Ikea

Unless you’ve been hiding under a stone, you’ll have a good idea of what IKEA is (and you have probably, at some point, put together some of its flat pack furniture). But do you know where this highly successful brand and business has evolved from? Well, the answer – as with most success stories – is from very humble beginnings.
To give you some background, the company was set up by a (very) young Swedish boy called Ingvar Kamprad in 1943.

The world was a very different place when Ingvar was growing up in Agunnaryd, Sweden during the Great Depression, and this tough upbringing gave the young boy a great appreciation for thrift. Even at a tender age, he showed an extraordinary aptitude for entrepreneurship.

At just five years old, Ingvar bought matches in bulk and sold them from his bicycle at a profit. Quickly addicted to the buzz of selling for a profit, Ingvar moved on to ballpoint and fountain pens, Christmas cards – and even fish!

“Talk about the profit margins, but I still remember the lovely feeling. I can’t have been more than five at the time,” he recalls in Leading by Design – the IKEA Story…and all of this from a young boy who was dyslexic.

When he was 17, as a reward for some success at school, his father gave Ingvar some money. Ingvar used this money to set up the business which would become IKEA. (The name, by the way, is a mix of his own initials and places close to his heart; Ingvar Kamprad Elmtaryd Agunnaryd.)

So, in 1943, IKEA was born with the aim of selling goods (pens, wallets, watches, picture frames, jewellery) by mail order. Ingvar travelled around Sweden looking for products to sell (not furniture at the eginning) and he advertised these goods in his catalogue. This is where the seeds were sown for the now world-famous IKEA catalogue.

History of the company logo

The current yellow and blue – both primary colours – in the IKEA logo evidently highlight the colours of the
Swedish national flag. The boldness of the lettering and the contrasting colours make the emblem really leap out. The blue colour represents trust, and the yellow depicts happiness, optimism and imagination.

It wasn’t until 1948 that Ingvar started to sell furniture, produced by local manufacturers. The early offerings ranged from sofa beds to cut-glass chandeliers.

Because of his dyslexia, Ingvar found it difficult to remember the order numbers of the various products, so he decided to give each piece of furniture a name. (Now you know where the Billy Bookcase came from.) Business grew, and later that same year Ingvar took on his first employee. Within two years IKEA would be up to eight
employees.

In 1951 the company published the first ever IKEA catalogue, focusing on furniture and furnishing products. What a momentous decision: the catalogue was a great success and the company began to grow fast, with the aim of selling as much furniture as possible, as cheaply as possible.

“Not until the first complaints started coming in did I realise that it was quality that was lacking. One day that would force me to draw certain conclusions and choose another way”– Ingvar Kamprad, from Leading by Design – the IKEA Story

The mail order business had become very competitive at this stage, which was driving prices down and inevitably also the quality of the products. This proved the impetus for a change to the IKEA business – the decision to create a permanent, accessible space for customers to view the products before buying.

Ingvar opened IKEA’s first store in Älmhult, Sweden in 1953, the new idea being to provide a wide range of ffordable, well-made goods for customers to see and touch before purchasing.The impact was immediate and impressive (including the decision to offer buns and coffee to customers – which would form the basis for the IKEA in-store restaurants).

The next significant decision of the company came in 1965, when Ingvar decided to start designing their own furniture. Not long after that, the flat-pack concept was inadvertently discovered – by one of the company employees who was having problems trying to fit a wooden table into a car for safe transportation. He reportedly shouted:
“Oh God, let’s pull off the legs and put them underneath”(IKEA engineer Gillis Lundgren)

This turned out to be a pivotal selling point for IKEA. As the furniture remains unassembled, they can pass the reduced labour and storage costs onto the customer. As a result they can sell at substantially lower prices than theircompetitors.
Over the next few years IKEA would expand internationally at a rapid pace. The flat-pack phenomenon meant its furniture could be shipped relatively cheaply, and the company grew at almost the rate of a new country every year – Denmark 1969, Switzerland 1973, Germany 1974 and Australia 1975.

IKEA would first initiate and develop a relationship with a supplier in the target country, and with the subsequent provision of legal, cultural, financial and political support and insight, this would facilitate each store’s eventual launch.

In 1982 Ingvar decided to change the corporate structure of his business, forming the IKEA group. This has enabled IKEA to stay private, which Ingvar feels has been critical to its growth by allowing it to make decisions much faster than a public company might.

Ingvar documented IKEA’s vision in a booklet entitled The Testament of a Furniture Dealer, which he gave to each of his employees in 1976 as a Christmas present. Nowadays every new employee receives a copy when they join. It includes such gems as:

“You can do so much in 10 minutes’ time; 10 minutes, once gone are gone for good. Divide your life into 10-minute units and sacrifice as few of them as possible in meaningless activity.”

A visit to IKEA is predictable. You set out with the intention of spending just €50 but you exit having spent €250 on bookcases and picture frames. The company has worked hard to ensure its brand is associated not just with easy living and quality products but with social and environmental activism.

Ingvar retired in 1986 to make way for the new generation and the company has continued to grow. From his starting point of selling boxes of matches to family and friends, Ingvar Kamprad created a huge home furnishings empire which according to most recent reports boasts 328 stores in 28 countries, with over 155,000 employees selling a product range of 9,500 items. It claims to have the world’s largest print run of over 198 million catalogue copies.

The company claims global turnover of a staggering €31.9 billion, with a net margin of over 10%.Now that’s a success story.