Self-assembled billionaire

As Ikea’s latest and greatest superstore takes Dubai’s shoppers by storm, Rhys Jones looks at the life and times of one of the business world’s living legends — the Swedish furniture giant’s maverick founder Ingvar Kamprad.

  • E-Mail
By  Rhys Jones Published  November 20, 2005

|~|IKEA-200-feature.jpg|~|Innovation: Ikea’s flat-pack self serve section (far left), is one of Kamprad’s contribution to furniture shopping.|~|As Ikea’s latest and greatest superstore takes Dubai’s shoppers by storm, Rhys Jones looks at the life and times of one of the business world’s living legends — the Swedish furniture giant’s maverick founder Ingvar Kamprad. A few facts about the richest man in the world: he drives a battered 11-year-old Volvo, rarely dines out, always flies economy class and avoids paying expensive hotel mini-bar bills by replacing what he’s consumed with cheaper drinks from the local shop. And contrary to popular belief his name isn’t Bill Gates. The man in question is Ingvar Kamprad, founder of the Ikea furniture chain — and he is about to add to his US$53 billion fortune as his empire steps up its presence in the Middle East. Last week the company opened up its biggest outlet in the region — a 30,000 square meter superstore in Dubai’s Festival City (DFC) development. Despite his understated lifestyle and thrifty nature, the 79 year-old Swede who is also known as ‘Uncle Scrooge’ or ‘The Miser’ has one of the most spectacular life stories you are ever likely to hear. A recovering alcoholic and former Nazi sympathiser, Kamprad was born in 1926 in Elmtaryd, Sweden, the son of a farmer. Folklore, as retold in the company’s in-house journal, paints a picture of a lazy child who was reluctant to drag himself out of bed in the morning to milk the cows on his father’s farm. “You sleepyhead! You’ll never make anything of yourself!” his father would say. Then, one birthday, Kamprad got an alarm clock and determined to prove his father wrong, set the alarm for five am and removed the ‘off’ button. By the age of five he was selling matchboxes, Christmas cards, pens and wall hangings to villagers. A former schoolmate recalled: “We sold flower pins for charity one year. He sold more than anyone else. He’s a natural.” From that point on Kamprad refused to look back and in 1943 at the age of 17 he founded Ikea: the name is an acronym consisting of his initials, plus E for Elmtaryd, the family farm and the A for Agunnaryd, the village where he grew up. The early incarnation of Ikea sold pens, wallets, picture frames, table cloths, watches, jewelry and even nylon stockings — all at vastly reduced prices. Kamprad first introduced furniture into the Ikea product line in 1947 and used local manufacturers to keep his costs down. It was a hit, and in 1951 he decided to discontinue all other product lines and focus solely on furniture. Kamprad’s ‘golden idea’ followed soon after with the introduction of the do-it-yourself kit, which enabled customers to buy their wares from the store and put it together at home. At first Kamprad sold his goods out of his home and by mail order, but in 1953 a store was opened in the nearby town of Älmhult as a result of competitive pressures. Ikea was in a price war with its rivals and the showroom allowed people to see, touch, feel and be sure of the quality of its products before buying. The Älmhult warehouse store came to serve as a model for Ikea establishments elsewhere and in 1963, the first store outside Sweden was opened in Asker, a Norwegian municipality outside Oslo. In 1973, the company opened its first branch outside Scandinavia in Zurich, Switzerland. Customers flooded into the stores thanks to the successful formula of a tasteful design at a reasonable price. From day one Kamprad’s mission was for Ikea to provide functional, well-designed furniture at prices that are accessible to as many people as possible. In short, practical, easy to use, cheap furniture. Ikea now has over 200 stores in 32 countries, most of them in Europe, the rest in the United States, Canada, Asia, Australia and the Middle East. The Dubai megastore takes over from the company’s Deira City Centre outlet, which will close down to make way for the new and impoved store. It is four times bigger than the outgoing shop and will feature around 6500 products and 54 room-sets. It will aslo have 1,200 parking spaces, a 300 seat restaurant and a Swedish foodmarket. The DFC store is Ikea’s fifth wearhouse operation in the region — adding to the company’s portfolio of stores in Abu Dhabi, Kuwait City, Riyadh and Jeddah. All of Ikea’s branches in the Middle East have opened with much fanfare with people cueing overnight to get at the bargains first. However, in September three men were trampled to death and 16 shoppers injured in a stampede to claim vouchers when Ikea opened a store in Jeddah. There were no such scenes of hysteria at the DFC branch last week although Ikea fans turned out in their droves, creating a movie premier style atmosphere for the opening — testimony to Kamprad’s foresight and marketing acumen. Since Kamprad set the Ikea ball rolling over 60 years ago the company has become more of a state of mind — revolving around contemporary design, low prices, wacky promotions and enthusiasm — than just a plain furniture merchant. Perhaps more than any institution in the world Ikea represents a way of life and a style that strikes a chord with both young and old, black and white and people from every imaginable walk of life. “Awareness of our brand is much bigger than the size of our company,” says Anders Dahlvig, Ikea’s CEO.