I'm at Ikea today. Of course, we're
gonna shop around. Ikea. Ikea. Ikea,
Ikea store. I love Ikea. I've
been shopping online, this morning. I buy a lot
of things from Ikea. Yesterday. I love
the princess cake. While I was in Miami
on vacation last week. The Malm collection,
of course. And these at
Ikea are $5.99. It was such a great
price, I actually grabbed a second one. The
Besta cabinet. I don't think addicted, but
if I had a bigger allowance to shop
there, probably. Welcome to Ikea. The only
place in the world where you can snack
on Swedish meatballs while you shop for your new
Poäng chair or Färgrik mug. Ikea has 433 stores
in 53 countries. Three hundred sixty-seven of
them are owned and operated by Ingka Group. Despite serious product recalls
and food court scandals, Ikea is
going strong. There is something about
the uniqueness with the yellow and blue and the
meatballs and the long way through the stores and
maybe the twinkle in the eye as well. That makes
us just a little bit more human than others. But that's
just speculation. Ikea's combined global and
online presence is massive. It brought in
$45 billion in retail sales, had 1 billion
store visits and 2.8 billion online visits
in 2019. Its closest competitor in
the home furnishing space, Bed, Bath & Beyond,
brought in $12 billion in 2018 in
in-store sales. Before the massive blue
and yellow warehouses, there was a young Swedish
man with a simple idea. "Why are beautiful products only
made for a few buyers? It must be possible
to offer good design and function at
low prices." Ikea was founded in
1943 by 17-year-old Ingvar Kamprad at Elmtaryd farm
in Agunnaryd village in Sweden. It started small,
selling things like pencils and postcards. In 1948, Ikea
started selling furniture. In 2019, it sold
seven million Billy bookcases. A major reason people flock
to Ikea is its price point. When I hear Ikea,
I think of cheap, simple furniture that looks
really nice. Ikea falls in the
affordable area of the spectrum, but it depends
on what you buy. They have beds that
start at $99. They have really well designed
beds that go up to $500. The Ikea brand
is sleek, minimal and affordable. Ikea from its
very beginning has focused a lot on its
customers building its own furniture and therefore they
could offer them cheaper prices. If you're starting out,
you're moving into your first apartment, you don't have
a lot of money to spend. Keep it simple. Look at Nordic design. Buy some simple Ikea pieces
and invest in some really nice bedding, a
great rug, cool side tables. Prices are lower in
part because Ikea is basically a giant storage
facility for furniture parts. It's the warehouse's
design that sets it apart. So what a great
store will do will allow you the pleasure
of discovery. So anytime I hear
a retailer saying, "Our consumers want to come in,
take some stuff and run out." Yes, they will. If you didn't give
them the pleasure of discovery. So a great store
will give you the sense of comfort and
familiarity and will also give you the
pleasure of discovery. And that is when
retail becomes retail therapy. The winding maze is
designed to make customers stop and shop and spend
more than they planned. You walk through an Ikea
store and you'll find a number of mirrors. Mirrors placed tastefully
here, tastefully there, on a table, on
a closet, etc. The brain is
entranced with mirrors. Why? Why? When you look in a
mirror, you see the most gorgeous human being looking
back at you. Ikea plays to the narcissist
in each of us. Ikea employs mirrors
everywhere through their stores. As you walk by,
you have love because you have love for yourself
in the mirror. Point number one. Point
number two, Ikea uses white everywhere through
the store. White cupboards, white
closets, white tables. There is almost an
App le-esque view. If Apple was to design
a closet, it would probably look like
an Ikea closet. The brain perceives
everything through context. The notion of that
white there symbolizes clutter-free, pure, simple,
transparent, without saying all those words,
through the judicious use of white, that is
spotless, Ikea communicates what you aspire
for your home. The crisp, clean aesthetic
lends itself to a broad audience. But I
kea doesn't just sell furniture. Glassware. I would always go to
Ikea for glassware, dishes, pots and pans. I love their $500
solid wood bed. Depending on the situation,
they have some very nice minimal sofas. I do not shop
at Ikea for bedding. Pillows, duvets, comforters, sheets
and towels I think are items that you
really want to invest in. For families
shopping at Ikea, some locations have
complimentary daycare . With or without the kids, shopping can
be exhausting. Do you know that the
most tiring environment for the entire human brain,
the most tiring environment, is a
retail environment? It is the worst environment
for the human brain simply because you're
processing so much information. But Ikea has a
plan to keep you energized. When I hear
Ikea, I think of meatballs. It recognizes
that customers need sustenance to
keep shopping. Right in the center of
most stores, you'll find a cafeteria serving up
Swedish fare. But in 2013, horse meat
was detected in Ikea's meatballs. The problem was
traced back to a European supplier and
only affected European stores. Ikea pulled all
meatballs until this issue was resolved. Despite this news going
viral, the iconic dish remains on the menu.
