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IKEA
Company typePrivate
IndustryRetail
Founded1943; 81 years ago (1943)
Älmhult, Sweden[1][2]
FounderIngvar Kamprad
HeadquartersDelft,[3] Netherlands
Number of locations
392 (2016)
Area served
  • Europe
  • Asia
  • North America
  • South America
  • Africa
  • Oceania
Key people
  • Peter Agnefjäll (Chairman and CEO of INGKA Holding)
  • Torbjörn Lööf (CEO of the Inter IKEA Group))[4]
ProductsSelf-assembly furniture
RevenueIncrease €29.293 billion (2014)[5]
Decrease €3.793 billion (2014)[5]
Increase €3.329 billion (2014)[5]
Total assetsIncrease €44.667 billion (2014)[5]
Total equityIncrease €31.608 billion (2014)[5]
Number of employees
183,000 (2016)[6]
ParentStichting INGKA Foundation
Websitewww.ikea.com

IKEA (/aɪˈkiːə/; Swedish: [ɪ²keːa][7]) is a Swedish multinational group of companies that designs and sells ready-to-assemble furniture (such as beds, chairs and desks), appliances and home accessories. It has been the world's largest furniture retailer since at least 2008.[8][9][10][11] [12]Founded in Sweden in 1943 by then-17-year-old Ingvar Kamprad, who is now one of the ten richest people in the world and the owner of a more than 40 billion dollar fortune, [13][14][15] the company's name is an acronym that consists of the initials of Ingvar Kamprad, Elmtaryd (the farm where he grew up), and Agunnaryd (his hometown in Småland, southern Sweden).[16] The company is known for its modern architectural designs for various types of appliances and furniture, and its interior design work is often associated with an eco-friendly simplicity.[17] In addition, the firm is known for its attention to cost control, operational details, and continuous product development, corporate attributes that allowed IKEA to lower its prices by an average of two to three percent over the decade to 2010 during a period of global expansion. The IKEA group has a complex corporate structure, which the European Union has alleged was designed to to avoid over $1 billion Euros in tax payments over the past decade.[18] [19] It is controlled by several foundations based in the Netherlands, Luxembourg and Liechtenstein.[20]

As of December 2016, IKEA owns and operates 392 stores in 48 countries.[21] In fiscal year 2016, €36.4 billion worth of goods were sold, a total that represented a 7.6 percent increase over 2015.[22] The IKEA website contains about 12,000 products and is the closest representation of the entire IKEA range. There were over 2.1 billion visitors to IKEA's websites in the year from September 2015 to August 2016.[23] The company is responsible for approximately 1% of world commercial-product wood consumption, making it one of the largest users of wood in the retail sector.[24]

History

Main article: List of countries with IKEA stores
Map of IKEA stores around the world
Legend:
  Current market locations
  Future market locations
  No current or planned market locations
The first IKEA store, located in Älmhult in Sweden, not far from where the founder was born. In June 2016, it became the IKEA Museum.
The world's largest IKEA store located near the KTX Gwangmyeong Station in Seoul Capital Area, South Korea.[25]
The world's second largest IKEA store,[26] situated at Kungens Kurva in Huddinge Municipality, Sweden. This IKEA store was opened in 1965.
IKEA store in Shenzhen, China.
IKEA store in Frisco, Texas, United States.
IKEA store at Port Island in Kobe, Japan, one of the very few IKEA stores with direct mass transit access.
Entrance to an IKEA store at the 4th floor of MegaBox in Kowloon Bay, Hong Kong.
An IKEA 4.5 Museum display at the outer precinct of the Meiji Shrine in Tokyo, Japan.

Ingvar Kamprad founded IKEA in 1943 as a mostly mail-order sales business. It began to sell furniture five years later.[27] The first Möbel-IKÉA store was opened in Älmhult, Småland, in 1958 (Möbel means "furniture" in Swedish). The first stores outside Sweden were opened in Norway (1963) and Denmark (1969). The stores spread to other parts of Europe in the 1970s, with the first store outside Scandinavia opening in Switzerland (1973), followed by West Germany (1974).[28]

Amid a high level of success, the company's West German executives accidentally opened a store in Konstanz in 1973 instead of Koblenz.[27] Later that decade, stores opened in other parts of the world, such as Japan (1974), Australia, Canada,[29][30] Hong Kong (1975), and Singapore (1978).[31] IKEA further expanded in the 1980s, opening stores in countries such as France and Spain (1981), Belgium (1984),[32] the United States (1985),[33] the United Kingdom (1987),[34] Italy (1989).[35] The company then expanded into more countries in the 1990s and 2000s. Germany, with 50 stores, is IKEA's biggest market, followed by the United States, with 44 stores. At the end of the 2009 financial year, the IKEA group operated 267 stores in 25 countries.[36] The first IKEA store in Latin America opened on 17 February 2010 in Santo Domingo, Dominican Republic.[37][38] As of July 2013, the company's presence in developing countries remains minimal.

The world's five largest IKEA stores are:

  1. Gwangmyeong, Gyeonggi, South Korea: 59,000 m2 (640,000 sq ft)
  2. Stockholm Kungens Kurva, Sweden: 55,200 m2 (594,000 sq ft)
  3. Shanghai Baoshan, China: 55,032 m2 (592,360 sq ft)
  4. Shanghai Pudong Beicai, China: 49,400 m2 (532,000 sq ft)
  5. Wuxi, China: 49,117 m2 (528,690 sq ft)

In December 2014, it was announced that the world's largest IKEA store at 59,000 square meters (640,000 square feet),[39][40][41][42][43][44][45][46] opened near the KTX Gwangmyeong Station, located at the heart of South Korea's Seoul Capital Area. The next store opening in Goyang in 2017 will be even larger at 164,000 square meters in gross floor area, breaking the previous world record holder's 131,550 square meters. IKEA plans to have 6 stores in the country by 2020, four in the Seoul Capital Area, one in Daejeon and one in Busan.[47]

The largest store in the Southern Hemisphere is located in Tempe, Sydney, Australia with a total area of 39,000 m2 (420,000 sq ft).[48] The biggest store in North America is located in Montreal, in the province of Quebec, Canada. The store was opened in 1986 in the Ville-St-Laurent area, and was completely renovated and expanded in 2012-2013. Built in 1986, the store's initial area was 22,062 m2 (237,470 sq ft), while the renovated store now measures 43,636 m2 (469,690 sq ft).

