WITH an insider’s knowledge, Johan Stenebo’s controversial book is a remarkable, personal view inside a company that overtook Argos as the UK’s largest home furnishings retailer in 2009 but, after 67 years, only disclosed its profits for the first time last month (worldwide net profit £2.2bn in the year to 31 August 2009). In these three extracts from the book, Stenebo gives his view of Ikea’s UK business dealings, Ikea’s 84-year-old founder and the seductive layout of Ikea’s stores.
ON IKEA IN THE UK
“During these years [the 1990s] up until 2000, Ikea’s British subsidiary showed a profit which in percentage points surpassed the cost level of many sister-companies. Swedish legislation regarding company secrets unfortunately prohibits me from quoting the exact figures, but let me give a fictitious example by comparison. Say, the Hennings company runs ten textile stores and in all has a turnover of SEK1bn per year (£90m). The turnover of SEK1bn corresponds to 100 per cent. The company’s profits after having paid the purchase of all goods and materials are, say, 50 per cent. From the remaining 50 per cent it must cover all the costs of running the company and make a sufficient profit. The total cost of running Hennings corresponds to 40 per cent of turnover. Thus Hennings makes a profit 10 per cent (turnover less purchases less running costs), which is a fine result for any company. Now imagine a case, as with Ikea UK Ltd, where profits are actually higher than the cost of running the entire company! Very few retailers like that exist anywhere in the Western world.
Obviously such profit levels cannot be healthy for a subsidiary in the long run, as it amounts to ruthless exploitation of the customer. Only someone who shopped or worked in the British stores at this time can really understand the immense pressure both customers and co-workers were subjected to when far too many people crowded into a far too small space day in day out. As a customer you could frequently go neither forward nor backward in the store aisles, but were forced further into the interior of the building like penned cattle. This was a common state of affairs in the Wallau store in Germany when I first started working for Ikea. But there it happened one or two days a week. In the case of the UK the crush soon became unbearable throughout the week, and in many stores during all opening hours. This was a totally unique situation within the Ikea-world. Nowhere else – neither before nor after – has the customer experience been so unbearable, for such a long period, as in the British stores.”
ON IKEA’S FOUNDER, INGVAR KAMPRAD
“Ingvar has today no neo-Nazi or fascist sympathies whatsoever. I have never even heard vague allusions to this. Ingvar is absolutely no anti-Semite. I would say the contrary. He has told many anecdotes from the early sixties when he helped Polish Jews or Jewish groups in need of money or support in other ways. He has a soft spot for colleagues of this religion. Some of them are among Ingvar’s favourites. Why this is so I do not know, perhaps he wishes to compensate for his earlier sins.
Ingvar grew up in an extremely authoritarian family of German origin. His paternal grandmother was more than pro-German, a matriarch who set the agenda in the Kamprad home. The fact that Ingvar’s father Feodor was a confirmed Nazi was, according to the now dead colleague Leif Sjöö, known all around the district. Beatings and indoctrination were part of everyday life on their farm, Elmtaryd, as in so many other homes during the twenties and thirties. To be able to escape from this emotional desert as a child without lasting damage must have been difficult. The fact that Ingvar, as Sjöberg perhaps correctly points out, was a Nazi, or in any case a fascist, at the end of the fifties is decidedly bad. But my assessment is that those acts of folly stopped, in order to never return.”
ON IKEA’S PSYCHOLOGICAL SEDUCTION
“One of Ikea’s absolute competitive advantages is the fantastic capability to in a subtle way, almost unnoticeably, manoeuvre your purchases, something usually called purchasing process. This is done in a very ingenious way and with the only purpose to make you buy as much as possible. It begins already as you come up the escalator to the furniture display. Here you are met by the open-your-wallet market and bins with Ingvar’s bags [the distinctive large, blue Ikea carrier bags] so that you will have room for all the extremely cheap products you without fail will pick up.
Then your stroll along the main route begins, the grey path. You continually find new tasteful room sets and interesting products. Wherever you go it is all so interesting and varied. To get lost is almost impossible. Signs in the ceiling, pedagogic plans and arrows on the floor lead you on with a firm but gentle hand. Your visit is going smoothly. Perhaps you won’t even notice that no part of the grey pathway has a straight stretch of more than 10-15 metres (longer than that is called “Autobahn” and is considered a serious mistake) before it is interrupted by a bend, then a short straight stretch and then a bend in the other direction. As you turn your eyes you will without noticing see new hot areas with new hot products. You carry on like this throughout the entire store: straight stretch, bend, short straight, bend, straight stretch. You cannot really tire as your eyes are inexorably guided towards new destinations and Ingvar’s bag will be exchanged for a trolley in order to have room for all you have picked up and in the end there you are at the checkout with a full trolley. Consider that this entire process, all your experiences, the firm control over you strolling through the department store happens so subtly that you at no time manage to perceive how you are being influenced to purchase decisions other than possibly subconsciously.”
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