How IKEA Became the Largest Furniture Retailer in the World

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IKEA is a multinational retail company specialising in furnitutre. Late swedish billionaire Feodor Ingvar Kamprad founded the company as an NGO.

IKEA is world’s largest furniture company. The company is a leading name in global ready to assemble furniture market.

Key statistics ( from 2021 )

There are 466 stores of IKEA, operating in 63 countries (2021 data).

There are around 225,000 people working in IKEA stores worldwide.

Most of IKEA’s sales comes from Europe (70.7%), while America accounts for 18% and Asia, 11.3%

71% of their products are sold throught the retail outlets, while 26% are sold online.

IKEA sold highest number of products in Germany 14.2%, followed by the U.S (13.4%), France (7.7%), United Kingdom (6%) and China ( 5.1%).

Total sales, offline and online, was pegged at $48.7 billion for the financial year 2021.

Currently around 60 of their freight is transported by rail, 20 by road and 20 by sea.

The story

Ingvar Kamprad had an entrepreneural streak since childhood. As a child, he started selling matches and fishes to earn money.

The early initiatives did not bring in much, so he stopped selling them and decided to invest his little profit in something more productive.

At 14 he enrolled in a boarding school and continued business studies. There too he used to sell pen, wallets and watches to classmates.

Soon he realized that success depended on the simplest and most cost efficient distribution from factory to customers.

He started looking for a business to do that and zeroed in on furniture.

The post war Swedish Govt. had build a lot of housing and loans for home furnishing were easy to come by.

Ingvar Kamprad seized on this opportunity to build one of the greatest business empires in home furnishing in the world.

IKEA success model

IKEA offers high quality but affordable home furnishing products. They buy wood in bulk, and gets discount in volumes. They pass on the discount to customers.

IKEA consumes around 1% of commercial wood produce of the world.

They offer the widest range of home furnishing products avaiable on the market. Every year new designs are introduced which can be ordered through their online website.

One big reason for their continued success is the modular way they package their products.

Most of their products can be unassembled and carried conveniently in a box. These boxes then can be stacked on top of one another.

Stacking of products this way reduces the transportation cost. This also helps to save cost in storage.

Customers can take down the boxes and assemble their own furniture. More like a Do it Yourself (DIY) concept.

Apart from reducing the overall cost, this assembling of products involves customer participation. This gives the customers a feel of being a part of the product and ultimately promotes loyalty.

IKEA also adds an emotional touch in naming of products. Instead of assembly line labeling of products in numbers, IKEA usually names the products with human name, birds, fruits and island names.

The main focus of IKEA strategy is – producment of raw material in large volumes and global distribution in flat packages to reduce cost.

IKEA marketing strategy

The company has a constant and recognizable theme, starting from the product names to the color scheme.

Mixed and matched product design strategy gives each user a distinct product value proposition to call his/her own.

They have a participatory philosophy. Customers can engage and create designs on their own. This gives a sense of belonging and increases customer loyalty.

IKEA uses technology to give its customers the latest experience in home furnishing. They use tools to let customers preview how or if a piece of furniture will fit their lifestyle.

Sponsored content with creative partners expands their reach to new demograhic of users.

Roadmap

IKEA aims to reach maximum households in the coming days. They are entering evolving markets in developing countries slowly.

IKEA is also into making its product more environment friendly. It has began using reusable bags in place of plastic bags.

The company plans to make Green tech part of its product offerings in future. They have initiated a venture capital fund with 50 million Euros for this purpose.