In March 2013, IKEA opened its first outlet in Qatar, after a delay of several months.[49][50] Like others in the Gulf Cooperation Council, the Doha outlet is operated by the Al-Futtaim Group.[51] In August 2013, the first store in the Baltic States was opened in the Vilnius region of Lithuania. Construction of the 26,500 sq ft (2,500 m2) store commenced in 2011 and the store employs over 200 people.[52] it is the biggest furniture-selling mall in the Baltic states.[53]

In 2014, IKEA opened its first warehouse in Croatia, near Zagreb.[54] Due to problems with building permissions, the construction was postponed to 28 August 2013.[55] Eventually, the warehouse opened its doors on 21 August 2014.[56] The shopping center in Zagreb with a total area of 38,000 m2 (410,000 sq ft) is one of the 5 biggest in Europe and among the 10 biggest IKEA stores in the world.[57][58][59][60]

IKEA began constructing its first store in India on 11 August 2016. The 400,000 sq ft store in Hyderabad is being built at a cost of ₹7 billion (US$84 million), and is scheduled to open in autumn 2017.[61][62]

Store design

IKEA Restaurant
The IKEA Marketplace
The Warehouse

Layout

Older IKEA stores are usually blue buildings with yellow accents (also Sweden's national colours) and few windows. They are often designed in a one-way layout, leading customers counter clockwise along what IKEA calls "the long natural way" designed to encourage the customer to see the store in its entirety (as opposed to a traditional retail store, which allows a customer to go directly to the section where the desired goods and services are displayed). There are often shortcuts to other parts of the showroom. Newer IKEA stores, like the one in Mönchengladbach, Germany, make more use of glass, both for aesthetics and functionality. Skylights are also now common in the self-serve warehouses; natural lighting reduces energy costs, improves worker morale and gives a better impression of the products.

The sequence first involves going through furniture showrooms making note of selected items. The customer then collects a shopping cart and proceeds to an open-shelf "Market Hall" warehouse for smaller items, then visits the "Self Serve" furniture warehouse to collect previously noted showroom products in flat pack form. Sometimes, they are directed to collect products from an external warehouse on the same site or at a site nearby after purchase. Finally, customers pay for their products at a cash register.

Today, most stores follow the same layout of having the showroom upstairs with the marketplace and self-service warehouse downstairs. Some stores are single level, while others have separate warehouses to allow more stock to be kept on-site. Single-level stores are found predominantly in areas where the cost of land would be less than the cost of building a 2-level store, such as the Saarlouis, Germany and Haparanda, Sweden locations. Some stores have dual-level warehouses with machine-controlled silos to allow large quantities of stock to be accessed throughout the selling day.

Most IKEA stores offer an "as-is" area at the end of the warehouse, just before the cash registers. Returned, damaged and formerly showcased products are displayed here and sold with a significant discount, but also with a no-returns policy. Most IKEA stores communicate the IKEA policy on environmental issues in this part of the store. The area, which is painted red, is named according to local customs, in the United Kingdom this is referred to as "Bargain Corner", in Sweden "FYND" (Bargains) and in Denmark, "Rodebutikken" (Rummage boutique).

In Hong Kong, where shop space is limited and costly, IKEA has opened three outlets the city, most of which have the one-way layout. They are part of shopping malls, and while being tiny compared to common store design, are huge by Hong Kong standards.

Another feature of IKEA stores is their long opening hours; many are in operation 24 hours.[citation needed]

Food markets

Every store includes a restaurant serving traditional Swedish food, including potatoes with Swedish meatballs, cream sauce and lingonberry jam, although there are variations. In Kuala Lumpur, Malaysia, the usual boiled potatoes have been replaced with French fries. Besides these Swedish foods, hot dogs and drinks are also sold, along with a few varieties of the local cuisine, and beverages such as lingonberry juice. Also items such as prinsesstårta (princess cake) are sold as desserts. Stores in Israel sell kosher food with a high degree of rabbinical supervision.[63] The kosher restaurants are separated into dairy and meat areas; falafel and non-dairy ice cream are available at the exit. IKEA stores in Saudi Arabia, Kuwait, Qatar and the United Arab Emirates serve chicken shawarma at the exit café as well as beef hot dogs, while in United Kingdom, a Quorn hot dog is available in the exit café.[64]

In many locations, the IKEA restaurants open daily before the rest of the store and serve an inexpensive breakfast.[65][66][67]

Every store also has a Swedish Food Market that, until 2011, sold branded Swedish prepared specialist foods, such as meatballs, packages of gravy, lingonberry jam, various biscuits and crackers, and salmon and fish roe spread. Later IKEA replaced most of the branded foods and extended its product range with the introduction of the IKEA food label. The new label has a variety of items including chocolates, meatballs, jams, pancakes, salmon, along with various drinks. All food products are based on Swedish recipes and traditions.

Småland

Every store has a play area, named Småland (Swedish for small lands; it is also the Swedish province where Kamprad was born). Parents drop off their children at a gate to the playground, and pick them up after they arrive at another entrance. In some stores, parents are given free pagers by the on-site staff, which the staff can use to summon parents whose children need them earlier than expected; in others, staff summon parents through announcements over the in-store public address system.

Alternative designs

The vast majority of IKEA stores are located outside of city centers, primarily because of land cost and traffic access. Several smaller store formats have been unsuccessfully tested in the past (the "midi" concept in the early '90s, which was tested in Ottawa and Heerlen with 9,300 m2 (100,000 sq ft), or a "boutique" shop in Manhattan). A new format for a full-size, city centre store was introduced with the opening of the Manchester (United Kingdom) store, situated in Ashton-Under-Lyne in 2006. Another store, in Coventry opened in December 2007. The store has seven floors and a different flow from other IKEA stores. IKEA's Southampton store which opened in February 2009 is also in the city centre and built in an urban style similar to the Coventry store. IKEA built these stores in response to UK government restrictions blocking retail establishment outside city centres.[68]

In 2015, IKEA announced that it would be attempting a smaller store design at several locations in Canada. This modified store will feature only a display gallery and small warehouse. One location planned for Kitchener is in the place formerly occupied by a Sears Home store. The warehouses will not keep furniture stocked, and so customers will not be able to drop in to purchase and leave with furniture the same day. Instead, they will purchase the furniture in advance online or in store and order the furniture delivered to one of the new stores, for a greatly reduced rate. IKEA claims that this new model will allow them to expand quickly into new markets rather than spending years opening a full-size store.[69]

Products and services

IKEA in Athens, Greece

Furniture

Rather than being sold pre-assembled, much of IKEA's furniture is designed to be self-assembled. The company claims that this helps reduce costs and use of packaging by not shipping air; the volume of a bookcase, for example, is considerably less if it is shipped unassembled rather than assembled. This is also practical for many of the chain's European customers, where public transport is commonly used, because the flat-pack methods allow for easier transport via public transportation.

