IKEA Insists That You Are Not Going To Pay a Lot for This Sofa
Swedish retailer prospers by combining form, function, and low cost. DESIGN COMES FIRST
HERE, in what the Swedes call ``the deep wood'' south of Stockholm, Tord Bjorklund works at his drawing board to create household items that must meet three criteria for global distribution: good design, high quality, and low cost.
``You don't come here if you want to work on the $100,000 piece,'' Mr. Bjorklund says.
Welcome to the philosophy that drives IKEA International A/S. Once a catalogue company, IKEA has been propelled from the woods into worldwide sales of $4.5 billion worth of ready-to-assemble furniture and related decor, often pricing merchandise between 10 and 30 percent less than other retailers.
``It's more demanding to work here because of the cost factors,'' explains Bjorklund, an award-winning chair designer. ``If it doesn't have form it's bad. Function isn't enough.''
Form, function, and low prices find their way into nearly everything from sofas, cutlery, linens, bookcases, curtains, lamps, end tables, stuffed animals, plants, and bulletin boards to dining-room sets, kitchens, and bathrooms. Stores even have their own design teams to help customers configure furniture to their available space and their budgets.
Last year the company, which takes its name from the initials of founder Ingvar Kamprad, and his nearby hometown of Elmtaryd in the Agunnaryd parish, celebrated 50 years of designing for and selling to style- and price-conscious consumers.
Stichting Ingka, a non-profit foundation Mr. Kamprad set up to avoid paying Sweden's high inheritance tax, owns IKEA. Its worldwide financial headquarters are in Copenhagen, while Kamprad lives in Switzerland.
Today, IKEA has 119 stores in metropolitan locations in 24 countries. Twenty of them are in North America, and 12 of those are in the United States. Five alone are in the Los Angeles area. But while the company is scouting new locations in Chicago and Atlanta, US expansion in 1994 is on hold as the recession lingers.
In an effort to boost sales in the US, the company is planning to convert from a metric system to an American standard of measurement later in the year. ``America is the graveyard for European retailers,'' says Gorun Carstedt, president of IKEA of North America at company headquarters outside Philadelphia. ``It's very hard to succeed here.''
Indeed, British retailer Conran's Habitat has filed for bankruptcy protection in the US, and IKEA has bought the European holdings of Conran's, keeping the name Habitat. IKEA has also been forced to close boutiques in Canada and Japan and a store in the former Yugoslavia.
``IKEA is seen as a starter set for people living in apartments or who have just bought their first homes,'' notes trend-watcher Faith Popcorn. ``IKEA offers consumers an environment they can control and take care of.''
But older consumers or those with more disposable income are gravitating to such furniture names as Ethan Allen for what retail consultant Bill Flatley, of Levy Kerson Associates, a New York-based retail consulting firm, calls ``investment pieces.''
At the low end of the retail furnishings industry is Pier 1 Imports. Mr. Flatley calls it an ``accessory store.''
``There's overlap at either end, but IKEA is in the middle with its wide choice, low prices, and streamlined furniture style,'' he adds.
To keep prices low, IKEA's designers and product managers deal directly with 1,800 suppliers located around the world. Forty percent of IKEA's US inventory comes from North American suppliers, according to Mr. Carstedt.
To encourage browsing in its stores - many of which are the size of airplane hangars - shoppers are given bags, carts, catalogues, tape measures, and pencils to help keep track of their merchandise. There is also a cafeteria and gourmet store of imported Swedish foodstuffs.
IKEA also maintains separate restrooms for nursing mothers complete with changing tables, and children's playrooms managed by childcare workers. The company calls this feature ``the ballroom'' because it is filled with inflatable balls.
To emphasize how easy it is to own IKEA furniture, the company makes almost every box easy to lift and put in a car. Simple instructions along with a tool kit are included.
``IKEA is putting money and effort into better assembly and instructions,'' says Per Hahn, product manager for bookcases, the company's most profitable line. ``For the ready-to-assemble market, we work with style and function, followed by price.''
After bookcases, IKEA's top-selling products are storage units followed by kitchens then rugs - all items that can easily be complemented by IKEA's wide range of housewares.
While IKEA has been exporting its contemporary Scandinavian style abroad, it has found an opportunity to export an American style back across the Atlantic. ``Europeans are picking up on the American concept of entertainment units,'' Carstedt says. ``So, now we are developing this in the US and are selling it in Europe.''
Both Carstedt and Mr. Hahn share the observation that consumer tastes are merging globally. Hahn, who works in Almhut, also says that consumers around the world are favoring lighter wood finishes, light-weight textiles, and are moving away from chrome-plated finishes to epoxy lacquer on furniture.