The name IKEA was an acronym, I and K being his initials, while E stood for Elmtaryd, the name of the family farm, and A stood for Agunnaryd, the name of the village in Southern Sweden where the farm was located. Before long Kamprad had added ballpoint pens to his list and was selling his products via mail order. His warehouse was a shed on the family farm. The customer ful llment system utilized
the local milk truck, which picked up goods daily and took them to the train station.
In 1948 Kamprad added furniture to his product line and in 1949 he published his rst catalog, distributed then as now, for free. In 1953 Kamprad found himself strug- gling with another problem, the milk tuck had changed its route and he could no longer use it to take goods to the train station. Kamprad’s solution was to buy an idle fac- tory in nearby Almhult and convert it into his warehouse. With business now growing rapidly, Kamprad hired a 22 year old designer, Gillis Lundgren. Lundgren origi- nally helped Kamprad to do photo shoots for the early IKEA catalogs, but over time he started to design more and more furniture for IKEA, eventually designing as many as 400 pieces, including many best sellers.
IKEA’s goal as it emerged over time was to provide stylish functional designs with minimalist lines that could be manufactured cost ef ciently under contract by suppliers and priced low enough to allow most people to afford them. Kamprad’s theory was that “good furni- ture could be priced so that the man with that at wal- let would make a place for it in his spending and could afford it”.1 Kamprad was struck by the fact that furni- ture in Sweden was expensive at the time, something that he attributed to a fragmented industry dominated by small retailers. Furniture was also often considered a family heirloom, passed down across the generations. He wanted to change this: to make it possible for people of modest means to buy their own furniture. Ultimately, this led to the concept of what IKEA calls “democratic design”—a design that, according to Kamprad, “was not just good, but also from the start adapted to machine production and thus cheap to assemble”.2 Gillis
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