IKEA contends that it has been a pioneering force in sustainable approaches to mass consumer culture.[citation needed]. Kamprad calls this "democratic design," meaning that the company applies an integrated approach to manufacturing and design (see also environmental design). In response to the explosion of human population and material expectations in the 20th and 21st centuries, the company implements economies of scale, capturing material streams and creating manufacturing processes that hold costs and resource use down, such as the extensive use of Medium-Density Fiberboard ("MDF"), also called "particle board." It is an engineered wood fibre glued under heat and pressure to create a building material of superior strength which is resistant to warp. IKEA uses cabinet-grade and furniture-grade MDF in all of its MDF products, such as PAX wardrobes and kitchen cupboards. IKEA also uses wood, plastic, and other materials for furniture and other products. The intended result is flexible, adaptable home furnishings, scalable both to smaller homes and dwellings as well as large houses.

Not all furniture is stocked at the store level, such as particular sofa colours needing to be shipped from a warehouse to the customer's home (for a delivery charge). The item can also be shipped from the warehouse to the store. Some stores charge an extra fee for this service, but not all.[clarification needed]

Notable items of IKEA furniture include the Poäng armchair, the Billy bookcase and the Klippan sofa, all of which have sold by the tens of millions since the late 1970s.

Houses and flats

IKEA has also expanded its product base to include flat-pack houses and appartments, in an effort to cut prices involved in a first-time buyer's home. (This practice is not new; the defunct Canadian retailer Eaton's sold houses in a similar fashion), The IKEA product, named BoKlok was launched in Sweden in 1996 in a joint venture with Skanska. Now working in the Nordic countries and in the UK, sites confirmed in England include London, Ashton-under-Lyne, Leeds, Gateshead, Warrington and Liverpool.[70]

Solar PV systems

At the end of September 2013, the company announced that solar panel packages, so-called "residential kits", for houses will be sold at 17 UK stores by mid-2014. The decision followed a successful pilot project at the Lakeside IKEA store, whereby one photovoltaic system was sold almost every day. The solar CIGS panels are manufactured by Solibro GmbH a German-based subsidiary of the Chinese company Hanergy.[71][72] By the end of 2014, IKEA began to sell Solibro's solar residential kits in the Netherlands and in Switzerland.[73]

In November 2015 IKEA ended its contract with Hanergy and in April 2016 started working with Solarcentury[74]

IKEA announced in April 2016, that it was doing a second attempt with SolarCity to sell solar pannels in the United Kingdom. It allows users to be able to order them online and starting with three stores and by the end of summer available in all United Kingdom stores.[75]

Retail shopping centres

IKEA owns and operates the MEGA Family Shopping Centre chain in Russia.

Family Mobile

Main article: IKEA Family Mobile

On 8 August 2008, IKEA UK launched Family Mobile, a virtual mobile phone network, running on T-Mobile.

Manufacturing

IKEA Anagnina in Rome, Italy

Although IKEA household products and furniture are designed in Sweden, they are largely manufactured in developing countries to keep costs down. China accounts for about 2½ times as much supply as Sweden.[citation needed] For most of its products, the final assembly is performed by the end-user (consumer).

Swedwood, an IKEA subsidiary, handles production of all of the company's wood-based products, with the largest Swedwood factory located in Southern Poland. According to the subsidiary, over 16,000 employees across 50 sites in 10 countries manufacture the 100 million pieces of furniture that IKEA sells annually. IKEA furniture uses the hardwood alternative particle board and Hultsfred, a factory in southern Sweden, is the company's sole supplier.[76]

Product names

IKEA products are identified by one-word (rarely two-word) names. Most of the names are Scandinavian in origin. Although there are some exceptions, most product names are based on a special naming system developed by IKEA.[77]

  • Upholstered furniture, coffee tables, rattan furniture, bookshelves, media storage, doorknobs: Swedish placenames (for example: Klippan)
  • Beds, wardrobes, hall furniture: Norwegian place names
  • Dining tables and chairs: Finnish place names
  • Bookcase ranges: Occupations
  • Bathroom articles: Scandinavian lakes, rivers and bays
  • Kitchens: grammatical terms, sometimes also other names
  • Chairs, desks: men's names
  • Fabrics, curtains: women's names
  • Garden furniture: Swedish islands
  • Carpets: Danish place names
  • Lighting: terms from music, chemistry, meteorology, measures, weights, seasons, months, days, boats, nautical terms
  • Bedlinen, bed covers, pillows/cushions: flowers, plants, precious stones
  • Children's items: mammals, birds, adjectives
  • Curtain accessories: mathematical and geometrical terms
  • Kitchen utensils: foreign words, spices, herbs, fish, mushrooms, fruits or berries, functional descriptions
  • Boxes, wall decoration, pictures and frames, clocks: colloquial expressions, also Swedish place names

For example, DUKTIG (meaning: clever, well-behaved) is a line of children's toys, OSLO is a name of a bed, BILLY (a Swedish masculine name) is a popular bookcase, DINERA (meaning: (to) dine) for tableware, KASSETT (meaning: cassette) for media storage. One range of office furniture is named EFFEKTIV (meaning: efficient, effective), SKÄRPT (meaning: sharp or clever) is a line of kitchen knives.

A notable exception is the IVAR shelving system, which dates back to the early 1970s. This item is named after the item's designer.

