How IKEA Became Sweden’s National Brand

In 2017, more than 20 million people visited the most popular theme park in the world: 

Magic Kingdom at Walt Disney World in Florida. Together, the Disney parks, including Disneyland Anaheim, Tokyo, Paris and Hong Kong attract 150 million annual visitors; over all other. One could argue, however, and I will, there is an even more popular one: IKEA, with 460 million. Let me explain. We in business know there are many definitions of "theme park" - the academic definition, my definition, and, when you're ready to really dive deep into literature, you turn to the experts: the International Association amusement parks and attractions, which define "Theme park" like: "an amusement park which has thematic attractions, be it food, costumes, entertainment, retail stores and / or rides ”.

Photo by Ferhat Deniz Fors on Unsplash

Check, close enough, check, check and verify. Shopping at IKEA is a full day activity - you get in the family van, get out of town, drop your children in the playground, maximize your credit cards, then top it off with a few Swedish meatballs. The IKEA brand is as iconic and loved as Disney, Six Flags and Universal. The only small problem comes from the "s" in "rides" - IKEA has only one: the path that guides you through the store, in the warehouse and the restaurant. The journey could be called “Käpitalism”. The theme of the park, Sweden. Although, despite its colors, names and advertising philosophy, IKEA is not strictly speaking actually Swedish. Or, technically, a business at all.

What are the secrets of the enormous global success? 

While not roughly the same company, it is today Ingvar Kamprad founded IKEA in 1943 as a traveling salesman, selling commodities like matches, pencils and watches. Seven years later he started selling furniture. See the logistical difficulty of the expedition big items away, Ingvar decided to lay flat the furniture, which also reduced the chances damage during transport. The company has created a catalog that customers could browse and order from afar. The first showroom was built in 1953 in the same small town, followed by the first the company's iconic giant warehouses 1965. The business model has more or less remained consistent since. Rather than trying to compete with the department stores in the city center, IKEA has always preferred large multi-storey buildings away from restlessness, with a few exceptions as in cramped Hong Kong.

With this much cheaper property, the company can build adjoining parking lots just as giant. 

The average store size is around 35,000 square meters or 370,000 square feet, with over 8,000 unique items. Inside, the experience is unlike any other. Customers are guided through the store by a one-way street, which begins in the showroom, flows into the "market hall" where the little ones items can be picked up instantly and end in the warehouse, where previously selected items can be removed from shelves and paid to the register. Most retailers design their stores to maximize the time you spend inside, laying out staples like bread, milk and bananas. IKEA takes this approach to the extreme. By developing its stores as a transit line, the company has full control over purchasing experience and requires you to look through all its departments. Placed near the start of the trip are generally its main drivers of profit: bedroom and kitchen. The restaurant and the children's play area not only keep customers indoors longer but also communicate low prices and value, which are reflected in the brand as a whole.

The average visit lasts a full hour and a half in several of its stores and, according to one estimate, 60% of items purchased from IKEA are unplanned. Pushed to, in other words, by the store psychology. Research also suggests that we value more to things that we help make ourselves IKEA's self-assembly from flaw to feature. It also helps reduce manufacturing and shipping costs - another ingredient in the IKEA formula. Low prices are his self-proclaimed mission - to, quote, "Democratizing furniture". Whatever his real motivation, IKEA has remained inexpensive despite its ubiquity. The price of his most popular chair, for example, has decreased significantly over time, adjusted for inflation. The company would have set a price target for a product before sending it to his a small team of around twenty designers, who work within these limits.

Finally, the warehouse design eliminates the need a large staff, which significantly reduces operating expenses. This low cost image is so important that, before dying in 2018, the founder and CEO only claimed to fly in economy, never to stay luxury hotels and use public transport - stay true to the values ​​of the company. But, maybe even more important than his psychology, warehouse design or low price is IKEA's impenetrable brand. As it began to expand internationally, in Switzerland in 1973, then throughout Europe over the next few decades, he strongly emphasized its Swedish character. From 2000 to 2009, the company opened 150 stores, more than in the last 50 years, many in North America and Asia.

Today, with over 200,000 employees and 433 stores, IKEA is not only the largest retailer of furniture but also the largest in the world consumer of wood, period. His strategy has been to enter into many markets, each with only a small number of stores in the most optimal locations. The United States, for example, is the second largest market by number of stores, despite only 50 and 17 countries or territories have only 1. The success of this approach is proof of the global brand. As many companies enter a new market in locate their message and product, IKEA succeeded by doing the exact opposite: embracing his Swedish origins.

The image of IKEA is so strong in the world, that he can open a single store in a whole country and always be instantly recognized e Love you. From the minimal and functional design of its furniture, to their famous difficult to pronounce names, IKEA is unmistakably Swedish. Its bright blue and yellow stores advertise its heritage from afar. Beyond its visual design, IKEA also exports Scandinavian egalitarianism. Employees at all levels are encouraged to address each other by first names, and not securities. Business leaders are invited to participate in the so-called "anti-bureaucratic weeks" where they work in stores to find out daily operations and sympathize with their colleagues. Not only this association with his house country good for the company, but it is also good for Sweden - who encouraged and greatly enjoyed the good reputation of IKEA. Swedish embassies, for example, actively participate in new store openings and even sponsored financially.

 Ironically, despite all of this, IKEA is, legally, more Dutch than Swedish. 

The company is actually owned by a Dutch holding company company whose profits lead to a tax exemption non-profit foundation, also Dutch, which indirectly channel the money through another Dutch foundation with pretty much the same name. Intellectual property, on the other hand, is owned by a holding company called Inter IKEA, this time, registered in Luxembourg, which, in turn, belongs to a company of the exact same name in the Netherlands Antilles, which, yes, also owned by a trust company.

And that's a simplified explanation. All that legal fine print makes IKEA the 3rd the largest charity in the world, only 30% smaller than the Bill and Melinda Gates Foundation. IKEA is certainly not unique in its complexity legal structure, but, when registering as a charitable foundation, it goes beyond standards of most global companies. All of this, he claims, is designed to protect control of the company by third parties, including, in all honesty, the founder's own family. Critics, however, argue that control is only secondary benefit after tax evasion. Legally, physically and financially, IKEA is, today, more global than Swedish. And yet he has one of the strongest, most resilient brands in history. IKEA has come to embody some rare type of friendly capitalism. After all, despite its size and controversies, who could hate a theme park? In its embrace of capitalism and likeness at an amusement park, IKEA reminds a little from another unique place on earth .

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