Another Ikea classic: the cinnamon bun. Its placement near
the exit is no accident. There's a part of
the brain that fires every time you pay. Right? And so by having
the scent of baking, of warmth, of sugar in
particular, that takes the stress out, they get down
the stress of payment. And therefore the experience
is memorable without it overwhelming you with how
much money you spent out there. But whether you
buy Ikea furniture in the store or online, once
you open the boxes, it's time to get to work. The problem with Ikea was
you realized that the closet was so
minimalist and beautifully designed. But, oh my God. There are 10 million parts
I got to put together to get the
minimalistic design. What I don't like is
that you have to put everything together
by yourself. Like, I want a delivery! Deliver it to me
and put it together. Like, what if you're
a single mom? You don't have anybody to
do that for you. However, according to a
2011 study by Harvard Business School, you are
more inclined to value an item you
built yourself. The study even named
this phenomenon the "Ikea Effect." But many customers
don't want to assemble their
own furniture. One of the other really
big trends we're seeing is a shift
toward services. So you have people like
Amazon that are offering convenience. Now, all of a
sudden, it's not just how good is a product
in your store, it's what kind of simplicity can
we offer our customers? The Besta cabinet is
the most versatile. It stands on legs. You can hang it
on the wall. Anything you need the Besta
unit to do, I highly advise it. Hire TaskRabbit to
put it together and hang it on the wall.
It'll just make your life easier. So in 2017,
Ikea acquired TaskRabbit. Now, for a flat fee,
Ikea customers can hire TaskRabbit to do
the assembly. Since the acquisition
TaskRabbit's, furniture assembly tasks have gone up from
2 % to 10 %. There's been a lot going
on with Ikea lately. Since 2010, the company
has recalled millions of products. The most infamous,
the Malm line of chests and dressers. Ikea is recalling 29
million dressers for a second time after the product
was blamed for the death of an eighth
child in May. Consumers are being asked to
secure the items or return them. It still
sells these items today. Ikea is currently making
some necessary changes to its business model. One of the new things,
if you like, is the investments in digital. Well, we have given ourselves
three years to make a massive transformation. So if you want to do
it at home on a Tuesday evening when the kids are
to bed and things are done, we will try to
bring our solutions and our knowledge digitally
to you. It's investing in its
online presence, delivery services and opening
smaller stores. The majority of Ikea stores
are operated by Ingka Group. Its operating income,
one measure of profits, was down 26
% in 2018. Ingka Group says the drop
in profits is part of the plan. Ikea will
close its only U.S. factory at the
end of 2019. Ikea Group, the owner
of most Ikea furniture stores worldwide, says it plans
to cut 7,500 jobs over the next
couple of years. Those cuts will be
focused on administrative staff positions. At the
same time, however, the group also says it
will create 11,500 new positions as it expands
with new store formats and online. Ikea thrives on a
business of quantity, not quality. You can say that
Ikea is the fast fashion of home furnishings
because it does produce relatively inexpensive
products that may seem disposable because of
the, say, average quality. You know, whether
or not Ikea is sustainable because of
that functionality of encouraging people to
buy more. True sustainability would be
people buying better quality things that
last longer. And that results
in fewer purchases. But that is not
how corporations work. It seems like customers
don't work that way either. Depending on
the country, people will say that they
care about the climate. They care
about sustainability. But if there's a higher
price tag, to that, it will deter some people. It's very easy to design
a sofa for $3,000, but to do a comfortable sofa
with good quality that the kids can jump up
and down in with removable covers, you can wash them,
that is made of sustainable foam that you can
bring back in the supply chain and make
a new sofa. And it's beautiful and
comfortable at the low price is very,
very difficult. So our fascination is around
that problem, not to make something expensive. Ikea alone used 18
million cubic meters of commercial wood in 2018. It's making a
conscious effort toward sustainability. As of 2018,
Ikea's Ingka Group owns around 445,000 acres
of responsibly managed forests. Combined, that's
bigger than Alaska. Ingka Group has
planted 3.6 million trees and had
harvested 700,000 trees in 2018. The clock
is ticking. So it's time for companies
like us to commit and start working out our plans
and live with that we might not have all
the answers, but we will find them in the decade
or so to come. While the company aims
to make internal changes, it's also focusing on
extending the life of products it's
already sold. Ninety percent or north of
90 % of all our consumers are concerned
today, are really concerned about climate. But only 3% know
what they can do. So what we will try is
to try different ways of supporting them with saving
water, waste, energy and to that testing, trying
new ways of where you can also rent furniture,
or lease furniture from us. So we keep the
furniture in the system a longer while. So that's just
one of the different tests that we are
doing right now. In the meantime, Ikea
is opening planning studios in city centers. The showrooms are
significantly smaller than traditional Ikea stores. What Ikea and a lot
of other retailers are trying to do is downsize their
footprint and focus on doing smaller stores that
can cater to today's shoppers. The first Ikea
planning studio opened in Manhattan in
April 2019. Giants like Target and
Dollar General are also opening smaller shops. And online companies like
Wayfair are also adjusting their
strategies. So one strength that Ikea has
is the fact that it does have a brick
and mortar footprint because people can pick it up
and that's cheaper for them to operate. One of the
things that Wayfair really struggles with is its
cost of doing business. That's why we're actually
seeing Wayfair go into brick and mortar. So you're
kind of seeing online retailers trying to adapt to
brick and mortar and brick and mortar like Ikea,
trying to adapt to online. But both
have strengths the others want. Wayfair is just one of
many retailers coming for Ikea. For now, Ikea is still
on top, but can it stay there? Or will
the growing marketplace level the playing field?