Some of IKEA's Swedish product names have amusing or unfortunate connotations in other languages, sometimes resulting in the names being withdrawn in certain countries. Notable examples for English include the "Jerker" computer desk (discontinued several years ago as of 2013), "Fukta" plant spray, "Fartfull" workbench,[78] and "Lyckhem" (meaning bliss). Kitchen legs are called FAKTUM (called AKURUM in the United States). The latest addition is the new "Askholmen" outdoor suite. Similar blunders happen with other multinational companies.[79] See also: Lufsig

Company founder Kamprad, who is dyslexic, found that naming the furniture with proper names and words, rather than a product code, made the names easier to remember.[80]

IKEA uses a sales technique called "bulla bulla" in which a bunch of items are purposefully jumbled in bins, to create the impression of volume, and therefore, inexpensiveness.[27][additional citation(s) needed]

Catalogue

Main article: IKEA Catalogue

IKEA publishes an annual catalogue, first published in Swedish in 1951.[81] IKEA published 197 million catalogues in 2010, in twenty languages and sixty-one editions.[27] It is considered to be the main marketing tool of the retail giant, consuming 70% of the company's annual marketing budget.[82]

The catalogue is distributed both in stores and by mail,[83] with most of it being produced by IKEA Communications AB in IKEA's hometown of Älmhult, Sweden where IKEA operates the largest photo studio in northern Europe at 8,000 square metres (86,000 sq ft).[84] The catalogue itself is printed on chlorine-free paper of 10–15% post-consumer waste, and prints approximately 175 million copies worldwide annually,[85] more than 3 times as much as the Bible.[86]

The 2013 catalogue is smartphone compatible, containing videos and photo galleries that can be accessed via an app by scanning the catalogue's pages, while the 2014 catalog incorporates an augmented reality app that projects an item into a real-time photograph image of the user's room. The augmented reality app also provides an indication of the scale of IKEA objects in relation to the user's living environment.[87]

IKEA Family card

IKEA Family card, issued in Canada, ca. 2012

In common with some other retailers, IKEA launched a loyalty card called "IKEA family". The card is free of charge and can be used to obtain discounts on a special range of products found in each IKEA store. It is available worldwide. In conjunction with the card, IKEA also publishes and sells a printed quarterly magazine titled IKEA Family Live which supplements the card and catalogue. The magazine is already printed in thirteen languages and an English edition for the United Kingdom was launched in February 2007. It is expected to have a subscription of over 500,000.[88]

IKEA Family, like other loyalty programs, allows members to obtain lower prices on certain items. Its signature difference from other such programs is that it allows for free tea or coffee (from Monday to Friday at most locations) at the IKEA restaurant.[89][90]

Corporate structure

Main articles: Stichting INGKA Foundation, IKANO, and Ingvar Kamprad
IKEA Concept Center - The head office of Inter IKEA Systems B.V. which owns the IKEA trademark and concept
Flowchart showing the structure and ownership of IKEA companies. The chart is inverted, with parent companies at the bottom.

IKEA is owned and operated by a complicated array of not-for-profit and for-profit corporations. The corporate structure is divided into two main parts: operations and franchising.

There are 13 franchisees who own and operate IKEA stores. Most of the stores are owned by INGKA Holding, a private, for-profit Dutch company. Of the 392 IKEA stores in 48 countries, 343 are run by the INGKA Holding. The remaining stores are run by other franchisees. The smallest franchisee is PT Hero, which operates one IKEA store in Jakarta, Indonesia. The exception is IKEA Delft in the Netherlands, which is not franchised.[91][92]

INGKA Holding is not an independent company, but is wholly owned by the Stichting INGKA Foundation, which Kamprad established in 1982 in the Netherlands as a tax-exempt, not-for-profit foundation. The INGKA Foundation is controlled by a five-member executive committee.[93] Ingvar Kamprad is senior advisor of the INGKA Foundation, while his son Jonas is a member of the board.[94]

In Australia, IKEA is operated by two companies. Stores located on the East Coast including Queensland, New South Wales and Victoria are owned by INGKA Holding. Stores elsewhere in the country including South Australia and Western Australia are owned by Cebas Pty Ltd.[95] Like elsewhere, all stores are operated under a franchise agreement with Inter IKEA Systems.[96]

While most IKEA stores operate under the direct purview of INGKA Holding and the INGKA Foundation, the IKEA trademark and concept is owned by an entirely separate Dutch company Inter IKEA Systems, headquartered in Delft.[97] Every IKEA store, including those run by INGKA Holding, pays a franchise fee of 3% of revenue to Inter IKEA Systems. IKEA founder Ingvar Kamprad created this structure in the 1980s.[98] He said the aim was to ensure IKEA would continue as a private company without the risk of a takeover.

The ownership of Inter IKEA Systems is exceedingly complicated and not publicly known. Inter IKEA Systems is owned by Inter IKEA Holding, a company registered in Luxembourg. The Inter IKEA Holding, in turn, is owned by the Interogo Foundation, based in Liechtenstein.[93][99] In 2016, the INGKA Holding sold its design, manufacturing and logistics subsidiaries to the Inter IKEA Holding.[98]

In June 2013, Ingvar Kamprad resigned from the board of Inter IKEA Holding SA and his youngest son Mathias Kamprad replaced Per Ludvigsson as the chairman of the holding company. Following his decision to step down, the 87-year-old founder explained, "I see this as a good time for me to leave the board of Inter IKEA Group. By that we are also taking another step in the generation shift that has been ongoing for some years."[100] After the 2016 company restructure, Inter IKEA Holding SA no longer exists. Mathias Kamprad became board member of the Inter IKEA Group and the Interogo Foundation.[101] Mathias and his two older brothers, who also have leadership roles at IKEA, work on the corporation's overall vision and long-term strategy.[100]

Profits

IKEA Twin Cities in Bloomington, Minnesota, USA
File:IKEA Alam Sutera, Tangerang, Banten, Indonesia.jpg
IKEA store in Tangerang, Indonesia.

The net profit of IKEA Group (which does not include Inter IKEA systems) in fiscal year 2009 (after paying franchise fees to Inter IKEA systems) was €2.538 billion on sales of €21.846 billion. Because INGKA Holding is owned by the nonprofit INGKA Foundation, none of this profit is taxed. The foundation's nonprofit status also means that the Kamprad family cannot reap these profits directly, but the Kamprads do collect a portion of IKEA sales profits through the franchising relationship between INGKA Holding and Inter IKEA Systems.

