I'm at Ikea today.
Of course, we're gonna shop around.
Ikea. Ikea. Ikea, Ikea store.
I love Ikea. I've been shopping online, this
morning. I buy a lot of things from Ikea.
Yesterday. I love the princess cake.
While I was in Miami on vacation last week.
The Malm collection, of course.
And these at Ikea are $5.99.
It was such a great price, I actually grabbed a
second one. The Besta cabinet.
I don't think addicted, but if I had a bigger
allowance to shop there, probably.
Welcome to Ikea. The only place in the world
where you can snack on Swedish meatballs while
you shop for your new Poäng chair or Färgrik mug.
Ikea has 433 stores in 53 countries.
Three hundred sixty-seven of them are owned and
operated by Ingka Group.
Despite serious product recalls and food court
scandals, Ikea is going strong.
There is something about the uniqueness with the
yellow and blue and the meatballs and the long
way through the stores and maybe the twinkle in
the eye as well. That makes us just a little bit
more human than others.
But that's just speculation.
Ikea's combined global and online presence is
massive. It brought in $45 billion in retail
sales, had 1 billion store visits and 2.8
billion online visits in 2019.
Its closest competitor in the home furnishing
space, Bed, Bath & Beyond, brought in $12 billion
in 2018 in in-store sales.
Before the massive blue and yellow warehouses,
there was a young Swedish man with a simple idea.
"Why are beautiful products only made for a few
buyers? It must be possible to offer good design
and function at low prices."
Ikea was founded in 1943 by 17-year-old Ingvar
Kamprad at Elmtaryd farm in Agunnaryd village in
Sweden. It started small, selling things like
pencils and postcards.
In 1948, Ikea started selling furniture.
In 2019, it sold seven million Billy bookcases.
A major reason people flock to Ikea is its price
point. When I hear Ikea, I think of cheap, simple
furniture that looks really nice.
Ikea falls in the affordable area of the
spectrum, but it depends on what you buy.
They have beds that start at $99.
They have really well designed beds that go up to
$500. The Ikea brand is sleek, minimal and
affordable. Ikea from its very beginning has
focused a lot on its customers building its own
furniture and therefore they could offer them
cheaper prices.
If you're starting out, you're moving into your
first apartment, you don't have a lot of money to
spend. Keep it simple.
Look at Nordic design.
Buy some simple Ikea pieces and invest in some
really nice bedding, a great rug, cool side
tables. Prices are lower in part because Ikea is
basically a giant storage facility for furniture
parts. It's the warehouse's design that sets it
apart. So what a great store will do will allow
you the pleasure of discovery.
So anytime I hear a retailer saying, "Our
consumers want to come in, take some stuff and
run out." Yes, they will.
If you didn't give them the pleasure of
discovery. So a great store will give you the
sense of comfort and familiarity and will also
give you the pleasure of discovery.
And that is when retail becomes retail therapy.
The winding maze is designed to make customers
stop and shop and spend more than they planned.
You walk through an Ikea store and you'll find a
number of mirrors.
Mirrors placed tastefully here, tastefully there,
on a table, on a closet, etc.
The brain is entranced with mirrors.
Why? Why?
When you look in a mirror, you see the most
gorgeous human being looking back at you.
Ikea plays to the narcissist in each of us.
Ikea employs mirrors everywhere through their
stores. As you walk by, you have love because you
have love for yourself in the mirror.
Point number one. Point number two, Ikea uses
white everywhere through the store.
White cupboards, white closets, white tables.
There is almost an App le-esque view.
If Apple was to design a closet, it would
probably look like an Ikea closet.
The brain perceives everything through context.
The notion of that white there symbolizes
clutter-free, pure, simple, transparent, without
saying all those words, through the judicious use
of white, that is spotless, Ikea communicates
what you aspire for your home.
The crisp, clean aesthetic lends itself to a
broad audience. But I kea doesn't just sell
furniture. Glassware.
I would always go to Ikea for glassware, dishes,
pots and pans.
I love their $500 solid wood bed.
Depending on the situation, they have some very
nice minimal sofas.
I do not shop at Ikea for bedding.
Pillows, duvets, comforters, sheets and towels I
think are items that you really want to invest
in. For families shopping at Ikea,
some locations have complimentary daycare .
With or without the kids,
shopping can be exhausting.
Do you know that the most tiring environment for
the entire human brain, the most tiring
environment, is a retail environment?
It is the worst environment for the human brain
simply because you're processing so much
information. But Ikea has a plan to keep you
energized. When I hear Ikea, I think of
meatballs. It recognizes that customers need
sustenance to keep shopping.
Right in the center of most stores, you'll find a
cafeteria serving up Swedish fare.
But in 2013, horse meat was detected in Ikea's
meatballs. The problem was traced back to a
European supplier and only affected European
stores. Ikea pulled all meatballs until this
issue was resolved.
Despite this news going viral, the iconic dish
remains on the menu. Another Ikea classic: the
cinnamon bun. Its placement near the exit is no
accident. There's a part of the brain that fires
every time you pay.
Right? And so by having the scent of baking, of
warmth, of sugar in particular, that takes the
stress out, they get down the stress of payment.
And therefore the experience is memorable without
it overwhelming you with how much money you spent
out there. But whether you buy Ikea furniture in
the store or online, once you open the boxes,
it's time to get to work.
