Thursday, November 15, 2007

The Toy Store For Adults—IKEA

April in Paris—the City of Light, romance, the fashion capital of the world (at least it was then), romance, certainly the home of croissants, romance. That’s where I fell in love, except it was really in September, actually a better time to be in Paris than April. Yes! Some twenty five years ago, just by happenstance (probably the better word would be serendipity), is when I stopped at a doorway leading to a lovely courtyard and viewed what has become a long-term and enduring memory of beauty and form, sometimes sculptural and sensuous. There, lying in seeming innocence, untouched, virginal, obviously waiting to be picked up by residents of the compound within, were several of them. Looking about carefully to ensure I was not being observed; I selected one, (okay I stole one) and quickly returned to the hotel. It was there that I really became smitten, overwhelmed with admiration by the sights I beheld. Oh, to relive that moment when I first gazed upon the contents of an IKEA catalog!

That is truly the very first time I came in contact with IKEA, and I must admit, I am even more impressed today than that first time 25 years ago. As a one-time painter and stone carver, an admirer of art, design, color, and architecture, I was fascinated even then by the taste and design level exhibited, even though I could not decipher the French text. Some time thereafter, I had the good fortune to visit several IKEA stores and I’ve become an enthusiastic admirer. Of course, I’m hardly alone since there are some 250 stores in over 34 countries in Europe, Asia, Australia and the United States (28 of them here) that draw well over 400 million shoppers a year.

Generating close to $20 billion in annual revenues, IKEA’s success has even inspired two case studies at Harvard Business School. Unlike another giant retailer that might come to mind, IKEA was ranked two years in a row in Fortune magazine’s annual “100 Best Companies to Work For.” Why the popularity? The best way to describe an IKEA store is it’s like a Crate &Barrel on steroids with Costco-like prices. If you’ve ever visited an IKEA you know what I mean. If not, the new IKEA in Sunrise, only about half an hour away, will be quite a pleasant surprise.

The name IKEA was first registered in Sweden in 1943 by its founder, Invar Kamprad when he was only 17 years old. Even before that, Invar was an entrepreneur, selling matches from his bicycle, quickly moving to fish, Christmas tree decorations, seeds, and ballpoint pens. His first store opened in 1956, and a giant store, more typical of today’s IKEA, opened in 1965.

Now 81, retired, and a long time resident of Switzerland, he is a relative unknown despite the stunning fact that Forbes magazine lists Kamprad as the fourth richest person in the world with $33 billion. Some question this figure since Kamprad’s actual ownership of the company is limited because he transferred his interest to a foundation as well as to a holding company in a complex tax-sheltering scheme. He does however control both.

Nevertheless, he shares some traits with Warren Buffett, his fellow multi-billionaire. He drives a 15-year old Volvo, flies only economy class, and encourages IKEA employees to write on both sides of the paper. While they are both frugal, traits they do not share are that he was once an alcoholic, and even more disturbingly, he has admitted he raised funds for, and recruited members for a pro-Nazi group in 1942. He now calls this the greatest mistake in his life. He has written letters of apology to IKEA employees of Jewish descent, and is one of the few retailers to have a store in Israel despite doing business with the Arab world.

With that background in mind, does the new IKEA store that opened a month ago in Sunrise deserve the appellation given to IKEA by Business Week as the “quintessential global brand?” If your taste favors dark, fussy, traditional Old Europe home furnishings, probably not. (That doesn’t make you a bad person). If you relate to the simpler, minimalist, functional Scandinavian designs, you are an IKEAN. In that case, a trip to IKEA is more of an outing, an adventure, than a shopping experience.

The store itself, all 293,000 square feet (the size of five football fields) is like eye candy. Every item carried has a Swedish sounding name. That practice originated because Kamprad was dyslexic and had trouble remembering stock keeping unit numbers. Entering the two-story store on the ground floor, you are welcomed and offered a map—you need one. You are guided to an escalator, and on the second floor the fun begins. That’s why people are so enthusiastic—shopping in IKEA is an entertaining, eye opening experience.

The store is extremely well organized with a main aisle, identified by a series of arrows on the floor, circling around through seven unique categorized sections, each clearly identified. A major portion of the home furnishings is displayed in some 40 model room settings, with an amazing array of accessories. There is a Living Room section, Wall Units, Media and Storage, Work Area, Kitchen and Dining, Bedrooms and Bathrooms, and a delightful Children’s Area.

But before continuing, we must stop for breakfast, lunch, or a snack at the remarkable restaurant and café for an authentic Swedish repast. This is an attractive area that seats 250. As an indication of its popularity, when I was there, almost all the tables were taken and I counted 75 more people on line, selecting their food. There were half a dozen different sections, each with unique lighting fixtures that were available for purchase. I mention this because I bought one of the styles five years ago in a Chicago IKEA for $24.95. It (and many of the other lighting fixtures) is what you might expect to see in the Museum of Modern Art gift store in New York for significantly more money.

The ground floor is part warehouse (that you stroll through in order to pick up the furniture items you want) and part showroom, with eight additional areas such as Cooking and Eating, Textiles and Rugs, and a huge Lighting section. Throughout, there are hundreds of small accessory items for just a few dollars that are unique and clever.

While good design is paramount, (the company has more than a dozen full-time designers and some 80 free-lancers) there is an obsession with costs and affordability. Management’s objective is to lower prices across the board by an average of two to three percent a year. As a result, pricing is remarkable as are the values. Interestingly, IKEA might have originated the pricing doctrine adopted by Costco (remember Costco’s vow to maintain forever, the $1.50 price of its hot dog/soda combination, the same as has existed for the past 17 years). In this sense, long ago Kamprad, established a policy that any item adopted must have the potential of being produced for a lower price, and rather than increase IKEA’s profit, the lower cost would be passed on to the customer. For example, despite inflation and the probable increase in the cost of materials over the past five years, my lighting fixture mentioned above is still just $24.95.

How did I transport a lighting fixture on the plane from Chicago? It was flat packed, fit in my luggage, and I had to assemble it. That’s the other major IKEA secret of success, and low pricing. Almost all of the furniture items and many of the other items are flat packed, thereby saving labor, delivery, and shipping costs. Most also must be assembled. However, IKEA will recommend an installer if you need one, and they also will arrange for delivery.

Exactly two years ago Business Week ran a cover story on Costco, and one paragraph captured the essence of the operation beautifully: “…IKEA World [is] a state of mind that revolves around contemporary design, low prices, wacky promotions, and an enthusiasm that few institutions in or out of business can muster. Perhaps more than any other company in the world, IKEA has become a curator of people’s lifestyles, if not their lives. At a time when consumers face so many choices for everything they buy, IKEA provides a one-stop sanctuary for coolness. It is a trusted safe zone that people can enter and immediately be part of an IKEA-minded cost/design/environmentally-sensitive global tribe. There are other would-be curators around — Starbucks and Virgin do a good job — but IKEA does it best.”

The best way to get to IKEA is to take the Sawgrass Expressway to Sunrise Blvd. and turn right at 136 th Avenue. One caveat: If you embark on an IKEA adventure, for the moment, don’t do so on a weekend. You might find the parking frustrating and the crowds overwhelming. Wait for a weekday so you can get into the café and enjoy a Swedish meatball.


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