Inter IKEA Systems collected €631 million of franchise fees in 2004, but reported pre-tax profits of only €225 million in 2004. One of the major pre-tax expenses that Inter IKEA systems reported was €590 million of "other operating charges". IKEA has refused to explain these charges, but Inter IKEA Systems appears to make large payments to I.I. Holding, another Luxembourg-registered group that, according to The Economist, "is almost certain to be controlled by the Kamprad family." I.I. Holding made a profit of €328 million in 2004.

In 2004, the Inter IKEA group of companies and I.I. Holding reported combined profits of €553m and paid €19m in taxes, or approximately 3.5 percent.[93] In 2013 the Daily Mail media publication reported that the IKEA subsidiary Swedwood had grown between 20-25% per year since its inception in 1991.[76]

The Berne Declaration, a non-profit organisation in Switzerland that promotes corporate responsibility, has formally criticised IKEA for its tax avoidance strategies. In 2007, the Berne Declaration nominated IKEA for one of its Public Eye "awards", which highlight corporate irresponsibility and are announced during the World Economic Forum in Davos, Switzerland.[102]

In a company statement emailed on 14 October 2013, IKEA's full-year sales rose 3.1 percent due in part to growth in Russia and China. IKEA's revenue total rose to US$37.9 billion (27.9 billion euros), with significant growth also recorded in North America.[103]

In February 2016, the Greens / EFA group in the European Parliament issued a report entitled IKEA: Flat Pack Tax Avoidance on the tax planning strategies of IKEA and their possible use to avoid tax in several European countries. The report was sent to Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, Taxation and Customs, and Margrethe Vestager, the European Commissioner for Competition, expressing the hope that it would be of use to them in their respective roles "to advance the fight for tax justice in Europe."[19]

Control by Kamprad

Along with helping IKEA make non-taxable profit, IKEA's complicated corporate structure allows Kamprad to maintain tight control over the operations of INGKA Holding, and thus the operation of most IKEA stores. The INGKA Foundation's five-person executive committee is chaired by Kamprad. It appoints the board of INGKA Holding, approves any changes to INGKA Holding's bylaws, and has the right to preempt new share issues. If a member of the executive committee quits or dies, the other four members appoint his or her replacement.

In Kamprad's absence the foundation's bylaws include specific provisions requiring it to continue operating the INGKA Holding group and specifying that shares can be sold only to another foundation with the same objectives as the INGKA Foundation.[93]

Charitable giving

The INGKA Foundation is officially dedicated to promoting "innovations in architecture and interior design."[93] The net worth of the foundation exceeded the net worth of the much better known Bill and Melinda Gates Foundation (now the largest private foundation in the world) for a period.[104] However, most of the Group's profit is spent on investment; the foundation expects to spend €45 million on charitable giving in 2010 (compare the Gates Foundation, which made gifts of more than $1.5 billion in 2005.[104])

IKEA is involved in several international charitable causes, particularly in partnership with UNICEF, including:

  • In the wake of the 2004 Indian Ocean earthquake and tsunami, IKEA Australia agreed to match dollar for dollar co-workers' donations and donated all sales of the IKEA Blue Bag to the cause.
  • After the 2005 Kashmir earthquake, IKEA gave 500,000 blankets to the relief effort in the region.[105]
  • IKEA has provided furniture for over 100 "bridge schools" in Liberia.[106]
  • In the 2008 Sichuan earthquake in China, IKEA Beijing sold an alligator toy for 40 yuan (US$5.83, €3.70) with all income going to the children in the earthquake struck area.

IKEA also supports American Forests to restore forests and reduce pollution.[107][108]

IKEA Social Initiative

In September 2005, IKEA Social Initiative was formed to manage the company's social involvements on a global level. IKEA Social Initiative is headed by Marianne Barner.

The main partners of IKEA Social Initiative are UNICEF[109] and Save the Children.[110]

On 23 February 2009, at the ECOSOC event in New York, UNICEF announced that IKEA Social Initiative has become the agency's largest corporate partner, with total commitments of more than US$180 million.[111][112]

Examples of involvements:

  • The IKEA Social Initiative contributes €1 to UNICEF and Save the Children from each soft toy sold during the holiday seasons, raising a total of €16.7 million so far.[113] In 2013, an IKEA soft toy, Lufsig, created a storm and sold out in Hong Kong and in Southern China because it had been misnamed in Chinese.[114]
  • The IKEA Social Initiative provided soft toys to children in Burma after Cyclone Nargis.[115]
  • Starting in June 2009, for every Sunnan solar-powered lamp sold in IKEA stores worldwide, IKEA Social Initiative will donate one Sunnan with the help of UNICEF.[116]
  • In September 2011,[117] the IKEA Foundation pledged to donate $62 million to help Somali refugees in Kenya.[27]
  • According to The Economist, however, IKEA's charitable giving is meager, "barely a rounding error in the foundation's assets."[27]

In 2009, Sweden's largest television station, SVT, revealed that IKEA's money—the three per cent collection from each store—does not actually go to a charitable foundation in the Netherlands, as IKEA has said. Inter IKEA is owned by a foundation in Liechtenstein, called Interogo, which has amassed $12 billion, and is controlled by the Kamprad family.[27]

Environmental performance

After initial environmental issues like the highly publicized formaldehyde scandals in the early 1980s and 1992,[118][119][120] IKEA took a proactive stance on environmental issues and tried to prevent future incidents through a variety of measures.[121] In 1990, IKEA invited Karl-Henrik Robèrt, founder of the Natural Step, to address its board of directors. Robert's system conditions for sustainability provided a strategic approach to improving the company's environmental performance. In 1990, IKEA adopted the Natural Step framework as the basis for its environmental plan.[122] This led to the development of an Environmental Action Plan, which was adopted in 1992. The plan focused on structural change, allowing IKEA to "maximize the impact of resources invested and reduce the energy necessary to address isolated issues."[122] The environmental measures taken include the following:

