In 1946, Ingvar Kamprad founded the world famous IKEA
furniture company. The name IKEA consists of the initials of
the founder of the company, his family’s farm,
Elmtaryd and the village where he grew up, Almhult, Sweden.
IKEA started off as a local retail business specializing in
household items selling its goods at a discount price. In
1950, the company started selling furniture and opened its
first store in 1953. In 1956, the guiding mission of IKEA
that has lead the company to great success was invented when
the company realized that flat packaging would not only
benefit the customer but the company by minimizing the
overall cost of shipping. The days of strapping tables to
the car roof were over and ready-to-assemble furniture was
entering our homes! Today, IKEA with 175 stores (including
outlets), is found on 4 continents and in 32 countries. IKEA
plays host to 260 million customers a year. In 2001, IKEA
took in 9.6 billion dollars in revenue, which is higher than
some country’s annual gross domestic product including
Jordan, Jamaica, and Zimbabwe. Ingvar Kamprad, now 76 years
old, is the 16th richest person in the world according to
Forbes magazine. The IKEA legacy will be carried on by
Kamprad’s three sons in the years to come. His vision
of discount household items has evolved into a worldwide
furniture phenomenon that no other company has come close to
topping. (CHECK
OUT IKEA's LOCATIONS)
Annually, 110 million copies of the IKEA catalogue
are sent out in 46 different languages. The catalogue has a
circulation rate four times that of the Bible. It accounts
for 50 percent of the company’s annual marketing. In
order to transcend geographical boundaries, at an effective
cost, IKEA has revolutionized how a company works at meeting
its customers’ needs. Suppliers for IKEA span the
globe. The company has 1,800 suppliers located in 55
countries. IKEA is always looking for the best way to
produce and ship its goods so that its price tags can be as
low as they possibly can be, without being labeled “cheap”
in the negative sense. ‘Our low prices are your low
prices’, echo throughout the big-box retailer’s
locations. IKEA focuses on using its materials efficiently
and is always emphasizing price. First, IKEA designs the
product’s price. This price is usually set at 30 to 50
percent lower than IKEA’s competitors. From this
point, they then find a manufacture that will make the
product at their desired price and finally the product is
designed. Once the tangible item is made the final step is
figuring out shipping. Products are always designed so that
a shipping container can hold the maximum number of units,
thus the success of flat
packaging. IKEA goes so far to keep its prices down that
they even limits the goods they sell online in order to
promote people to go to the stores themselves. Together, all
these steps allow for the IKEA ship to enjoy smooth sailing.
And prices without a doubt will go down next year when the
next batch of catalogues arrives in our mailboxes.
Today, there are 24 IKEAs in North American with plans to
open 50 more by the year 2013. So how does the big-box
retailer choose its locations? With great and careful
thought. IKEA’s ideal location is near a bustling
metropolitan area where its target audience will be found.
They also like to be located near container port facilities
to keep shipping costs down and to have easy access to
transportation hubs. IKEA’s Elizabeth, New Jersey
location is in the perfect spot- right along the water near
Elizabeth’s port facility and next to Newark
International Airport. IKEA is a part of the Elizabeth
Center, along with Toys “R” US Kids World and
Rex Plex Athletic Center, which together make up what is
known as a “Value Center”. The center cost 50
million dollars to build but created 500 construction jobs
and 800 permanent jobs. The center is also located in an
area that is called an Urban Enterprise Zone, which permits
sales tax to be only 3 percent (versus the usual 8) on
taxable items in New Jersey. Annually, the center has
brought in $ 750,000 from revenue taxes. The IKEA in
Elizabeth, NJ has been open for over a decade and is the
best selling IKEA in North America. Within the tri-state
area there is another IKEA in Hicksville, New York.
Attempts to open more IKEA locations in the tri-state area
have been met with strong resistance such as the case in New
Rochelle, NY. Anti-IKEA posters were all around City Park,
an area in New Rochelle, where IKEA wanted to build a new
store. IKEA first approached City Park in 1997 after the
success of the two stores in Elizabeth and Hicksville. All
IKEA stores carry the same merchandise and look fairly
simple and the residents of City Park and Westchester County
would not stand for it. The citizens of the area were not
willing to deal with the massive traffic that would come
into the area, nor the change to their quality of life,
despite the projected annual $3 million tax revenues that
would come into the city. Moore O’Keeffe the town
supervisor for Mamaroneck, which borders New Rochelle said,
"They figured they would use a cookie-cutter approach in an
affluent, passionate, highly educated community&and they
were defeated. No one is shy here." When IKEA builds a store
they are investing into a community for a long time and
wants to make sure both the store and the people of the
community succeed. In January of 2001, after spending 23
million dollars on property in the area IKEA abandoned the
proposed store.
Today, a new IKEA location in Red Hook, a section of
Brooklyn, NY, is the talk of New York City. The proposed
300,000 square foot site would bring 600 construction and
600 permanent jobs to the area. To combat the traffic
concerns that kept IKEA out of New Rochelle, the company is
including transportation plans into the overall plan for the
area. This area of Brooklyn was once a thriving industrial
area and is now beginning to experience some resurgence. Is
IKEA just what Red Hook needs or is it just going to
continue the cycle of gentrification that has already hit
other areas in Brooklyn? With 50 new IKEAs set to be
constructed in North America by 2013, we have to wonder if
the thrill of going to IKEA as a shopping experience will
lose all excitement, as even our cities begin to be taken
over by big box retail.
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