IKEA - Why They're So Successful

I just gotta hit the launch button well I'm on patreon now it's actually my first time doing something like this people have expressed some interest so I spent the last few months planning it all out but I don't want to make it seem like it's all just for you it can potentially become really helpful for me and the channel basically you go there and sign up for some extra stuff related to the channel and if I did it all right everybody wins it's at patreon.com slash company man there's a link in the description if you dig these videos I'd appreciate if you at least check it out but don't feel too pressured if you just want to hear me talk about Ikea that's fine too because I have a lot to say about IKEA IKEA is massive both the company and the stores themselves it's easily the biggest store I've ever been to comparing it to Walmart and I compare it to Walmart because that's another large retailer we all know on average Walmart's are pretty big they're around a hundred thousand square feet well the average IKEA is more like 300 thousand square feet it's usually 2 or 3 floors the top floors tend to be where they display all the furniture and the bottom floor is a giant warehouse where all the actual boxes that contain the furniture can be purchased but then there's also hundreds of other things on sale and those top floors that you can just pick up right there but then there's also a restaurant and a play area for children it's huge it's somewhat of an odd business but they're doing very well they're the largest furniture retailer in the world I pulled up some facts about the company to help you understand how big they actually are in 2017 they had 2.3 billion visits to their website and 936 million visits to their stores all of those visits resulted in 36 point 3 billion euros in sales which after converting it's well over 40 billion US dollars and clearly that numbers been moving in the right direction in 2017 they opened 14 new stores bringing their total to 403 spread out across the world but mostly in Europe if you are from North America just think about that for a second I'm guessing you already perceived them as having a large presence there well that's only 14% of their locations and 19% of their revenue narrowing it down to only the US that's 14% of their revenue they sell more in Germany than they do in the United States in fact I think our perception of their presence in the US may be somewhat exaggerated I mean to put it into perspective Walmart is approaching 5,000 US locations I'm sure we all knew there were more Walmart's than I Kias but would you have guessed 85 times more IKEA is more of a destination than a quick trip it's one of those places that tends to be an hour away and you have to plan out your trip maybe you have an open Saturday so you and your family can go down to Ikea for three or four hours and I know that may sound strange we're not talking about six flags we're talking about a furniture store but they really do make it an experience for their customers it all started in 1943 in the beginning they didn't even sell furniture it was fish and a few other things but it was always called IKEA IKEA is an acronym meaning each letter stands for something and more so than any other acronym I've ever encountered it's impossible to guess it's one of those things you just have to know and I would tell you what it stands for but I can't say these words instead I'll just show it to you the first two words are the name of the person who started it when he was 17 by the way the third word is the name of his farm and the fourth is the name of the village he's from which is also where the company started I looked it up on Google Maps and it's definitely a small village population of a few hundred people in the 1950s is when the business that we know today started taking shape they started selling furniture and soon after they started making and designing their own furniture and they moved their business from that small town in Sweden to well not as small town in Sweden in 1965 they opened a second and much larger store outside of Stockholm which is the largest city in Sweden from there it was a lot of growth and a lot of expansion in the 1980s they opened a store in Philadelphia which marked their first location in the United States those are just some of the highlights but the story of Ikea is the classic success story a 17-year old started selling fish in a very small town in Sweden and today it's the world's largest furniture store and still growing as far as I know IKEA is one-of-a-kind if you know any other business that even resembles IKEA I'd like to hear it so I've identified three things that IKEA does that others don't all of which contribute to their success first is the most obvious one the furniture it's all decent enough furniture there doesn't seem to be many complaints about the quality but what I'm talking about is how it all comes in these flat brown boxes and requires assembly there's a lot to be said about the low cost involved in selling furniture like this for one no money spent on fancy packaging it's all plain and brown as simple as you can get for two lower shipping and storage costs since they're all flat and compact easier for the customer to transport as well three it's a large number of the same items which is cheaper to manufacture as opposed to having a wider variety and then there's no assembly costs obviously I think all of these are fairly obvious but maybe not as obvious is something that's been labeled the IKEA effect it essentially says that if I build a desk myself I'll like and appreciate it more than if I had bought it already built to use a reference I'm sure everyone's familiar with when Tim Taylor built his hot rod in the garage he valued it more than if he had just bought it from someone else IKEA is likely selling more furniture because they're forcing their customers to construct