||**|||~||~||~|The bottom line is that over the years Ikea has morphed into a cult global brand and its clever marketing and publicity stunts have certainly helped its cause. For example, before the company opened its Atlanta branch in the United States Ikea managers invited locals to apply for the post of Ambassador of Kul (Swedish for fun). The five winners had to live in the store for three days before the opening, take part in challenges and competitions and sleep in the bedding department to claim the prize — US$2,000 in vouchers. Such stunts create a buzz about the company and earn it miles of newspaper and magazine column inches. Another gimmick, which gets people talking is the wacky names of the company’s products: beds are named after Norwegian cities, bedding after flowers and plants. ‘Nothing special’ you may think but people lap it up and many of us now sit on our comfortable Poang armchairs sipping coffee from our Trofe mugs. The US$120 Billy bookcase, US$13 Lack side table and US$190 Ivar storage system are best-sellers worldwide. Such a feel good factor keeps sales ticking along year after year. For the last fiscal year revenues rose 15%, to US$17.7 billion. Analysts estimate the company’s pre-tax operating profits are around the US$1.7 billion mark. To keep the profits flowing Ikea is rolling out 19 new outlets (including the DFC operation) at a cost of roughly US$66 million per store. Despite its considerable success the United States remains a big target for the company — it has 25 stores in a market the size of Europe, where it has more than 160 shops. The goal is 50 US outlets by 2010: Five are opening this year, up from just one in 2000. The truth remains that people are far from bored with Ikea and there seems to be a great deal of extra mileage in the concept and the brand. The retailer accounts for just 5% to 10% of the furniture market in each country in which it operates. There is no doubt that Kamprad’s vision has been the driving force behind Ikea’s success, however. The recluse, known as ‘Mr. Ikea’ to his staff believes the company exists not just to improve people’s lives, but to improve the people themselves. His mantra says that the self-service store design and ease of assembly of Ikea furniture are not merely cost controls, but an opportunity for self-sufficiency — another example of Kamprad’s quirky style of leadership. “Kamprad is quite a leader and stands for the values of simplicity, humbleness and respect,” says Ikea’s managing director for commercial operations, Anders Jonsson, who has worked in the retail industry for over 25 years. “He’s a guy who does not talk — he executes and he lives for Ikea. He is the greatest contributor to a new type of business culture,” he adds. Anders Moberg, a former Ikea CEO who now heads the Dutch retailer Royal Ahod agrees and says Kamprad greatly influenced his own management style: “He trained people to look at things from the customers’ point of view.” And what the customer wants is an attractive design, which won’t break the bank. Ikea makes a point of hiring its own designers, who specialise in a technique known as ‘reverse product creation’. At Ikea, the designers first come up with a price for a product. Then they come up with the most efficient manufacturing process for the product. Finally, they conceptualise a design that fits the price and the process, instead of the other way round, which tends to tie the price to product. In other words, at Ikea, the price makes the product, not the other way around. These unconventional methods clearly stem from Kamprad, who is anything but the conventional businessman. Five years ago he emulated King Lear by pitting his three sons Peter, then 36, Jonas, 33, and Mathias, 31, against each other to see who excelled at running the business. Although his sons are being groomed to take over the firm, Kamprad remains closely involved with all company affairs. Kamprad has been extremely shrewd in creating Ikea’s organisational structure. It is owned ultimately by a Dutch trust controlled by the Kamprad family, with various holding companies handling different aspects of the company’s operations, such as franchising, manufacturing, and distribution. Ikea even has an investment banking arm. Kamprad has repeatedly resisted pressure to take the company public, feeling that it would slow their decision-making processes that have allowed their phenomenal growth — or perhaps he just wants to keep it all to himself, like his money. However, Kamprad may not be as tight-fisted as rumours suggest. According to one report he recently aided a refugee family with furniture from the Ikea stocks. “If this has really happened, it definitely was not in Epalinges,” says one of Mr. Ikea’s former neighbours in Sweden. “The local day care centre recently needed new chairs. They went to Kamprad and asked him if they could get a discount at Ikea. That was completely out of the question.” Despite criticism Kamprad receives for his alleged stinginess there is no doubt the man is a living legend who has influenced millions of lives. “Kamprad has long been a cultural icon and the chief spreader of the Ikea gospel, and he believes it’s best spread from mouth to ear,” says Harvard Business School professor Christopher Bartlett. “When he speaks, whether it’s to customers or employees, people are electrified.” And judging by the response to the Ikea’s latest superstore — Dubai’s shoppers will be electrified for some time to come.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code