Ikea Invades America

It was in this context that IKEA competed in the United States. IKEA's success in America had not come easily. After opening its first U.S. store in Philadelphia in 1985, the company discovered that Americans did not like its products: apparently, its beds and kitchen cabinets did not fit American sheets and appliances, its sofas were too hard for American comfort, its product dimensions were in centimeters rather than inches, and its kitchenware was too small for American serving-size preferences. As one manager recalled, "People told us they were drinking out of the vases."¹⁰However, by paying close attention to customer complaints, IKEA had been able to address these problems, relying on market research to adjust its product lineup and merchandising.

At the same time, IKEA had launched a high-profile advertising campaign designed to get Americans to take a more "commitment-free approach to furniture." Josephine Rydberg-Dumont, the managing director of IKEA of Sweden, explained:

When you think of your own life, there's a time for several different lifestyles. That old,

traditional stuff is making us feel the other way, that things can't change, that taking

responsibility for your things is more important than taking responsibility for your life. It's

O.K. to replace them, to get rid of them. We don't think we're going to live one way always.

Our feeling is: It's just furniture. Change it.¹¹

As an example, one IKEA ad campaign called "Unboring" had featured a series of television commercials poking fun at Americans' unwillingness to part with their furniture. The best known of these commercials had been an award-winning ad directed by Spike Jonz, a director best known for his film "Being John Malkovich." The spot (simply titled "Lamp") had opened with a discarded lamp sitting forlornly on the sidewalk in the rain and had concluded with an actor turning to the camera and saying, "Many of you feel bad for this lamp. That is because you are crazy. . . . "

By the mid-1990s, the company's fortunes in the United States had begun to improve, and from 1997 to 2001 the company was able to double revenues in the United States, from $600 million to $1.27 billion. By 2002, the United States was IKEA's third-largest market (after Germany and Britain, see Exhibit 3), and its 14 U.S. stores were servicing close to 30 million American customers a year (see Exhibit 7). As another indication of IKEA's success, the company's in-house restaurants were now the 15th-largest food chain in America.

As for its American customer base, IKEA described its typical shopper as the sort of person who traveled abroad, liked taking risks, liked fine food and wine, had a frequent-flier plan, and was an early adopter of consumer technologies such as Walkmen, laptops, and cell phones. (Incidentally, IKEA described its least likely customer as the type of person who collected guns.)¹²

Shopping at IKEA

For IKEA customers, shopping at IKEA required some preparation. As the company's Web site advised: "Be prepared. Make a list of anything you may need for your home. . . . Take measurements of spaces you want to fill with furniture. And be sure there's room in your car. You'll need it."¹³

Everything else customers needed to shop at IKEA was available at the store entrance: pencils, paper, tape measures, store guides, catalogs, shopping carts, shopping bags, and strollers. All of the stores were self-service, so if customers found smaller items they wanted, they could place the item in their shopping carts. If customers wished to purchase larger items, they could jot down the item numbers; they then needed to pass through the IKEA warehouse to pick up their flat-packed items before proceeding to checkout. (Self-serve trolleys were available to help customers carry their purchases from the warehouse to the checkout counter to the car.)

Customers were not only expected to transport their purchases home, they were also expected to assemble their purchases on their own. According to the Web site, "Picking up your purchases is an important part of IKEA's approach to customer involvement. Specifically, if you can do simple things like pick up your purchases and assemble them at home, we'll keep prices low."¹⁴

In terms of product selection, IKEA sold many types of furniture, but its style selection was limited according to the "matrix." As the Web site explained, "We don't have everything. We don't have the very extreme or over-decorated. We only have what helps build a home that has room for good living."¹⁵ IKEA also sold every manner of household item, including dinnerware, rugs, lamps, and clocks. The company's total product range consisted of about 10,000 different products; many of these items featured bold colors and whimsical product names: Ticka alarm clocks, Fniss trash cans, and Bumerang clothes hangers.

If customers preferred to shop without their children, they could drop their kids off at the company-operated childcare facility on the way into the store. If they got hungry, they could stop by the IKEA restaurant for a lunch break. And if they needed assistance with shopping, they could stop by a sales desk and speak to an IKEA representative. The ratio of sales reps to customers was quite low, however, consistent with the company's self-service ethos.

Looking Forward

IKEA's goal was to have 50 stores in operation in the United States by 2013. Already, IKEA was the fastest-growing furniture retailer in the country and—excluding general merchandise retailers such as Wal-Mart, Office Depot, and Sam's Club—it was the seventh-largest furniture retailer in the United States.¹⁶ (See Exhibit 8.) As one analyst put it, "Not only does IKEA have monster stores and great prices, it has also created a unique niche. It's the quintessential power retailer in America."¹⁷

Dahlvig added, "The more stores we build and the more we increase our market share, the more we have to find ways to appeal to a broader public. Scandinavian design and style is a niche and it is not to everyone's taste. But we don't want to be just another supplier of traditional furniture. Scandinavian design is what makes us unique. We have to find a balance."¹⁸

Exhibit 2 IKEA Group: Sales by Region (FY 2003)

Region % Sales

HARVARD BUSINESS SCHOOL 1