The what? Amazingly, it's the nonprofit foundation that operates all the Ikea stores. Meanwhile the Ikea brand is owned by another company, which is owned by another company, etc. The brand-owner earns money by franchising the trademark to Ingka Holdings. The article reports that in 2004, these complex of entities earned 553 million euros, but paid less than 20 million euros in tax - mainly by exploiting various tax avoidance clauses in different jurisdictions.
Ingenious. As ingenious as the retail innovations that have made Ikea the global giant in home goods and furniture retailing. Among it's many great ideas is flat pack furniture, one of major logistic innovations of the 20th century, along with the shipping container.
Here's how Businessweek describes the Ikea shopping experience:
What enthralls shoppers and scholars alike is the store visit -- a similar experience the world over. The blue-and-yellow buildings average 300,000 square feet in size, about equal to five football fields. The sheer number of items -- 7,000, from kitchen cabinets to candlesticks -- is a decisive advantage. "Others offer affordable furniture," says Bryan Roberts, research manager at Planet Retail, a consultancy in London. "But there's no one else who offers the whole concept in the big shed."I can't but agree. My wife and I got a lot of furniture and decor from the Ikea store in KL. The most memorable part was when I got back home, and I spent several days poring over the instructions, hammering, jamming, screwing, swearing, but finally getting it all together. Three beds, two tables, several shelves, a workstation, and a few other items. The stuff may look cheap - and it is cheap - but don't knock it: it has the decent, middle-class, mass-produced look, and after three years everything is fine (except for the parts I warped or scratched.)
The global middle class that Ikea targets shares buying habits. The $120 Billy bookcase, $13 Lack side table, and $190 Ivar storage system are best-sellers worldwide. (U.S. prices are used throughout this story.) Spending per customer is even similar. According to Ikea, the figure in Russia is $85 per store visit -- exactly the same as in affluent Sweden.
Wherever they are, customers tend to think of the store visit as more of an outing than a chore. That's intentional: As one of the Harvard B-school studies states, Ikea practices a form of "gentle coercion" to keep you as long as possible. Right at the entrance, for example, you can drop off your kids at the playroom, an amenity that encourages more leisurely shopping.
Then, clutching your dog-eared catalog (the print run for the 2006 edition was 160 million -- more than the Bible, Ikea claims), you proceed along a marked path through the warren of showrooms. "Because the store is designed as a circle, I can see everything as long as I keep walking in one direction," says Krystyna Gavora, an architect who frequents Ikea in Schaumburg, Ill. Wide aisles let you inspect merchandise without holding up traffic. The furniture itself is arranged in fully accessorized displays, down to the picture frames on the nightstand, to inspire customers and get them to spend more. The settings are so lifelike that one writer is staging a play at Ikea in Renton, Wash.
Along the way, one touch after another seduces the shopper, from the paper measuring tapes and pencils to strategically placed bins with items like pink plastic watering cans, scented candles, and picture frames. These are things you never knew you needed but at less than $2 each you load up on them anyway. You set out to buy a $40 coffee table but end up dropping $500 on everything from storage units to glassware. "They have this way of making you believe nothing is expensive," says Bertille Faroult, a shopper at Ikea on the outskirts of Paris. The bins and shelves constantly hold surprises: Ikea replaces a third of its product line every year.
Then there's the stop at the restaurant, usually placed at the center of the store, to provide shoppers a breather and encourage them to keep going. You proceed to the warehouse, where the full genius of founder Kamprad is on display. Nearly all the big items are flat-packed, which not only saves Ikea millions in shipping costs from suppliers but also enables shoppers to haul their own stuff home -- another savings. Finally you have the fun (or agony) of assembling at home, equipped with nothing but an Allen wrench and those cryptic instructions.
No Ikea in Manila yet, nor do I expect one for many years. Even if the retail industry were sufficiently deregulated - which I doubt - sheer market size would probably not be up to snuff for the next couple of decades. Still, I wonder how much I would save - or not! - were one to open in, ah, Fort Bonifacio?