A New Era For IKEA

It is 90 years since Ingvar Kamprad started selling matches to his neighbours and around 70 years since his small business selling matches, flower seeds, greeting cards and Christmas tree decorations began to take roots in the furniture industry. This year, Ingvar Kamprad, founder of Swedish shopping giant IKEA, died. Looking forward, the question looms: can IKEA’s new CEO continue to furnish the same success without their charismatic founder, and replicate the vision he shared with his employees?

There is no doubt that Kamprad was a visionary leader. Loof, the current chief executive of Inter Ikea, remembers how Kamprad told his employees that he only wanted to talk about the mistakes they’d made, not about new products or accessories, but about the mistakes and how they could learn from them; there were prizes for those who’d made the biggest. From a small business in the woods of southern Sweden, Kamprad built a multinational empire which boasted 411 stores spanning over 49 countries, turning over €38bn a year. According to the Financial Times, in some years the Ikea catalogue was reportedly the most printed book after the bible.

As famous for flat-pack furniture as it is for meatballs, Ikea has changed the way consumers shop, forcing them to do the choosing, packing, designing and assembling themselves, Ikea can offer a cost-friendly shopping approach which, in their own words, is “for the many people”. However, following the death of its founder and facing an increasing threat from online providers of furniture and urbanisation, Loof clearly asserted that “one era is ending and another beginning”.

According to chief executive Jesper Brodin, the company may try to overcome such challenges through penetrating city centres. Such a model has been tested in the centre of Stockholm, whereby a small shop has been set up containing only Ikea kitchens, and in Madrid, whereby a city-centre store offers just bedrooms. Digitalisation also poses a threat as there’s an increasing need to integrate both good in-store customer service and a good website as physical and digital worlds converge.

Other ways IKEA is looking to continue on its path of success is to cross boundaries into markets such as South America and India. Following its success in serving the expanding middle class after the war, Ikea may look to do the same in China and in India whereby a middle class is now emerging. This strategy has proved successful to other Western companies such as Starbucks which now has a huge presence in urban Chinese cities.

Other challenges Ikea faces are tax controversy and concerns regarding sustainability. Many argue that although Inter Ikea and Ikea Group are two separate entities, the way they operate suggests otherwise as they work closely together and the family sits on both boards. It is not transparent and in December 2017 was investigated by the European Commission to see whether it benefitted from illegal state aid.

Furthermore, Ikea is among the world’s biggest users of wood. In a time where business sustainability plays an increasing role in customers consumption decisions, it may threaten Ikea’s success. Ikea is, however, working hard to become a circular company; reusing, refurbishing and recycling.

In conclusion, Ikea is a remarkable and successful business with a model and leadership that could be described as revolutionary. However, as urbanisation, digitisation and increasingly complex consumer behaviour change the way we shop and value a firm’s service, Ikea needs to transform itself into a business which sticks to the Ikea culture of “doing it a different way… for the many people” but equally meets the needs and desires of the modern-day consumer.

By Chloe Pryce

image: [incitrio]