The problem with Ikea was you realized that the
closet was so minimalist and beautifully
designed. But, oh my God.
There are 10 million parts I got to put together
to get the minimalistic design.
What I don't like is that you have to put
everything together by yourself.
Like, I want a delivery!
Deliver it to me and put it together.
Like, what if you're a single mom?
You don't have anybody to do that for you.
However, according to a 2011 study by Harvard
Business School, you are more inclined to value
an item you built yourself.
The study even named this phenomenon the "Ikea
Effect." But many customers don't want to
assemble their own furniture.
One of the other really big trends we're seeing
is a shift toward services.
So you have people like Amazon that are offering
convenience. Now, all of a sudden, it's not just
how good is a product in your store, it's what
kind of simplicity can we offer our customers?
The Besta cabinet is the most versatile.
It stands on legs.
You can hang it on the wall.
Anything you need the Besta unit to do, I highly
advise it. Hire TaskRabbit to put it together and
hang it on the wall. It'll just make your life
easier. So in 2017, Ikea acquired TaskRabbit.
Now, for a flat fee, Ikea customers can hire
TaskRabbit to do the assembly.
Since the acquisition TaskRabbit's, furniture
assembly tasks have gone up from 2 % to 10 %.
There's been a lot going on with Ikea lately.
Since 2010, the company has recalled millions of
products. The most infamous, the Malm line of
chests and dressers.
Ikea is recalling 29 million dressers for a
second time after the product was blamed for the
death of an eighth child in May.
Consumers are being asked to secure the items or
return them. It still sells these items today.
Ikea is currently making some necessary changes
to its business model.
One of the new things, if you like, is the
investments in digital.
Well, we have given ourselves three years to make
a massive transformation.
So if you want to do it at home on a Tuesday
evening when the kids are to bed and things are
done, we will try to bring our solutions and our
knowledge digitally to you.
It's investing in its online presence, delivery
services and opening smaller stores.
The majority of Ikea stores are operated by Ingka
Group. Its operating income, one measure of
profits, was down 26 % in 2018.
Ingka Group says the drop in profits is part of
the plan. Ikea will close its only U.S.
factory at the end of 2019.
Ikea Group, the owner of most Ikea furniture
stores worldwide, says it plans to cut 7,500 jobs
over the next couple of years.
Those cuts will be focused on administrative
staff positions. At the same time, however, the
group also says it will create 11,500 new
positions as it expands with new store formats
and online.
Ikea thrives on a business of quantity, not
quality. You can say that Ikea is the fast
fashion of home furnishings because it does
produce relatively inexpensive products that may
seem disposable because of the, say, average
quality. You know, whether or not Ikea is
sustainable because of that functionality of
encouraging people to buy more.
True sustainability would be people buying better
quality things that last longer.
And that results in fewer purchases.
But that is not how corporations work.
It seems like customers don't work that way
either. Depending on the country,
people will say that they care about the climate.
They care about sustainability.
But if there's a higher price tag, to that, it
will deter some people.
It's very easy to design a sofa for $3,000, but
to do a comfortable sofa with good quality that
the kids can jump up and down in with removable
covers, you can wash them, that is made of
sustainable foam that you can bring back in the
supply chain and make a new sofa.
And it's beautiful and comfortable at the low
price is very, very difficult.
So our fascination is around that problem, not to
make something expensive.
Ikea alone used 18 million cubic meters of
commercial wood in 2018.
It's making a conscious effort toward
sustainability. As of 2018, Ikea's Ingka Group
owns around 445,000 acres of responsibly managed
forests. Combined, that's bigger than Alaska.
Ingka Group has planted 3.6
million trees and had harvested 700,000 trees in
2018. The clock is ticking.
So it's time for companies like us to commit and
start working out our plans and live with that
we might not have all the answers, but we will
find them in the decade or so to come.
While the company aims to make internal changes,
it's also focusing on extending the life of
products it's already sold.
Ninety percent or north of 90 % of all our
consumers are concerned today, are really
concerned about climate.
But only 3% know what they can do.
So what we will try is to try different ways of
supporting them with saving water, waste, energy
and to that testing, trying new ways of where you
can also rent furniture, or lease furniture from
us. So we keep the furniture in the system a
longer while. So that's just one of the different
tests that we are doing right now.
In the meantime, Ikea is opening planning studios
in city centers.
The showrooms are significantly smaller than
traditional Ikea stores.
What Ikea and a lot of other retailers are trying
to do is downsize their footprint and focus on
doing smaller stores that can cater to today's
shoppers. The first Ikea planning studio opened
in Manhattan in April 2019.
Giants like Target and Dollar General are also
opening smaller shops.
And online companies like Wayfair are also
adjusting their strategies.
So one strength that Ikea has is the fact that it
does have a brick and mortar footprint because
people can pick it up and that's cheaper for them
to operate. One of the things that Wayfair really
struggles with is its cost of doing business.
That's why we're actually seeing Wayfair go into
brick and mortar. So you're kind of seeing online
retailers trying to adapt to brick and mortar and
brick and mortar like Ikea, trying to adapt to
online. But both have strengths
the others want.
Wayfair is just one of many retailers coming for
Ikea. For now, Ikea is still on top, but can it
stay there? Or will the growing marketplace level
the playing field?