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BUSINESS ISTIN FROM FOUNDER IKEA

IKEA is a Scandinavian company that, over more than 75 years of existence, has changed not only the retail world, but also the approach to the lives of millions of people around the world. She became a living legend.

The circulations of ikeev catalogs, which have been published since the beginning of the 1950s, have bypassed the Bible a long time ago, “every tenth European is made in IKEA bed”, every 10 seconds another BILLY cabinet is sold somewhere in the world – these are the most famous figures about IKEA.

Everyone loves IKEA, and IKEA loves everyone. About how she does it, tells the book “History of IKEA. A brand that has fallen in love with the whole world ”Bertil Torekul and Ingvar Kamprad.
When Ingvar Kamprad founded his small company IKEA, which traded furniture by mail, in the 1940s, he did not even imagine that one day it would generate $ 38 billion in annual revenue.

And that the company will come up with curtains that clean the air, will make designer furniture from recycled plastic and will start renting kitchens and office interiors.

How IKEA has changed the retail world

Why do people come to IKEA? Because it is a synonym for democracy, accuracy, rationality and high quality at a price with a minimum margin.

Why are they coming back? Because the cabinets, shelves and chairs that you assemble at home with a screwdriver make you involved in something huge and powerful.

The concept of “IKEA effect” even appeared in psychology – when the buyer appreciates the product more because he partially created it. What was invented for reasons of economy – disassembled furniture is cheaper to transport – has become one of the most significant differences between IKEA.

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Kamprad always appreciated the insights, but in the work of his system he relied on instructions. For all IKEA employees, he compiled a memo – “The Commandments of a Furniture Dealer.”

And although it was created for IKEA, its key principles are suitable for everyone.
1. Assortment is our “I”
IKEA has a huge number of products, but there is no chaos – each product is released for a reason: its price, appearance and purpose are thought out in detail and justified.

How IKEA has changed the retail world

Kamprad was sure that when working with the assortment, five aspects should be taken into account:

Range. The main component of the assortment is household goods, and all other areas (office and restaurant furniture) are only additions to this “axis”.

It is necessary to highlight the main products in each group and focus on them.

Style. IKEA is Scandinavia, and no innovation should erode this. Ingvar said that Belgians do not need to be taught to buy Belgian cabinets, but you can share a Scandinavian way of life with them.

In Sweden, IKEA’s product philosophy should be perceived as the brand’s corporate identity, and abroad as something Swedish.

How IKEA has changed the retail world

Functionality and quality. The product should not serve for months, but for years – this is fundamental. At the same time, the level of quality should always be justified, buyers should not pay for excess.

For example, the surface of the countertop should be more wear-resistant than the surface of the shelf – and a higher price of the countertop will be rational.

Low price with meaning. At IKEA, a product should cost less than its competitors – but exclusively at the expense of a lean approach to production, without compromising on quality or convenience.

Each product group should have an offer with a super low price. Maximizing cost savings through optimization is a goal for everyone who works at IKEA, from engineers to salespeople.

Ultimately, buyers pay for everything, Kamprad said, and the company’s goal is to make them pay less.

Changes in assortment. The main principle of IKEA is that for most people its products should be affordable. In order not to accidentally violate this principle and not go aside, decisions on changing the assortment policy should be made strictly at the level of the board.
2. Profit – a source of resources
“We do not believe that ripe plums will fall into our mouths ourselves,” Kamprad said.

He believed that the result is achieved only through hard work. Resources can be obtained from two sources: from own profit or state subsidies.

But it is better to extract these resources on your own, and not feed on other people’s labor.

How IKEA has changed the retail world

The higher the profit, the greater the resource. But if you earn on margin, either the quality of the product or the price pattern will suffer – both of them are unacceptable for IKEA.

Therefore, the company takes volume – sets the cost with a minimum margin and earns on the sale of millions of lots.

IKEA has a lot of “hot dogs” – high-quality goods at an extremely low price, like hot dogs in restaurants inside chain stores.

The cost of such goods is formed on the principle of “3 + 1 + 1”, that is, three crowns to the manufacturer, one for taxes and one company. If you cannot adhere to this rule, you need to think hard why.

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