The ‘IKEA Effect:’ Behind the Company’s Unique Business Model | WSJ The Economics Of
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- čas přidán 11. 07. 2024
- A large part of IKEA’s success stems from its policy requiring its customers to build their own furniture. Given how ubiquitous IKEA is today, it can be difficult to appreciate just how innovative some of its business practices were when they were first introduced.
WSJ explores some of the strategies the Swedish company has used to become the world’s biggest furniture retailer including the behavioral psychology behind the ‘IKEA effect.’
0:00 Build-your-own products
0:46 Store layout
1:53 The ‘IKEA effect’
3:08 Mass market appeal
4:23 Democratic design
The Economics Of
How do the world's most successful companies generate revenue? In this explainer series, we'll dive into the surprising stories behind how businesses work--exploring everything from Costco's "treasure-hunt" model to the economics behind Amazon's AWS.
#IKEA #Furniture #WSJ
i love the maze concept. i get why it could be annoying, but it honestly just feels like an adventure. a huge factor for me is also how the rooms are the way items are displayed. i loved it when i was younger and i still love it now bc you can visualize what something will look like in real life. also, the stuffed animals are so cute!!!! idk if that’s a huge selling detail for most but oh my golly that is one of my favorites and i don’t even buy stuffed animals anymore
It's honestly a pretty crippling design fault for a lot of people, especially the old or those that have any sort of hip/foot/knee disability. The shortcuts are extremely few and often don't save you that much time so even if you know what you're going to look at, you still have to walk like two football fields minimum and because the path is constantly winding, you immediately get lost and the places where there's maps are also few.
@@CoecooIf I want to save time, I skip the showroom. I go directly to the marketplace but that’s still a long walk, too, lol. The marketplace also has shortcuts but yah know, don’t expect to be out in the counter right away.
there are 5 shortcuts sown at 1:30
Back in the day I had to ask a staff member if I wanted to go straight for an item - I really like these shortcuts now!
Dear WSJ, please do more of these "The Economics of" videos! They are great!
200% agree !
300% agree !
Actually IKEA is moving away the “maze” concept. I work a at a newly built store in Sweden that instead of forcing people through a specific path has an “organized shortcut” that allows you to go to any department directly. You don’t have to go through check-out to pay, the staff carries smartphones that can be used to pay. The the warehouse is automatic, robots picks the items for you. Also, in some bigger cities IKEA has smaller inner-city stores where you can only order the items for home delivery, skipping the warehouse concept completely.
While this has been the IKEA way for a long time, it might not be the future concept of IKEA.
Do you have any internet article talking more about this??
I'd like to know the motivations for that change and the vision the company has for the future
@@martu33127 not that I’m aware of. I work at IKEA so I guess it’s a bit of insider information 😉
Isak A vilken Ikea är det haha, låter mycket bättre än de Ikea som jag har besökt..
@@isaka3719 how’s work life in ikea?I heard their food is too good!
They have this now in most stores in the United States.
If someone ate a cake like that in front of me, I think I would go insane
Where you at? I have my cake ready.
He woke up and chose chaos
He woke up and chose cake
@@smileandlaughs😂
I think the secret to their success is through having cheaper products then everyone else. While they feel much cheaper than other products with a premium price tag it still holds the value you get with it. I also think that having a modernized look also helps sell their products rather than going for one specific look like rustic or antique.
they have absolutely perfected their value engineering. Yes their furniture feels cheap when you take a closer look, but it doesn't feel nearly as cheap as every other cheap furniture brand.
