Understanding IKEA

To keep growing at that pace, Ikea is accelerating store rollouts. Nineteen new outlets are set to open worldwide in the fiscal year ending Aug. 31, 2006, at a cost of $66 million per store, on average. CEO Dahlvig is keen to boost Ikea's profile in three of its fastest-growing markets: the U.S., Russia (Ikea is already a huge hit in Moscow), and China (now worth $120 million in sales). In the U.S. he figures the field is wide open: "We have 25 stores in a market the size of Europe, where we have more than 160 stores." The goal is 50 U.S. outlets by 2010: Five are opening this year, up from just one in 2000.

The key to these rollouts is to preserve the strong enthusiasm Ikea evokes, an enthusiasm that has inspired two case studies from Harvard Business School and endless shopper comment on the Net. Examples: "Ikea makes me free to become what I want to be" (from Romania). Or this: "Half my house is from Ikea — and the nearest store is six hours away" (the U.S.). Or this: "Every time, it's trendy for less money" (Germany).

What enthralls shoppers and scholars alike is the store visit — a similar experience the world over. The blue-and-yellow buildings average 300,000 square feet in size, about equal to five football fields. The sheer number of items — 7,000, from kitchen cabinets to candlesticks — is a decisive advantage. "Others offer affordable furniture," says Bryan Roberts, research manager at Planet Retail, a consultancy in London. "But there's no one else who offers the whole concept in the big shed."

The global middle class that Ikea targets shares buying habits. The $120 Billy bookcase, $13 Lack side table, and $190 Ivar storage system are best-sellers worldwide. (U.S. prices are used throughout this story.) Spending per customer is even similar. According to Ikea, the figure in Russia is $85 per store visit — exactly the same as in affluent Sweden.

Wherever they are, customers tend to think of the store visit as more of an outing than a chore. That's intentional: As one of the Harvard B-school studies states, Ikea practices a form of "gentle coercion" to keep you as long as possible. Right at the entrance, for example, you can drop off your kids at the playroom, an amenity that encourages more leisurely shopping.

Then, clutching your dog-eared catalog (the print run for the 2006 edition was 160 million — more than the Bible, Ikea claims), you proceed along a marked path through the warren of showrooms. "Because the store is designed as a circle, I can see everything as long as I keep walking in one direction," says Krystyna Gavora, an architect who frequents Ikea in Schaumburg, Ill. Wide aisles let you inspect merchandise without holding up traffic. The furniture itself is arranged in fully accessorized displays, down to the picture frames on the nightstand, to inspire customers and get them to spend more. The settings are so lifelike that one writer is staging a play at Ikea in Renton, Wash.

Along the way, one touch after another seduces the shopper, from the paper measuring tapes and pencils to strategically placed bins with items like pink plastic watering cans, scented candles, and picture frames. These are things you never knew you needed but at less than $2 each you load up on them anyway. You set out to buy a $40 coffee table but end up dropping $500 on everything from storage units to glassware. "They have this way of making you believe nothing is expensive," says Bertille Faroult, a shopper at Ikea on the outskirts of Paris. The bins and shelves constantly hold surprises: Ikea replaces a third of its product line every year.

Then there's the stop at the restaurant, usually placed at the center of the store, to provide shoppers a breather and encourage them to keep going. You proceed to the warehouse, where the full genius of founder Kamprad is on display. Nearly all the big items are flat-packed, which not only saves Ikea millions in shipping costs from suppliers but also enables shoppers to haul their own stuff home — another savings. Finally you have the fun (or agony) of assembling at home, equipped with nothing but an Allen wrench and those cryptic instructions.

A vocal minority rails at Ikea for its long lines, crowded parking lots, exasperating assembly experiences, and furniture that's hardly built for the ages (the running joke is that Ikea is Swedish for particle board). But the converts outnumber the critics. And for every fan who shops at Ikea, there seems to be one working at the store itself. The fanaticism stems from founder Kamprad, 79, a figure as important to global retailing as Wal-Mart's Sam Walton. Kamprad started the company in 1943 at the age of 17, selling pens, Christmas cards, and seeds from a shed on his family's farm in southern Sweden. In 1951, the first catalog appeared (Kamprad penned all the text himself until 1963). His credo of creating "a better life for many" is enshrined in his almost evangelical 1976 tract, "A Furniture Dealer's Testament". Peppered with folksy tidbits — "divide your life into 10-minute units and sacrifice as few as possible in meaningless activity," "wasting resources is a mortal sin" (that's for sure: employees are the catalog models), or the more revealing "it is our duty to expand" — the pamphlet is given to all employees the day they start.

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