it themselves it's almost like they found a loophole in the system usually I have to spend more money to increase your sales in this case they're spending less money to increase their sales which is the best scenario you can ever hope for that you don't see often in the IKEA effect doesn't just apply to assembling the furniture it's even when you're buying it in most furniture stores if I find a table that I like I'll locate a Salesman tell him I want it and it'll bring me over to the counter so I can buy it and then someone will come out and load it into my truck not at IKEA they make you work for it if you find a piece of furniture you like at IKEA here's what you have to do when you first walk in there's a paper for you to take once you locate a piece that you want you have to look at the tag and write down all of this information or you can take a photo but if you're getting multiple items I recommend writing it down then you go downstairs to their warehouse section locate the proper aisle and bin and load the table onto your cart you then push it to the front and wait in the checkout line which is often pretty long if you've never been to an Ikea I doubt you put that much work into buying a table but once you've done all that and figured out how to assemble it you should be pretty happy with that table the second contributor to their success is the layout of the store it's terribly confusing see even though IKEA is massive outside of that warehouse section it doesn't seem that big if you don't have the full awareness of the building it feels much more like a bunch of little sections joined together they have all these little areas staged and if you didn't know any better you'd say there were actual rooms but there's dozens of them and you can't detect any pattern it's hard to explain if you were to randomly approach someone in a typical store and ask them to quickly point to the exit they'd be able to do it if you tried that with an IKEA customer you'd never get a correct answer I'd like to see a game show where they place two contestants in an Ikea and see who can locate certain sections first maybe run it on Nickelodeon and just look at the layout on the map and tell me this wasn't carefully constructed it helps them because it forces you to walk through these different sections as you're searching for an exit but it also just makes you forget about the exit when you're in IKEA you're lost in the world of Ikea it leads you through every section so you're now looking at and buying things you never even thought you would I once went in there looking to buy some towels and walked out with $1,400 worth of furniture all right that's not true but a story like that wouldn't shock me these first two reasons seem counterintuitive you wouldn't expect forcing your customers to do more work and having a confusing store layout to be positive but here we are the final reason I wanted to highlight is their food they've become known for it and it helps them in multiple ways they first implemented the restaurant section back when it was located in this smallish Swedish town the reason was because people would travel from long ways to get there and the food was almost needed after the long journey but it since become so much more first off people just like their food a lot of people go there simply just for that who also have to travel to a maze to get it I'm sure some of those people end up picking up things that they weren't planning to I would think if almost any stores started selling tasty food it would be good for business also it helps make it more of a family activity rather than a boring trip to the store all the fun places have a place to buy food as I said before people spend hours there over that time span people tend to get hungry so instead of leaving the store to get food and going about their day they never have to leave there's even a theory saying that cheap food prices trick the customers into thinking everything is cheap is 880 dollars a good price for this combination I have no idea I know next to nothing about furniture pricing but I do know that one dollar is a good price for some frozen yogurt when I see that I think hey they must have good prices here I guess that was a reasonable price for that sofa by the way this ad for their one dollar cinnamon bun it says not actual size at the bottom it's a massive picture and I'm not exactly sure if that's supposed to be a joke or if this is one of those things that I should send it into the Ellen show but anyway those were my main reasons as to why they've been so successful I do have one bonus additional reason that I've been considering to go along with it being more of an activity than a store it has a theme they heavily promote the fact that they're from Sweden don't they even for the viewers that knew little about them you probably knew they were from Sweden when I first walked in the doors the letters hej and then tells me it means hello in Swedish they give their furniture Swedish names their logo and the buildings are the same colors the Swedish flag they serve Swedish meatballs most companies don't feature their country of origin to this degree like do you know what country Spotify is from it's Sweden but you'd never know that you can dispute this reason I put it as a bonus because it's not a salad as the first three let me know in the comments is there any merit to that last reason but also do you agree with my first three main reasons or possibly have an idea of your own why do you like IKEA what do you think separates them from all the other furniture stores they must be number one for a reason so what's that reason I'd like to hear what you have to say don't forget about that whole patreon thing and thank you for watching [Music]

Channel: Company Man

Views: 850,805

Keywords: IKEA, Furniture Store, IKEA Effect, Business

Id: QgbtoL65X04

Length: 11min 48sec (708 seconds)

Published: Wed Aug 29 2018