@@BeetMasher Its almost like it’s cheap for high quality products or expensive for the most affordable products
This is how I feel. I know an Ikea item will into any room, so I can buy it with only utilitarian concerns in mind when selecting an item. The prices are better than I see elsewhere unless I am willing to go plastic. In that case Target has beaten Ikea, but then the item doesn't look or feel like furniture so it's not really the same item even though it serves the same function in my home. If I want real furniture, I can only afford to look at Ikea. Sometimes even Ikea is too much, I wonder if I'll ever have a wooden dining table with six chairs and it's kind of saddening. Those items have to be more sturdy though, so I can understand the slightly higher pricing (and still much better than their competitors).
i know a guy who runs one of their german stores and said they even have their own forests that grow their wood, their own mills to process it and the trucks to distribute it.
its probably one of the most efficient companies on earth
Vertical integration goes brrrr
As an avid ikea hopper. I'm always surprised that people get confused by the maze and most people don't know that they have built in shortcuts that lead you straight through the department store. You can clear an Ikea in under 10 minutes start to finish including picking up your item and go through the register.
i love to sit in the little sofas and watch the drama unfold ! love the maze
@@isabellaweir2763 Indeed, it's cheaper than a movie and you can bring snacks.
I work at IKEA's restaurant so this hits close to home, and no, I can't navigate through IKEA without getting lost either
I just quit y’all
For some reason we can easily navigate through it, maybe Australian
Ikea is like Zara, you can mix and match with your expansive goods. And never goes wrong.
I've built all of my kids' beds with ikea (among lots of other things), I do relish the opportunity to build something for them by hand with love. I like the new fresh cut timber smell of their product, always signifies to me a new phase in life. I own really expensive furniture, but I also love my ikea pieces in equal measure.
Yeah fake manly vibes
@@andyc9902you’re insecure
@@andyc9902 What is wrong with you? Are you okay? Do you need someone to talk to?
@@grundeir 🥲 yes
What's really frustrating is saying the store size in imperial units and then converting it to football fields for the Americans.
It’s an American newspaper. They use imperial system and won’t change get over it.
u mad bro
At least they didnt convert it into how many African Elephants it can fit....
It is a wood jungle 😁
@@Al-Akram92 americans ALSO use imperial units?
nobody else does...
IKEA seems to be able to read my mind. Whenever i need a new piece of furniture, i already have some sort of design in mind before even going shopping. Sometimes i even draw a CAD model. Then i go to many different furniture stores, browse online, but somehow IKEA always seems to be the closest to what i initially imagined. Just some examples:
- I wanted food storage containers for my kitchen (not ikea), and they had just the right size to fill up my shelves perfectly, without gaps.
- Wanted to color match my office desk and bookcases to my floor and windowsills - every other furniture store was offering a million different colors and textures, but none of them were quite right. IKEA has 4 colour optins, one of them fit perfectly.
- Wanted durable, scratch-resistant dining chairs without upholstery so my kids couldn´t ruin them by scribbling on them or spilling something - IKEA again.
- Now i´m looking for metal patio furniture so i would´t have to worry about oiling wood or ruining rattan, and so i could just powerwash it all when needed. Guess what, IKEA just introduced an all-aluminium patio set.
Their couches and chairs are really ugly and uncomfortable though.
Another thing IKEA does is decoy pricing. They present an item in three styles, for example; white, black, and in oak. While the white and the black appear to be of similar quality (same materials, only different paint), the one in oak appears to be more upscale. So they price it like this:
White: $40
Black: $60
Oak: $65
What customers intuitively think is that the White item is an unusually good deal, or that the oak item is an unusually good deal. Or both. In reality it's just the black item that's overpriced, and it acts as a decoy to put the other two items in better light.
sneaky
Excellent advice Elias! thanks, I know where it comes from; ask any man what he remembers of his ex, most probably he'll respond " when I meet her she was with her friends " 😮😅.
Here in France they do include maps of the departments so you can take short cuts in the store to get to the bit you want to quickly. We love it shop there quite often for things for the home.
Yup, it's also like that in my country. I wonder, is it really US they don't have shortcut or they don't put it in the map?
I can't speak for the US, might vary by location. However, in Canada the shortcuts are on the entrance map plus there are arrow signs indicating said shortcuts
US stores also show shortcuts
You can see the shortcuts on the map at 1:30
here in england we can make it round a shop without a map 🙄
Ah yes, the american football field, a classic unit of measure.
lol
Said the same thing 😂
''ah yes'' 🤓☝
Actually as an European,i found it very helpful.