  1. Replacing polyvinylchloride (PVC) in wallpapers, home textiles, shower curtains, lampshades and furniture—PVC has been eliminated from packaging and is being phased out in electric cables;
  2. minimizing the use of formaldehyde in its products, including textiles;
  3. eliminating acid-curing lacquers;
  4. producing a model of chair (OGLA) made from 100% post-consumer plastic waste;
  5. introducing a series of air-inflatable furniture products into the product line. Such products reduce the use of raw materials for framing and stuffing and reduce transportation weight and volume to about 15% of that of conventional furniture;
  6. reducing the use of chromium for metal surface treatment;
  7. limiting the use of substances such as cadmium, lead, PCB, PCP, and Azo pigments;
  8. using wood from responsibly managed forests that replant and maintain biological diversity;
  9. using only recyclable materials for flat packaging and "pure" (non-mixed) materials for packaging to assist in recycling.[122]
  10. introducing rental bicycles with trailers for customers in Denmark.[123]

In 2000 IKEA introduced its code of conduct for suppliers, called the IKEA way of purchasing, shortened as IWAY. Today IWAY is a totally integrated part of IKEA's purchasing model. IWAY covers social, safety and environmental questions. Today IKEA has around 60 IWAY auditors who perform hundreds of supplier audits every year. The main purpose with IWAY is to make sure that the IKEA suppliers follow the law in each country where they are based. Most IKEA suppliers fulfill the law today with exceptions for some special issues, one being excessive working hours in Asia, in countries such as China and India.[citation needed]

More recently,[when?] IKEA has stopped providing plastic bags to customers, but offers reusable bags for sale. The IKEA restaurants also only offer reusable plates, knives, forks, spoons, etc. Toilets in some IKEA WC-rooms have been outfitted with dual-function flushers. IKEA has recycling bins for compact fluorescent lamps (CFLs), energy saving bulbs and batteries. In 2001 IKEA was one of the first companies to operate its own cross-border goods trains through several countries in Europe.[124]

In August 2008, IKEA also announced that it had created IKEA GreenTech, a €50 million venture capital fund. Located in Lund (a university town in Sweden), it will invest in 8–10 companies in the coming five years with focus on solar panels, alternative light sources, product materials, energy efficiency and water saving and purification. The aim is to commercialise green technologies for sale in IKEA stores within 3–4 years.[125][126]

To make IKEA a more sustainable company, a product life cycle was created. For the idea stage, products should be flat-packed so that more items can be shipped at once; products should also be easier to dismantle and recycle. Raw materials are used, and since wood and cotton are two of IKEA's most important manufacturing products, the company works with environmentally friendly forests and cotton, whereby the excessive use of chemicals and water is avoided.[citation needed]

Manufacturing is third in the life cycle and includes IWAY, IKEA's code of conduct for manufacturers and suppliers that formulates and enforces requirements for working conditions, social and environmental standards, and what suppliers can expect from IKEA in return. Marketing is another part of IKEA's life cycle and a portion of the paper used for its catalogues is sourced from responsibly managed forests. The catalogue is also smaller, so that less paper is required, less waste is produced and more catalogues can be shipped per load.[citation needed]

IKEA stores recycle waste and many run on renewable energy with the use of energy-saving bulbs and sensors. All employees are trained in environmental and social responsibility, while public transit is one of the priorities when the location of stores is considered. Also, the coffee and chocolate served at IKEA stores is UTZ Certified.[127]

The last stage of the life cycle is the end of life. Most IKEA stores recycle light bulbs and drained batteries, and the company is also exploring the recycling of sofas and other home furnishing products. According to IKEA's 2012 "Sustainability Report", 23% of all wood that the company uses meets the standards of the Forest Stewardship Council, and the report states that IKEA aims to double this percentage by 2017. The report also states that IKEA does not accept illegally logged wood and supports 13 World Wide Fund For Nature (WWF) projects.[76]

On 17 February 2011, IKEA announced its plans to develop a wind farm in Dalarna County, Sweden, furthering its goal of using only renewable energy to fuel its operations.[128] As of June 2012, 17 United States IKEA stores are powered by solar panels, with 22 additional installations in progress.[129]

In 2011, the company examined its wood consumption and noticed that almost half of its global pine and spruce consumption was for the fabrication of pallets. The company consequently started a transition to the use of paper pallets and the "Optiledge system".[130] The OptiLedge product is totally recyclable, made from 100% virgin high-impact copolymer polypropylene (PP). The system is a "unit load alternative to the use of a pallet. The system consists of the OptiLedge (usually used in pairs), aligned and strapped to the bottom carton to form a base layer upon which to stack more product. Corner boards are used when strapping to minimize the potential for package compression." The conversion began in Germany and Japan, before its introduction into the rest of Europe and North America.[131] The system has been marketed to other companies, and IKEA has formed the OptiLedge company to manage and sell the product.[132]

IKEA has expanded its sustainability plan in the UK to include electric car charge points for customers at all locations by the end of 2013.[133] The effort will include Nissan and Ecotricity and promise to deliver an 80% charge in 30 minutes.[134]

In February 2014, IKEA in the UK announced that from 2016 they will only sell energy-efficient LED lightbulbs, lamps and light fixtures. LED lightbulbs use as much as only 15% of the power of a regular incandescent light bulb.[135]

Criticisms

Negative media attention

IKEA's goals of sustainability and environmental design in its merchandise have sometimes been at odds with the impact a new IKEA store can have on a community. In particular, the size of proposed IKEA stores has often seen significant opposition from members of such communities. The following are a list of issues which have received negative media attention, both regarding the size of IKEA's stores and other controversies:

