Europe is home to some of the world’s most iconic companies. Many started small to quell a single person’s curiosity before exploding into a global phenomenon. As a new resident, big, successful European brands have piqued my interest. What’s their story? How did they transform into the giants they are today? How have they sustained their legacy over time? Those are some of the questions I explore in this new series.
Most companies move with the tide–Ikea rewrites the playbook.
The Swedish furnishing company, which has become synonymous with all things at home, figured out its place in the world some 80 years ago and has stuck by that vision even when all hell broke loose.
85
Ingka Group’s rank on the Fortune 500 Europe
Much of what it does today comes down to a dossier that Ikea’s founder, Ingvar Kamprad, devised in 1976, titled “The Testament of a Furniture Dealer.” He was so precise in his idea of what he wanted of the company, which he started as a mail-order business, that Kamprad’s words are handed to every new Ikea employee even today.
Kamprad’s vision was clear from day one: “Expensive solutions to any kind of problem are usually the work of mediocrity. We have no respect for a solution until we know what it costs.”
Many of the company’s choices have been astonishing in the age of modern business. It never took outside financing and shunned the idea of being publicly listed. Ikea built its fortune by selling simplistic, flat-packed furniture that people pay to assemble on their own. In exchange, the company promised top-quality cabinets and tables, erring on the side of minimalism and functionality.
Ikea’s knack for going against the grain became the cornerstone of its growth: The sticker price on some of its furniture, like the Poäng chair, is 70% cheaper now than 30 years ago.
Another decision Kamprad made early on was separating the group into two entities: One is a charitable foundation based in the Netherlands that owns most Ikea stores and manages its profits, while the other oversees the company’s retail operations.
While this ownership model shares elements with other European companies, such as Novo Nordisk, Kamprad’s single-minded focus was Ikea’s independence from demanding shareholders or inheritance spats.
“He was almost obsessed with the longevity of Ikea, and he wanted to make sure that he did everything he could do to actually enable that,” said Peter van der Poel, managing director for Ingka Investments, the investment arm of the group that owns most Ikea stores. He received the handbook when he first joined the company in 1999 as a sales manager and says he still resonates with the “timeless” lessons it imparts.
Kamprad’s ties to a Swedish pro-Nazi group during his youth became a subject of scrutiny and immense backlash in the early 2010s after a book claimed his connection went deeper than he previously stated.
He wrote a letter apologizing to Ikea employees, regretting his fascist links and calling them “silly” in hindsight. Further complications surrounding the company’s past resurfaced during a separate 2012 investigation that found Ikea used political and other prisoners’ labor between 1960 and 1990. Last year, Ikea agreed to pay €6 million in compensation to the former prisoners in East Germany.
Kamprad died in 2018 as the world’s eighth-richest man. By this time, Ikea had become the biggest purveyor of home furnishing goods.
But that’s not all it was: The Swedish retailer produced one of the most-printed publications of all time—an unassuming brochure of all Ikea products—until 2021. For several years, Kamprad curated the catalog that became the company’s sales pitch to faithful shoppers. Some 220 million copies of the Ikea catalog were printed in 32 languages at its peak.
Today, Ikea is one of the top restaurant chains measured by number of customers, thanks to its cafe, which serves meatballs, hot dogs, and salmon gravlax.
To be successful in so many endeavors is no small feat. The Swedish retailer has made its presence felt globally by figuring out the fundamentals of its business early, spotting and sorting issues as they arise, and investing every penny it makes into its future.
3 things that helped Ikea conquer the world:
1. Finding its footing
Ikea would not be the company it is today without the concepts of “lista,” a relentless focus on frugality and democratic design.
Kamprad grew up in the southern province of Småland, where the history was riddled with poverty, warranting a level of thriftiness to survive.
People had no choice but to find creative ways to solve problems by making do with the bare minimum. This approach, called “lista,” guided every decision Kamprad made when expanding his business.
When it came to furniture, he resisted the urge to invest heavily in elaborate designs and craftsmanship, instead favoring a fusion of creativity and frugality.
The company’s famous flat-packs powered this very goal. Gillis Lundgren, Ikea’s fourth employee and the brains behind many of the company’s designs, including its logo, suggested dismantling the legs of a table when transporting it—and that’s how the flat-pack was born.
Before this became mainstream, furniture would take weeks to deliver, and furniture makers would be responsible for bringing bulky packages to people’s homes and assembling them.
When Ikea began expanding beyond Sweden, flat-packing proved its silver bullet for overcoming the challenge of expensive transportation. It controlled costs and allowed the company to pass those savings on to customers. The company’s use of Allen keys to screw and unscrew furniture complemented the ease that flat-packing offered.
The unwitting bonus of making flat-pack and self-assembly the norm was the so-called “Ikea effect,” which caused people to feel much more attached to the furniture they put together.
