Ikea: Euro success story makes big impact in U.S.
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By Gerri Hunt -- Kids Today, 6/1/2009 12:00:00 AM
Back in 1943, a company was born in southern Sweden. The founder named it Ikea — from his name, Ingvar Kamprad, and the farm he grew up on called Elmtaryd, in the parish of Agunnaryd.
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Kamprad, who retired in 1986 but remains a company advisor, started his business at age 17, when he bicycled around the neighborhood selling pens, Christmas cards and packets of seeds. Five years later, an armchair was added to his product mix.
In 1951, Kamprad distributed his first catalog, and the company started designing its own furniture in 1955. A year later, an employee unscrewed the legs of a table so it would fit into a customer's car, making history and marking the retail revolution of flat-packed products.
Kamprad opened a retail store in 1958, and added a restaurant inside. He had a philosophy that "you can't shop on an empty stomach," so he wanted to offer shoppers classic Swedish dishes like meatballs with lingonberries and cream sauce.
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| Ikea's Scandinavian heritage is evident in the design of the Leka baby gym. The play mat below is part of the same collection. |
That was followed by the development of a global supply network, and the first store outside of Sweden, in Norway.
The retailer's business idea is "to offer a wide range of well-designed, functional home furnishings at prices so low that as many people as possible can afford them."
Ikea products are designed with the price tag first, challenging the designers to be innovative and to think differently, resulting in quality furnishings at low prices.
Youth had always been part of the business, but was limited to a few lamps, bedding and a duvet cover. But that changed around 1985 — at the same time the United States saw its first Ikea store open near Philadelphia.
"We decided to unify all the children's offerings into one department, and to create a stronger statement for customers," said Joseph Roth, public affairs director.
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Restrooms were adjusted to accommodate children, and the restaurant added hot dogs, peanut butter and jelly sandwiches, milk and baby food. "(The changes) enhanced the brand, the store's family-friendliness, and increased sales," he said.
Ikea approaches its youth lines the same way it tackles its adult lines: "We offer products that are stylish, useful and affordable," Roth said. "You can't get them elsewhere, and you can take them home on the same day."
Youth products include beds, case goods, high chairs, bedding, lamps, small plastic and wood toys, feeding items, tea sets and plush, as well as storage and hangers.
Best sellers include:
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Trofast, a flexible storage system with a pine frame that can be customized with shelves, boxes, drawers or doors.
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The Mammut Collection, which features a table, chairs, nightstand, dresser and wardrobe, finished in bright colors or pastel, with an animated look.
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PS Fångst, a cylindrical hanging net with shelves and holes, which makes cleanup fun because items can be tossed in.
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| Ikea's inspirational room settings make it easy to see how pieces work together. |
Ikea provides visitors with a supervised play area called Småland, which looks like a typical farmhouse and forest in Sweden. Children can play and climb on faux rock walls, pine trees and a wooden shoe, and join puppet shows and other interactive activities. There are also family-friendly play areas throughout the store.
But one of the most unique things about Ikea is the shopping experience itself.
Pencils, shopping lists, tape measures, store maps, catalogs, shopping carts, big yellow shopping bags and strollers are available in the Ikea entrance lobby and throughout the store.
The floor is laid out with inspirational room settings, plus basic stocked shelves known as the Marketplace.
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"The display areas feature fully-furnished life situations with Ikea furniture and accessories, tailored to various lifestyles," Roth said. Five to 10 room settings feature children's bedrooms, while some adult room settings highlight a customer who might be living with children. For example, a high chair might be pulled up to a dining room table, or a sofa might have a toy chest behind it.
Price tags include information such as product type/function, name, details (size, color and measurements), features, benefits, designer and price. One of the key parts of the tag indicates where to pick up the item. Red tags direct customers to the Marketplace for small items and accessories, or to the Self-Serve Warehouse for furniture. Yellow tags mean the product can be retrieved at the Furniture Pick-up area where staff will help with heavier items.
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The self-serve shopping concept and ready-to-assemble products, with globally-used pictorial assembly instructions, allow customers to take their purchases home and use them the same day.
Ikea's shopper ranges from college students and young families to empty nesters and senior citizens. "The typical customer is a female in her late 30s to early 40s, shopping with children," Roth said.
To reach those customers, he said Ikea is "making a concerted effort to reach out to mom bloggers and publications other than (daily newspapers)," to go after a more specific audience.
Ikea's good reputation brings job seekers in to apply. "They find us; we don't spend much for ads to recruit," Roth said. "The No. 1 goal is for an employee to be compatible with our culture."
Job applicants go through one or two interviews, sometimes as a group to engage their interaction skills. "We look for employees who are solutions-oriented, friendly, take initiative, are hard working and fun to be around," said Roth.
Ikea is ranked as the No. 2 furniture retailer in 2008 by sales volume by Furniture/Today, a sister publication of Kids Today. It has also been ranked on Fortune's annual "100 Best Companies to Work For" list three years in a row; Working Mother magazine's annual list of "100 Best Companies for Working Mothers" four years in a row; and Training magazine's annual "Top 125" ranking of companies that excel at human capital development, five years in a row.
Nevertheless, the retailer does have some challenges.
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Ikea has to work on brand awareness in some markets, because it is relatively unknown. There is also a misperception that it carries only furniture, so the retailer has to spread the word that it has accessories as well. Plus, not everyone is into the Scandinavian style. "But we do have a lot of pieces with a country or traditional feel."
One of the retailer's best business ideas was the concept of letting customers get their own merchandise from the warehouse, he said.
One of the worst business moves was that when Ikea entered the United States, it didn't change from the metric system. That meant that bed frames, mattresses and sheets didn't match what the customer already had at home.
Along those lines, Ikea's drinking glasses flopped in the United States because they were too small. "Large glasses were not offered, because there was no ice (in the other markets)," Roth said.
The biggest battle the retailer faces now is the economy.
To help combat the tough times, Ikea hosts monthly events to attract consumers. During "Seize the Days," it offers a select variety of items at a great price. "It reminds customers that we're about affordability, and it reminds them of our accessory offerings," Roth said.
But business levels have remained relatively strong, he said, despite the economic downturn. "People are not buying new homes. They're focused on good values for their money," he said.
Ikea's future plans include opening 10 to 20 stores each year across the globe, including new markets like the Republic of Ireland, Bulgaria, and Dominican Republic. Growth will continue in Russia, Japan, China, the United States., Spain, Sweden, the U.K. and Italy.
The first Ikea-owned factory in the United States opened last year in Danville, Va., and more are planned worldwide. On the manufacturing side, distribution centers are opening across the globe.
"The most expensive part (of the retail operation) is the distribution and transfer of goods," Roth said. "So the more you can bring them closer together, the more lower prices you can offer."
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