IKEA, Sweden’s Jewel

Focus On: Merchandising & Creative

The year was 1943. World War II was raging across Europe. Norway was occupied by Germany. The Nazis needed access to open ocean and the deep-water fjords to shelter their great ships. Next door, Sweden remained neutral and relatively untouched by the conflict.

In the town of Elmtaryd, Sweden, in the parish of Agunnaryd, an ambitious 17-year-old boy named Ingvar Kamprad traveled from farm to farm selling seeds from a box on the back of his bicycle. He had other items to sell—fountain pens, pencils and matches—but couldn’t inventory them all on a bicycle. So he hit on a unique distribution idea.

He printed fliers that were delivered by the milkman to every house and farm in the area—the equivalent of today’s saturation mailing via ADVO. The difference between Kamprad’s business model and ADVO’s was that the milkman took the orders and delivered the merchandise.

Furniture was Kamprad’s passion, so a new business model was required. With his revenue from the door-to-door business he bought an old joinery and turned it into a display room for local furniture-makers. His philosophy was to make available good-looking, sturdy furniture that would enhance the lives of ordinary people who didn’t have a lot of money and who lived in his hardscrabble parish. Local retailers naturally were unhappy when this direct selling method started undercutting their prices. So he again changed his model, this time designing his own products so no one could accuse him of unfair competition.

In 1955 he designed and sold his first line. In 1956 he began creating furniture that could be shipped flat, so customers could cart it home rather than pay extra for delivery. His first item was a coffee table with detachable legs. The first store opened in Älmhult, Sweden, in 1958. In 1963, Kamprad expanded to Oslo, Norway, and IKEA—which stands for Ingvar Kamprad (the founder’s name) Elmtaryd, Agunnaryd (his hometown)—was born.

Kamprad Expands to America

The first North American store opened in 1985 in Plymouth Meeting, PA, a suburb of Philadelphia. A few painful lessons were learned here. For example, some items, such as bed sheets, were marketed using a metric system—resulting in low U.S. sales and high rates of return. The savvy Swedes soon adapted their merchandising strategies.

Today, IKEA has 171 stores in 31 countries—all of them in close proximity to large urban areas—including 15 in the United States and nine in Canada. The global network brings in $9.6 billion a year, employs 65,000 co-workers, and is visited by 260 million people annually.

Last December, IKEA opened its second store in Moscow. First to cross the threshold was a cat—a time-honored tradition in Russia when a new building is opened (cats are believed to have magical powers and drive away evil spirits). But not just any cat came traipsing in.

“We ran a competition to find a handsome cat with a Swedish heritage,” wrote Irena Vanenkova, head of public relations for IKEA Russia, in the company’s newsletter.

The publicity it generated was impressive: 20 newspapers, magazines and Web sites wrote about the competition. Such PR would have cost many thousands of rubles in advertising with none of the resulting positive editorial coverage.

Flat-packed Products

The current IKEA business model is revolutionary—unlike any retail-catalog operation in the world today. To understand how they have achieved this status, it’s important to examine a few key elements.

Kamprad’s original concept of creating products that can be flat-packed for easy delivery has been carried to the limits. If furniture can be flat-packed, many more SKUs can be inventoried, and customers can take delivery at the store.

Similarly, if kitchen items are designed to be stackable, shipping pallets can contain far more items, thus saving costs, and passing those savings on to the consumer. An example is the design of the IKEA BANG coffee mugs that stack into themselves, enabling a pallet to contain 2,000 rather than the usual 400 of a traditional design. With this kind of efficiency, IKEA sells these handsome little mugs for only 50 cents each. And 25 million are projected to be sold in the coming year. What’s more, since many of IKEA’s customers have small kitchens—as in starter homes or college apartments—these mugs take up 80 percent less room on the shelf.

The same design holds true for other products. For example, IKEA offers a 12-pack of tumblers for $4.95. Particularly dazzling is the handsome FALSTERBO sofa that triples as a settee, a reading lounge chair or, once extended, a twin bed. And it ships flat.

The Creative Process

IKEA develops nearly all of its own products and insists its designers get out of their studios to work directly with the material-handling people, as well as its network of 2,000 suppliers in 55 countries. Their goal is to create the most efficiently transportable items that also are stylish and ecologically sound. Further, it holds its manufacturers to rigid standards of excellence that include sturdiness, safety and material content.

For example, through research and cooperation with groups such as Global Forest Watch, IKEA executives are working toward their goal of sourcing all wood products from verified, well-managed forests.

In addition, strict standards are imposed on the use of chemical elements such as formaldehyde in board materials and the flame retardants applied to upholstery materials. Alternatives to environmentally unfriendly materials such as PVC are being introduced to the range. And of course, all catalogs are printed on recycled paper.

What’s more, few companies are as devoted as IKEA to enhancing the lives and communities that it touches. For instance, it has a specific corporate policy against working with vendors who have sweatshops or use child labor. Indeed, with 40 trading offices worldwide, IKEA maintains fanatically strict oversight on the social and environmental practices of its suppliers.

The IKEA Experience

IKEA’s chief of corporate public affairs, Clive Cashman, is a low-key, upbeat, immensely knowledgeable Australian. He answered every conceivable question about the company’s history, philosophy, practices and, of special interest to readers of this publication, the catalogs.