Authors of a 2011 paper, later published in the Journal of Consumer Psychology, likened Ikea’s model to that of ready-made cake mixes of the 1950s. When an initial experiment with the product failed, manufacturers tweaked the recipe to require bakers to add eggs, leading to a “greater liking for the fruits of one’s labor.”
How Ikea makes its products is not set in stone. Sometimes, it reverse-engineers them by deciding the price first, and then designing the product to fit this constraint. Its €1 LED bulb is an example of this challenge. It proved technically challenging at first, but the solution lay in using higher-quality parts that doubled up in function to achieve a low-cost bulb.
But the quest for all things low-cost could have led Ikea astray and into discount piles instead of elevating it to furnishing royalty. The mantra of “democratic design” prevented that from happening. The concept leans into the fundamentals of Scandinavian design philosophies. While cost, no doubt, is a key determinant of whether a product makes Ikea’s cut, form, functionality, quality, and sustainability also matter.
“Ikea’s success is largely driven by smart, practical design choices to accommodate most living spaces and scenarios,” said Alex Coates, director of Burra Design, an interior design firm specializing in Ikea cabinetry. He previously worked in Ikea’s U.K. design team for six years.
Coates added that the retailer is seen as “offering one of the best price-to-style ratios in the home furnishings market,” and the “exceptionally high guarantees” make shoppers feel more confident about their purchases.
“Ikea’s success is largely driven by smart, practical design choices to accommodate most living spaces and scenarios”
Alex Coates, director of Burra Design
The simplicity of the company’s furniture inadvertently sparked do-it-yourself projects on the internet, with people turning place mats into ceiling lights and sprucing up $4 spice racks.
2. Spot a problem, solve it
Since its humble beginnings in 1943, Ikea has evolved dramatically in size, reach, and product offerings. Despite the success on paper, in the mid-2000s, the Swedish giant went from being the disruptor to the disrupted in the furniture market.
For one thing, e-commerce became a pain point for the company, especially as the 80-plus-year-old Kamprad feared straying away from the tried-and-tested operating model.
Rivals were already making strides: Amazon’s marketplace was up and running and had become hugely popular worldwide. Subsequently, other traditional retailers began pouring money into e-commerce, raising the pressure on Ikea to create its own offering.
Even though the company had taken a left-field approach to design and retailing, CEO Jesper Brodin had to contend with the inertia from within the company before shaking up Ikea’s brick-and-mortar-store format and establishing its online shopping presence.
It wasn’t until 2017 that change began. Ikea invested heavily in creating an app and other services to support online shopping. Traffic for these increased by 50% by the 2019 financial year. Last fiscal year, Ikea’s website had approximately 4.6 billion visits.
“Besides accessibility, experiential elements have long been a hallmark of its brand, with its physical stores often seen as the goal for a day-out retail experience,” said Sam Nguyen, senior retail analyst at market research firm Mintel, adding that Ikea focuses on “the generation of shoppers increasingly driven by convenience.”
The biggest trick to understanding Ikea’s growth puzzle is its receptiveness to shoppers’ needs.
4.6 billion
The approximate number of visits to Ikea’s website last fiscal year
Perhaps the earliest evidence came from the company’s food introduction at its stores. When Ikea’s cafe debuted in 1958, the mixing of food and retail was unheard of. Kamprad argued that customers with full stomachs “stay longer and buy more,” but he didn’t want to make food Ikea’s cash cow (even today, Ikea’s hot dogs will set you back by just 85 pence in London).
The strategy has worked wonders for the retail giant. Today, Ikea sells some 1.2 billion meatballs annually, and executives characterize meatballs as the “best sofa-seller.”
Another way Ikea has responded to people’s gripes is by launching a variety of store formats. For many decades, the Swedish retailer only sold its furniture one way: in its sprawling, maze-like stores often located outside city centers.
But people’s busy lifestyles kept them in downtown areas, making Ikea inaccessible in its well-loved shape and form. That’s when the company rolled out a spate of smaller stores and pickup locations along with “Plan & Order” to consult with Ikea experts on room designs.
Some of Ikea’s thoughtfulness toward customers is reflected in how it treats its 216,000 employees. During the pandemic, the company faced alarming turnover among staff in the U.S., the U.K., and Ireland, with each exit costing upwards of $5,000 to replace. Movement in retail employment was not uncommon, given tight schedules and relatively low pay. Still, protests and unionization bids in some markets underscored the issues Ikea faced.
Ikea’s biggest franchisee, Ingka Group, sought to reverse the damage by boosting pay packages and benefits and improving the onboarding process for new hires. By last April, voluntary attrition had dropped in many key markets, Bloomberg reported.
“While values are easy to talk about (and put on websites and in corporate material), from my observations [and] research, it is clear that these are real—and also explains Ikea’s learning culture,” said Anna Jonsson, an associate business professor at Stockholm University who studied the company for her PhD.