  • In September 2004, when IKEA offered a limited number of free $150 vouchers at the opening of a new store in Jeddah, Saudi Arabia, three people were crushed to death in a stampede that followed the store's opening.[136]
    IKEA at Atlantic Station in Atlanta, US.
  • IKEA has demolished historic buildings,[137] in at least one case for a parking area.[138] (At the College Park, Maryland, US, store there is an interactive digital display which tells the history of a tavern which used to exist where the store is currently located.)
  • IKEA was refused planning permission for a future store in the UK in 2004 (to be based in Stockport, near Manchester) by the Office of the Deputy Prime Minister. It applied for judicial review but lost in 2005.[139][140] However, it later received permission to build a store within the Manchester area a few miles from the originally planned site in Ashton-under-Lyne.[141] An estimated £10,000 was spent on traffic policing, and even more on rerouting traffic from the M60 motorway around Ashton.
  • In 2004, there was controversy about an Irish law restricting the maximum size of a retail outlet to 6,000 square metres (65,000 sq ft). IKEA's plan to build a much larger store in Dublin caused the law to be put up for debate. The law was changed to remove the size limit for retail outlets selling durable goods in designated areas.[142] The Minister for the Environment was criticised for allegedly changing the law to suit one company and other agencies protested the law change as damaging to small businesses while the government defended its decision stating that the move was a positive one for Irish consumers. IKEA Dublin has since opened on 27 July 2009.[143]
  • After viewing the 100-foot-tall (30 m) sign of an IKEA under construction near Portland International Airport, Randy Leonard, the city commissioner in charge of sign permits in Portland, Oregon, placed a moratorium on all pending and future sign permits in the area.[144]
  • In 2007 several ancient tombs were destroyed while building an IKEA store in Nanjing, southeastern China. Archaeologists asked whether the building company could stop working for some days to allow archaeologists to work on the site, but they did not receive the necessary permission.[145]
  • In June 2007 the designated nationalist Social Democratic and Labour Party complained about an artist's rendering of IKEA Belfast that included both the Union Flag and the Ulster Banner flag as two of the three flags in front of the store. After being labelled "an upmarket Orange hall" by the party, IKEA assured customers and co-workers that only the Swedish flag would be seen outside the actual store.[146]
  • In a police investigation (2008) for corruption in Spain, there appears a conversation between a director of IKEA Expansion and an entrepreneur owner of the land selected to locate a store in Alicante. The IKEA director was pleased to meet with the "Spanish mafia"[147]

Dissatisfaction at price-discrimination

IKEA has been criticised by Citytv in Canada for charging up to twice as much in their Canadian stores as for the same items sold in their American stores, despite the Canadian dollar reaching parity with the U.S. dollar.[148]

Within the days after the launch of the South Korean edition of the official website, complaints arose from a group of consumers on Ikea's pricing policy in the country: the prices of certain products were higher than other countries.[149] On 24 November 2014, Jang Duck-jin, head of the Fair Trade Commission's consumer policy bureau, told the media that the Commission was planning to commission a consumer group to compare Ikea's product prices by country,[150] and on 19 March 2015, the Consumers Union of Korea published a report comparing the prices of 49 Ikea products in South Korea and other countries.[151]

Biased branding and advertising accusations

  • Former Norwegian prime minister Kjell Magne Bondevik has criticized IKEA for not depicting women assembling furniture in its instruction booklets.[152] IKEA denied this claim in a statement.[153]
  • In June 2007, The BRUNKRISSLA bedding notes said, "Brightens up your grad's dorm. Unlike a creepy gothic room-mate, who can be a bad influence." Members of the goth subculture took offence at the stereotype.[154]
  • A researcher from the University of Copenhagen pointed out that for years, IKEA has named their cheap rugs after Danish places, while the more expensive and luxurious furniture was named after Swedish places. The researcher, Klaus Kjøller, who is well known for tongue-in-cheek statements, accused IKEA of imperialism.[155]
  • In October 2012, IKEA was criticized for airbrushing women out of pictures in catalogues which were used in Saudi Arabia.[156]

Horsemeat Meatballs

  • In February 2013, IKEA announced it had pulled 17,000 portions of Swedish meatballs containing beef and pork from stores in Europe after testing in the Czech Republic found traces of horsemeat in the product. The company actually removed the Swedish meatballs from stores' shelves on 25 February 2013, but only made the announcement public after Swedish newspaper Svenska Dagbladet uncovered what happened.[157] In a March 2013 media report, an IKEA representative stated that the corporation had forced Familjen Dafgard, its main meatball supplier, to cease business with eight of its 15 suppliers and would reduce the number of purchasing countries. The discovered horsemeat was traced to a Polish abattoir.[158]

Child Deaths

  • Six babies were crushed to their deaths beneath the Malm line of dressers, which had not been properly secured to the wall to prevent tip over. Wrongful death lawsuits were settled by Ikea in 2016 for $50 million in compensation to the families of the dead babies.[159] In June 2016, after a third toddler died in the U.S., Ikea recalled all Malm dressers as well as several similar models which posed a tipping danger if not secured to the wall with the supplied kit.[160][161] On July 12, 2016, bowing to two weeks of rising pressure in China, Ikea announced that it was extending this recall to that country, which - along with Europe - was initially excluded from the recall.[162] Over 29 million dressers have been recalled.[163][164][165] IKEA has settled wrongful death lawsuits for over $50 million dollars in compensation to the families of children who were killed by Malm dressers which tipped over.[166][167]

Labor issues

  • In 2012, IKEA in France was accused by the independent newspaper Le Canard enchaîné and the investigative website Mediapart of spying on its employees and clients by illegally accessing French police records. The head of risk management at IKEA feared his employees were anti-globalists or potential ecoterrorists.[168][169]
  • In October 2012, Glendal Foods – a major supplier to IKEA Store Restaurants in Australia – was the subject of bullying allegations by about 50% of staff at the company and the National Union of Workers. Claims included self-harm by a worker, retention of wages, and a significant long-term pattern of staff abuse. The complaints are under investigation by WorkSafe Victoria. IKEA Australia has not yet made a formal comment.[170]

Operation Scandinavica

In 2014, documents were found at the Securitate archives in Bucharest which indicated that IKEA's open purchase of Romanian lumber throughout the 1980s was part of a complex scheme (codenamed "Scandinavica") to fund the Securitate and allow the accumulation of foreign currency: the Romanian lumber company Tehnoforestexport would regularly overcharge IKEA, transfer the overpayments into private Securitate bank accounts, wait for interest to accrue, and then reimburse IKEA the principal. IKEA has denied complicity in Scandinavica, but has begun an internal investigation to learn more.[171]

Use of forced labor

During the 1980s, IKEA kept its costs down by using production facilities in East Germany. A portion of the workforce at those factories consisted of political prisoners. This fact, revealed in a report by Ernst & Young commissioned by the company, resulted from intermingling of criminals and political dissidents in the state-owned production facilities IKEA contracted with, a practice which was generally known in West Germany. IKEA was one of a number of companies, including West German firms, which benefited from this practice. The investigation resulted from attempts by former political prisoners to obtain compensation. In November 2012, IKEA admitted being aware at the time of the possibility of use of forced labor and failing to exercise sufficient control to identify and avoid it. A summary of the Ernst & Young report was released on 16 November 2012.[172]

