IKEA Founder Ingvar Kamprad made headlines in early 2004 when Swedish business magazine Veckans Affarer reported that he had surpassed Bill Gates as the world's wealthiest person.
While IKEA's unconventional ownership structure made this the matter of some debate, there is no doubt that IKEA is still one of the largest, most successful privately held companies in the world, even after Kamprad's death in 2014. There are over 200 stores in 31 countries, employing over 75,000 people and generating over $12 billion in sales annually.
Ingvar Kamprad, a Born Entrepreneur
Kamprad was born in the south of Sweden in 1926 and raised on a farm called Elmtaryd, near the small village of Agunnaryd. At an early age, he learned that he could buy matches in bulk from Stockholm and sell them at a fair price, but a good profit. He reinvested his profits and expanded to fish, seeds, Christmas tree decorations, and pens and pencils. At age 17, Kamprad's father gave him a nice reward for doing well in school. What did he spend it on? He founded IKEA.
The Birth of IKEA
How IKEA got started: The name IKEA was formed from Kamprad's initials (I.K.) plus the first letters of Elmtaryd and Agunnaryd, the farm and village where he grew up. After founding the company near the end of World War II in 1943 as a mostly mail-order sales business, the company began by selling a variety of goods, including wallets, watches, jewelry, and stockings before expanding into furniture nearly five years later. When Kamprad outgrew his ability to call on his customers individually, he converted to a sort of makeshift mail-order operation, hiring the local milk van to make his deliveries.
"The Greatest Mistake of My Life"
During his teens, Kamprad attended some pro-Nazi meetings. When this was uncovered in 1994, Kamprad said, "This is part of my life I bitterly regret...[A]fter a couple of meetings in pure Nazi style, I quit." In a letter to employees titled "The Greatest Mistake of My Life," he asked forgiveness, and he devoted two chapters to it in his 1998 book, The History of IKEA. In an interview after its publication, he said, "Now I have told all I can. Can one ever get forgiveness for such stupidity?"
Focus on Furniture
In 1947, Kamprad introduced furniture into the IKEA product line. The use of local manufacturers allowed him to keep his costs down. The furniture was a hit, and in 1951, Kamprad decided to discontinue all other product lines and focus on furniture. In 1953, the first IKEA showroom opened. It came about because of competitive pressures. IKEA was in a price war with its main competitor. The showroom allowed people to see it, touch it, feel it, and be sure of the quality before buying.
Competition Leads to Innovation
IKEA has now become known worldwide for its innovative and stylish designs. Almost all IKEA products are designed for flat packaging, which reduces shipping costs, minimizes transport damage, increases store inventory capacity, and makes it easier for customers to take the furniture home themselves, rather than needing delivery. While this innovation is now viewed as a great customer experience that helps IKEA customers purchase furniture without the hassle of delivery fees and wait times, the original reason for it was competitive pressure from IKEA's competitors to their suppliers, who actually boycotted IKEA, forcing IKEA to do it themselves.
Good Design, Good Function, and Good Quality With Low Price
Kamprad's vision was the driving force behind IKEA's success. IKEA hires its own designers, who have received numerous awards over the years. Kamprad believed that the company exists not just to improve people's lives, but to improve the people themselves. The self-service store design and ease of assembly of their furniture are not merely cost controls, but an opportunity for self-sufficiency. This vision is reinforced in their advertising and catalog, as well.
All In the Family
Kamprad was extremely shrewd in creating IKEA's organizational structure. It is owned ultimately by a Dutch trust controlled by the Kamprad family, with various holding companies handling different aspects of IKEA's operations, such as franchising, manufacturing, and distribution. IKEA even has an investment banking arm. Kamprad repeatedly resisted pressure to take the company public, feeling that it would slow their decision-making processes that have allowed their phenomenal growth over the decades.
Frugality and Charity
On the one hand, Kamprad had a reputation for being, well, "cheap." He would take the subway to work, and when he drove, it was an old Volvo. Rumor is that when he stayed in a hotel, if he felt the urge to drink one of those expensive sodas from the in-room bar, he would replace it later with one picked up from a nearby convenience store. Yet IKEA has a long tradition of community outreach and philanthropy, with each store encouraged to support local causes, plus international sponsorship of UNICEF and others.