“Ikea values are used in all decisions Ikea makes,” she said.
3. Eye for investing
Ikea has a deliberately complex organizational structure that Kamprad crafted so that it could outlive him.
Ingka Group owns and operates the bulk of Ikea’s stores and manages the retailer’s finances through Ingka Investments. Ingka is foundation-owned and based in the Netherlands—another intentional move because Kamprad wanted to avoid Sweden’s high taxes. (The European Union has previously probed the franchise operation overseen by Inter Ikea over its tax dealings.)
The web, although complicated, has helped Ikea run like a well-oiled machine so far and has made it one of Europe’s greatest retail successes.
Van der Poel, who oversees the Ingka Group’s investment arm from the Dutch city of Leiden, describes his job as caring for “the lifetime savings that have been accumulated in Ingka,” which amount to roughly €27 billion in assets under management.
“There is something about the Ikea culture that is sort of magic. [But] it doesn’t come for free. It takes a lot of hard work,” van der Poel said.
The 2017 purchase of Taskrabbit, a platform for hiring people for handyman jobs such as furniture assembly, is one example of the type of deals Ingka Investments targets. Now, shoppers can request at-home installation through Taskrabbit. Last year, the group fully acquired Ikano Bank—another of Kamprad’s projects—to offer loans and mortgages alongside Ikea’s mainstay retail business.
Ingka Investments also helped bolster Ikea’s real estate presence in commercial hotspots, such as the 1 million-square-foot store on New York’s Fifth Avenue and the new three-story shop on London’s Oxford Street opening this week.
“There is something about the Ikea culture that is sort of magic. [But] it doesn’t come for free. It takes a lot of hard work.”
Peter van der Poel, managing director of Ingka Investments
Some of Ikea’s new investments aim to make it an all-encompassing retailer. The Swedish giant announced the launch of a marketplace to sell its furniture secondhand in select European markets.
Many retail majors have entered the secondhand retail market, including fellow Swedish company H&M. In Ikea’s case, the foray will draw it closer to its 2030 goal of halving emissions in its value chain and becoming net-zero by 2050. It will also extend the lifespan of Ikea’s products before they are recycled.
Ikea never stops toying with new ideas. For instance, earlier this month, it launched a delivery vehicle renting service in the Netherlands, Sweden, and Austria to help shoppers without cars carry heavy furniture home.
Future-proofing Ikea
Ikea has grown tremendously. Still, at its core, it resembles Kamprad’s brainchild from 1943, and it’s hard to separate his spirit from the company we see today.
Furniture retailing has been a highly fragmented market due to a mix of marketplaces and independent designers operating in different regions and scales. That’s why, despite its mammoth size, Ikea’s global market share is just under 6%.
Ikea may not have a monopoly, but few can rival its staying power. It’s become one of the world’s most valuable brands, according to market research firm Kantar. In its 82-year existence, its furniture is as indispensable to a student’s dorm room as it is to a working professional’s home office.
The Dutch-headquartered company has gone to great lengths to ensure its ubiquity. As with everything at Ikea, the seed was Kamprad’s larger-than-life vision of creating “a better everyday life for the many people.”
In the last few years, as inflation ticked up following the pandemic, the company has responded by slashing prices (not once but thrice). As a result, it saw higher sales but lower profit margins. The silver lining? Ikea’s private ownership and preparedness for the metaphorical “rainy days” help buttress the billions of euros lost in earnings due to price cuts.
That might explain why Ikea didn’t flinch when retail sales dipped 5% in its 2024 financial year compared to a year earlier. Van der Poel said the company thinks “years, sometimes even decades, with the investments that we’re taking on.”
Ikea faces fresh challenges amid U.S. tariffs and growing trade tensions.
“The uncertainty surrounding U.S. tariffs could disrupt Ikea’s global supply chain, potentially impacting pricing and manufacturing, given the retailer’s reliance on production in tariff-affected countries,” Mintel’s Nguyen pointed out.
As an octogenarian experienced with the ebbs and flows of business, Ikea has learned to future-proof itself. A company spokesperson said that despite the volatility in global trade, Ikea’s “absolute priority” was affordability.
In the increasingly complex, capitalistic business environment, Ikea emerges as an outlier with which few companies can compete in size and impact. When asked what a world without Ikea would look like, van der Poel, visibly stumped, took a few seconds before he found his words.
“It would be a world without a company that authentically aspires to make a positive difference, both in people’s lives at home, but also in the way we try to conduct our business,” he said.
Fortune wants to hear the stories of European companies with a global footprint that’s touching the lives of millions of consumers worldwide. Get in touch: prarthana.prakash@fortune.com
Editor’s Note: This article has been updated to clarify Ingvar Kamprad’s links to a Swedish pro-Nazi group and mentions of Ikea’s brochure as catalogs, not books.
