Ikea’s global strategy is a winning formula

If you have dumped your kids in the creche, struggled with an outsized trolley, picked up a flat-pack bookcase, queued for hours at the checkout, picked up recalcitrant children, and then triumphantly assembled your purchase only to find that one small, vital component, remains on the living room carpet, then you have spent your Sunday afternoon in home-owners’ heaven – Ikea.

Sweden’s most popular export since saunas, Abba and hard-core pornography is forging ahead and offering its sofas, lamps and self-assembly shoe racks, not only to Europeans but to the rest of the world. Part of its plans include opening two further stores in Britain this year and moving into China.

Last week it appointed a new advertising agency – St Luke’s – to handle the 4m account and develop stronger branding in the UK, although Ikea’s communications manager Hilary Pepler says it is too early to discuss any details. The company’s previous agency, Abbott Mead Vickers.BBDO, which had handled the business for eight years, declined to repitch.

St Luke’s marketing director David Abrahams says: “In our presentation we suggested that previous advertising for the Ikea brand hadn’t developed a strong brand property. We are going to bring together the different elements as Ikea penetrates the mass market.”

The brand already has strong properties to build on, according to analyst Patrick Vanderlinden at Verdict Research. “Ikea is not cheap and cheerful, it’s value for money,” although he adds that it is not as leading-edge in terms of style as the Habitat brand, which the company bought in 1992.

Ikea, as a company, is as far distanced from its frenetic shop floors as is possible. One source says: “You could never describe Ikea as quirky; it’s very methodical, very structured, very ordered, cool and rational.” An approach reflected in its product range.

For the Ikea brand is the same everywhere from Warrington to Warsaw. The basic stripped-down, well-designed and, most importantly, low-cost items are identical. The company has ignored traditional conventions of furniture retailing, whereby products are geared to local tastes, and instead it offers the same “typically Swedish product range”.

One of the few concessions that has been made to local tastes, says Pepler, is “that beds are bigger for the US because the people tend to be”. And Austria, for some reason, is indulged in its questionable Seventies’ taste for corner sofas.

One insider says this rigidity has been the source of some friction internationally where local management has wanted to adapt to local cultures but Ikea’s Swedish parent is adamant that the identity remains the same globally.

Another says: “Ikea has a slight Moonie-like quality – everything is the same whether it’s the UK, France, Canada or Iceland. It’s the same philosophy. It’s very production-oriented and still holds dear the vision of founder Ingvar Kamprad.”

Kamprad’s vision is expressed in a 1976 document “Testament of a furniture dealer” or the “Ikea way” which declares that “throw-away products are not Ikea. The consumer should enjoy the purchase for years”. There’s also a piece of home-spun philosophy: “Most things still remain to be done. Time is your most important asset. Split your life into ten-minute units and sacrifice as few as possible to futilities.”

The company certainly isn’t wasting any time. “The Ikea way” creates great economies of scale. With 131 stores in 27 countries its huge volumes, cheap out-of-town sites, and dedication to keeping costs low through self-assembly packs means that unlike some other furniture retailers Ikea has coped with the recession in major markets including the UK and Sweden. It has also ridden allegations, particularly from Jewish groups in the US, that Kampard was involved in a pro-Nazi Swedish organisation during the war.

Figures for this privately-owned company are a closely guarded secret but analysts estimate it has a market worth of 3bn. Which is all a long way from its humble origins when in 1947 Kamprad set up a mail order company selling everything from ballpoint pens to cow udder soap.

So where does it go from here? Pepler says: “We are opening a store at Thurrock in November and we have Nottingham and Glasgow sites planned. We are planning to open two new stores a year in the UK until 2000.” The company says there is also huge potential in new markets around the world.

In terms of the Ikea brand, Verdict’s Vanderlinden says: “I don’t see the company drastically repositioning but if you look at the product range in the past 18 months it has introduced some value-added lines such as leather sofas for slightly older customers as they have a bit more disposable income.” He adds that Ikea’s biggest problem, at least in the UK, will be to find enough out-of-town sites.

The company is likely to continue with its winning formula whether it is targeting consumers in Birmingham or Beijing. Edward Whitefield, an analyst at Management Horizons, says: “Ikea is one of the world’s leading retail brands and its move into the Far East will give it a very, very sound platform for the next decade of expansion.”