Verdana typeface

In 2009, IKEA changed the typeface used in its catalogue from Futura to Verdana, expressing a desire to unify its branding between print and web media. The controversy has been attributed to the perception of Verdana as a symbol of homogeneity in popular typography.[173] Time magazine and The Associated Press ran articles on the controversy including a brief interview with an IKEA representative, focusing on the opinions of typographers and designers.[174] Design and advertising industry-focused publications such as Business Week joined the fray of online posts. The branding critic blog, Brand New, was one of those using the "Verdanagate" name.[173] The Australian online daily news site Crikey also published an article on the controversy.[175] The Guardian ran an article asking "Ikea is changing its font to Verdana – causing outrage among typomaniacs. Should the rest of us care? Absolutely."[176]

Founder

Ikea was founded by a former Nazi, the 17 year old Ingvar Kamprad, a member and recruiter for the National Socialist Workers' Party (Sweden).[177][178]

Advertising

German-Turkish advertisement in Berlin-Neukölln

In 1994, IKEA ran a commercial in the United States widely thought to be the first to feature a homosexual couple; it aired for several weeks before being pulled after calls for a boycott and a bomb threat directed at IKEA stores.[179] Other IKEA commercials appeal to the wider GLBTQ community, one featuring a transgender woman.[180]

In 2002, the inaugural television component of the "Unböring" campaign, titled Lamp, went on to win several awards, including a Grand Clio,[181] Golds at the London International Awards[182] and the ANDY Awards,[183] and the Grand Prix at the Cannes Lions International Advertising Festival,[184] the most prestigious awards ceremony in the advertising community.

IKEA launched a UK-wide "Home is the Most Important Place in the World" advertising campaign in September 2007 using estate agent signs with the term "Not For Sale" written on them as part of the wider campaign. After the campaign appeared in the Metro newspaper London the business news website www.mad.co.uk remarked that the IKEA campaign had amazing similarities with the marketing activity of UK home refurbishment company Onis living who had launched its own Not For Sale advertising campaign two years prior and was awarded the Interbuild 2006 Construction Marketing Award for best campaign under £25,000.[185][186]

A debate ensued between Fraser Patterson, Chief Executive of Onis and Andrew McGuinness, partner at Beattie McGuinness Bungay (BMB), the advertising and PR agency awarded the £12m IKEA account.[187][188] The essence of the debate was that BMB claimed to be unaware of Onis's campaign as Onis was not an advertising agency. Onis's argument was that its advertising could be seen in prominent landmarks throughout London, having been already accredited, showing concern about the impact IKEA's campaign would have on the originality of its own. BMB and IKEA subsequently agreed to provide Onis with a feature page on the IKEA campaign site linking through to Onis's website for a period of 1 year.

In 2008, IKEA paired up with the makers of video game The Sims 2 to make a stuff pack called IKEA Home Stuff, featuring many IKEA products. It was released on 24 June 2008 in North America and 26 June 2008 in Europe. It is the second stuff pack with a major brand, the first being The Sims 2 H&M Fashion Stuff.

IKEA took over the title sponsorship of Philadelphia's annual Thanksgiving Day parade in 2008, replacing Boscov's, which filed for bankruptcy in August 2008.

In November 2008, a subway train decorated in IKEA style was introduced in Novosibirsk, Russia.[189] Four cars were turned into a mobile showroom of the Swedish design. The redesigned train, which features colourful seats and fancy curtains, carried passengers until 6 June 2009.

Oyster cards (the ticket-free system for the London Underground) were for given with wallets sponsored by IKEA in 2008-09. IKEA also sponsored the tube map.[190][191]

The Isle of Wight ferry Red Osprey in her IKEA livery.

In January 2009, just before the new store opened in Southampton, MV Red Osprey of Red Funnel was re-painted in an entirely yellow and blue livery to celebrate the opening of the new IKEA store in Southampton. This is the first time a Red Funnel ferry has been re-painted out of its own red and white colour scheme. It stayed in these colours for 12 months as part of a deal between Red Funnel and IKEA to provide home delivery services to the Isle of Wight. It was repainted with Red Funnel's red and white livery when the deal ended in January 2010.

In March 2010, IKEA developed an event in four important Metro stations in Paris, in which furniture collections are displayed in high-traffic spots, giving potential customers a chance to check out the brand's products. The Metro walls were also filled with prints that showcase IKEA interiors.

In September 2010, IKEA launched an advertisement for UK & Ireland called "Happy Inside" which had 100 cats lying on IKEA furniture in the flagship IKEA store in Wembley, London.[192]

In April 2011, an advertising campaign was launched aiming at discovering whether men or women are messier in the home. Created by Mother, the campaign will begin with a TV advert shot in front of a live audience, featuring four stand-up comedians, two men and two women, debating which gender is messier. The idea behind the campaign is that domestic clutter leads to arguments, and thus to an unhappy home, a conflict that IKEA wants to show can be avoided with better storage. Viewers will be directed to a new Facebook page for the brand, where they are able to vote on who they believe is messier, and submit evidence using videos and photos through an app created especially for the campaign. Meanwhile, online display banners will allow other users the opportunity to vote, with online adverts promoting IKEA products demonstrating the problems confronting people, and offering solutions.[193]

Other ventures

In mid-August 2012, the company announced that it will establish a chain of 100 economy hotels in Europe but, unlike its few existing hotels in Scandinavia, they will not carry the IKEA name, nor will they use IKEA furniture and furnishings – they will be operated by an unnamed international group of hoteliers.[194]

Awards

IKEA was named one of the 100 Best Companies for Working Mothers in 2004 and 2005 by Working Mothers magazine. It ranked 80 in Fortune's 200 Best Companies to Work For in 2006 and in October 2008, IKEA Canada LP was named one of "Canada's Top 100 Employers" by Mediacorp Canada Inc., and was featured in Maclean's newsmagazine. Additionally, IKEA is the most popular store for college furnishings.[195]

Countries with IKEA presence

Main article: List of countries with IKEA stores

IKEA has almost 400 stores around the world. Among the countries that have double-digit IKEA stores are:

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