Visiting an IKEA store is a hoot. Walking into the Plymouth Meeting store, I am immediately confronted with a “Welcome to IKEA” stand that offers free tape measures, pencils and shopping guides. Just beyond that is a room filled with thousands of soft, brightly colored balls. This is the playroom in which toddlers can be turned loose under professional supervision while their parents attend to the serious business of shopping. The cafeteria is off the main lobby, which means you head off to the furniture galleries savoring the smell of bread being baked.

IKEA’s demonstration rooms are bright, stylish and colorful. They show off the furniture, and are filled with knickknacks, picture frames and inventive lighting—all of it designed to give the shopper a feeling of home and comfort.

From here, you enter the furniture showrooms where all of the pieces are individually displayed in various sizes and colors. Throughout the store are desks where customers can make notes on their free notepads using their free pencils after measuring furniture with their free tape measures.

Once you’ve made your selections, you’re directed to the precise aisle and section of the warehouse where you can pick up your purchases. Of course, anything can be delivered, but with IKEA’s extraordinary design of flat-packed and stackable furniture and fixtures, you can drive it all home and get instant gratification.

The Catalogs

IKEA’s main catalog is an 8˝ x 9-3/4˝, full-color, 340-page book. Its main purpose is to drive traffic to the retail store, but at the same time it contains a rudimentary but serviceable order form with an invitation to phone or fax an order toll free. “Please include your phone number,” it requests. “A representative will call back to confirm your total price including tax and shipping.”

The catalog is produced by IKEA’s Älmhult, Sweden, internal agency in 42 editions in 24 languages. These are distributed in 32 countries to 110 million consumers. For the 2003 catalog, the agency will create four main versions globally—for Europe, North America, the Asia-Pacific markets (including Australia) and a fourth version for “external franchisees” such as Saudi Arabia, Kuwait, UAE, Greece, the Spanish Islands and Iceland.

Creative is done in Älmhult; film is completed in Sweden and Denmark; and catalogs are printed at a number of locations. The North American edition is printed in Kentucky by Quebecor World.

In addition, the agency produces several seasonal and product-specific books such as The Smart Kitchen, Professional Office Furniture and IKEA Summer.

IKEA’s creative personnel break some of the traditional rules of catalog design, such as using sans serif type, some black type against dark backgrounds and occasionally type over a busy background. At the same time, they’ve implemented some truly inventive design ideas. For example, the catalog shows a completely furnished room in which certain items are circled with a number that refers to copy at the edge of the page. So rather than showing a desk lamp by itself, you see what it looks like on a desk. What’s more, the catalog is filled with charts and schematics that show designs, sizes, colors and prices, enabling the merchandisers to display one item but list its many variations.

In addition to the full-color books, the internal agency creates black-and-white fliers, buying guides showing all parts of a furniture series and ideas for combinations—always with prices shown. Because the catalog is designed to drive store traffic, every IKEA retail establishment stocks the SKUs in the catalog. In addition, the mega-stores—such as the monster you see along the New Jersey Turnpike near the Newark Airport—offer many more items.

Everything about IKEA is alive, stylish and friendly—from the bright blue and yellow logo (the Swedish national colors) to the light, airy page designs and the copy that invites you in. Following is an example from a recent catalog edition:

At IKEA we think of the catalog as the starting point for new products and ideas. Now more than ever it has been our goal to launch new items in both the catalog and in the store. In fact, this year we will introduce nearly 2,500 new products making it possible for your home to be as up to date as you are. But that’s not all that’s new. We have also been able to lower prices on some very popular items and hope you’re as happy about this as we are. In keeping with the IKEA philosophy, we believe that good design and good quality are only meaningful when they come at a good low price.

IKEA not only enables consumers to find great ideas, but it’s a treasure trove for catalogers, too.

Actionable Tips from IKEA

• Use environmental shots: Many shoppers have a hard time imagining what a product will look like in their homes. Rather than straight cut-and-copy design, IKEA shows several products together in their natural settings, for example, a bedroom, kitchen or office. They circle each of the products, give each a number and then describe them elsewhere on the page.

• Keep costs and prices in check. IKEA designers work hard to shave costs and pass the savings along to consumers. The company’s signature technique is to discern how to cut shipping costs by getting more items on a pallet. Are your suppliers shipping merchandise to you in the most cost-efficient manner?

• Stock efficiently. It’s company policy to ensure that each item in the IKEA catalog is in every store. Out-of-stock SKUs make customers cranky, and back orders are expensive. How precise is your inventory control?

• Keep the ordering process for customers simple. The IKEA order form is positively rudimentary. “The order form should be so simple that an idiot can understand it,” writes freelancer Malcolm Decker. What makes IKEA’s so simple is it contains no tiny type or complex chart of shipping charges. Instead, customers give IKEA their phone numbers, and reps call to confirm orders, shipping charges and taxes. While IKEA executives admit it’s challenging to call every customer, they note that it also is a nice thing to do and offers the opportunity for an upsell. Worth a test in your catalog operation?

About This Company

U.S. Headquarters: Plymouth Meeting, PA

Products: home furnishings

Number of catalogs mailed

annually: 110 million worldwide;

42 editions in 24 languages distributed in 32 countries

Number of retail outlets worldwide: 171 in 31 countries

Annual sales: $9.6 billion

Number of employees: 65,000

Number of suppliers: More than 2,000 in 55 countries

Pernille Lopez,

president,

IKEA North America

Denny Hatch is a contributing editor to Catalog Success.