Understanding IKEA

The American market poses special challenges for Ikea because of the huge differences inside the U.S. "It's so easy to forget the reality of how people live," says Ikea's U.S. interior design director, Mats Nilsson. In the spring of 2004, Ikea realized it might not be reaching California's Hispanics. So its designers visited the homes of Hispanic staff. They soon realized they had set up the store's displays all wrong. Large Hispanic families need dining tables and sofas that fit more than two people, the Swedish norm. They prefer bold colors to the more subdued Scandinavian palette and display tons of pictures in elaborate frames. Nilsson warmed up the showrooms' colors, adding more seating and throwing in numerous picture frames.

Ikea is particularly concerned about the U.S. since it's key to expansion — and since Ikea came close to blowing it. "We got our clocks cleaned in the early 1990s because we really didn't listen to the consumer," says Kanter. Stores weren't big enough to offer the full Ikea experience, and many were in poor locations. Prices were too high. Beds were measured in centimeters, not king, queen, and twin. Sofas weren't deep enough, curtains were too short, and kitchens didn't fit U.S.-size appliances. "American customers were buying vases to drink from because the glasses were too small," recalls Goran Carstedt, the former head of Ikea North America, who helped engineer a turnaround. Parts of the product line were adapted (no more metric measurements), new and bigger store locations chosen, prices slashed, and service improved. Now U.S. managers are paying close attention to the tiniest details. "Americans want more comfortable sofas, higher-quality textiles, bigger glasses, more spacious entertainment units," says Pernille Spiers-Lopez, head of Ikea North America.

Can the cult keep thriving? Ikea has stumbled badly before. A foray into Japan 30 years ago was a disaster (the Japanese wanted high quality and great materials, not low price and particle board). The company is just now gearing up for a return to Japan next year. Ikea is also seeing more competition than ever. In the U.S., Target Corp. has recruited top designer Thomas O'Brien to develop a range of low-priced furnishings, which were launched in October. Kmart has been collaborating with Martha Stewart on its own furniture line. An Ikea-like chain called Fly is popular in France. In Japan Nitori Co. has a lock on low-cost furniture.

Perhaps the bigger issue is what happens inside Ikea. "The great challenge of any organization as it becomes larger and more diverse is how to keep the core founding values alive," says Harvard Business School Professor Christopher A. Bartlett, author of a 1996 case study. Ikea is still run by managers who were trained and groomed by Kamprad himself — and who are personally devoted to the founder. As the direct links with Kamprad disappear, the culture may start to fade.

For now, the founder's legacy is alive and well. The Klippan couches are selling briskly. New lines of foods, travel gear, and toiletries are due soon. Ikea is gearing up for its Christmas tree promotion — you buy a live tree, then return it for a rebate (and end up shopping at Ikea in the slow month of January).

And the fans keep clamoring for more. At least once a year, Jen Segrest, a 36-year-old freelance Web designer, and her husband travel 10 hours round-trip from their home in Middletown, Ohio, to Ikea in Schaumburg, Ill., near Chicago. "Every piece of furniture in my living room is Ikea — except for an end table, which I hate. And next time I go to Ikea I'll replace it," says Segrest. To lure the retailer to Ohio, Segrest has even started a blog called OH! IKEA. The banner on the home page reads "Ikea in Ohio — Because man cannot live on Target alone."

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