Innovations Helped IKEA Grow
by Ron Kurtus (14 December 2013)
IKEA is the world's largest furniture retailer. It was started in 1946 by 17-year-old Ingvar Kamprad. The name of company comes from the first initials of Kamprad, his family's farm Elmtaryd, and the town Agunnaryd.
The business started as a mail-order business, selling small goods through ads and then a catalogue. Innovations to grow the business included selling furniture, first through a catalogue and then in a showroom, designing furniture for flat pack shipping and self-assembly, and outsourcing to Poland.
Questions you may have include:
- What did the catalog and showroom do to grow the business?
- How was designing furniture for self-assembly an innovation?
- How did outsourcing to Poland help the company grow?
This lesson will answer those questions.
Added line of furniture
IKEA originally sold items such as pens, wallets, picture frames, table runners, watches, and other small items, often at reduced prices. Then in 1948, IKEA introduced furniture into their line of goods. The furniture was produced by local manufacturers. The response is positive and the line of furniture expanded.
This could be considered their first innovation.
The next innovation came in 1951 when Kamprad saw the opportunity to sell furniture on a larger scale using a catalogue. Mail order of furniture through the catalogue greatly increased their sales.
Started display store
IKEA wasn't the only furniture retailer selling by mail order. In fact, IKEA soon engaged in a price war with a main competitor.
As a way to convince customers of the quality of their furniture, IKEA opened a display store in nearby Almhult where the customers could preview and inspect products. The showroom allowed IKEA to clearly demonstrate the quality of its low-price products. The innovation is a success, and people were able to choose products with the best value for money. They could buy at the store or order from the catalogue.
The success of the showroom led IKEA to stop accepting mail orders. IKEA would still publish a yearly catalogue, while customers could purchase directly from the store.
Flat packs and self-assembly
A major IKEA innovation was to start designing furniture for flat packs and self-assembly. This would greatly reduce shipping costs.
However, in 1956, the success of the company and its low prices caused competitors to pressure suppliers to boycott IKEA. So the company had to look abroad for new sources of supply as the local industry could not or would not respond to the demand.
In 1961, IKEA outsourced some production to furniture factories in—of all places—Communist Poland. They soon became IKEA's largest source and significantly lowered the production costs. This allowed IKEA to reduce its prices even more.
As IKEA grew from a mail-order business to the world's largest furniture retailer, they made a number of innovations that drove their growth.
Major innovations included as selling furniture through catalogue sales, showing quality in a display store, designing furniture for flat pack shipping and self-assembly, and outsourcing production to low cost countries helped IKEA grow and keep their prices low.
Think of the customer
Resources and references
The following are resources on this subject:
IKEA History - IKEA website
David and Goliath by Malcolm Gladwell - Includes examples of IKEA's innovations.
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Innovations Helped IKEA Grow