Great video! I love the cake mix egg example. I recently bought an IKEA sectional vs. an already assembled one only because the boxes could fit in my new apartment building’s tiny elevator. Thankfully, the sectional has ended up being quite comfortable.
This is my fourth WSJ “The Economics of” video in same seating. Please keep posting these videos.
Wish IKEA would roll back it's product design and quality the early 2000s, like the GRUNDTAL & SALTSKÄRR wall mount medicine cabinets, adjustable wall bracket shelving ANTONIUS, the grey metal framed cream colored shelve (can't remember/find the name) kitchen shelves, UDDEN/VARDE free standing kitchen cabinet system; and the "personal" drawers/files previous gen to the MOPPE currently on sale (can't find the name of these either... they were nice enough to be in Architect's offices). They HAD A LOT of really clever useful things... and now well, they just seem cheap.
I love the fixed path. It makes me sure that I have seen everything. Anyway I love IKEA because its a decent products with a decent price. As a person that catch allergy easily, I can easily compare that other furniture brands (in Indonesia) do not give me great experience building them.
From the thoughtfully placed embellishments to the flawless stitching, it's pure perfection kkuwan
Look forward to seeing the other episodes planned, especially DJI and TSMC!
I dont know why but the way IKEA organize and set up their products, it makes me wanna go around the warehouse to explore the products and it’s really fun, but i only go to IKEA like 1-2 times a year so every time it’s like a first time😂😂😂
Its pretty simple tbh, good products for the price, they last a long time and look nice, great customer service, clean and fun to walk around stores, and good meatballs haha.
They’re products last 2-3 years tops, or one move. Most of IKEA’s furniture is flimsy particle board. It’s “fast furniture”.
The Ikea effect is a really interesting concept to apply to businesses that don’t sell physical products. In those situations, businesses might have to find creative ways to find ways to have the “labour causes love” and to implement democratic design for B2B companies. I’m interested in how these concepts could be applied in different ways for different industries.
we move to different cities every 2-3 yrs and ikea has been best for us, compact packaging, good utility and functional features and amazing quality.
The best series by WSJ. Keep doing more of these.
IKEA...my go to furniture store during college days. Good times.
Ah yes, I always measure using American Football Fields.
A man of culture I see
nerd alert
🤓👆
Love this series!!
Fact: The world’s largest IKEA store is opening in the Philippines 🇵🇭. Construction is still undergoing.
The largest? The country must have a very low wage minimum
@@iamjune8574 The Philippines has strong demands for furniture and hardware for home furnishing. Plus the soon-to-be world’s largest Ikea will house office spaces and storage facilities to supply neighboring countries with the Ikea brand as well. The Philippines is a key player since it will serve as a hub given that the country is located at the central south east Asia. In addition the Philippines is transitioning to an industrial country from an agricultural one. The rise of business and Condominiums across the country prompted Ikea to Invest.
Yup. Designed by JSLA Architects
The construction crew is wandering around in a maze, trying to find stuff!
@@user-cm9fy8nq3q *furniture and *hardware. Those are two examples of words that do not need to be pluralized.
What's with Filipinos and their tendency to add plurals where there shouldn't be?
There are shortcut doors, I always use them.
As a carpenter, its great to build your own self customized furniture. If you wanna put a what i consider "just a larger lego set together. Go for it. Its good to be independent and know how things work. Also cheaper in the long run.
I think its success is more of transportation and storage. They basically beat other manufacturers' price, even in Asian countries. And given their warranty and aesthetics, are miles better than chipboard furniture. If you want a step up from Ikea, you could only really go to solid wood, which cost way more.
i dont really understand what your comment means? is ikea wood not solid?is asian wood more solid?
wood comes from trees
3:48 Ikea has been in the US for a while, there's a store in Emeryville, CA that's been open since 2000.
I literally just went to IKEA for the first time a few days ago and I loved it !! It was so much fun !
This is grace of creativity
If someone paid me for all the furniture from IKEA I've build over the years, I would be a millionaire by now :-DDD
an ikea store just freshly opened in my hometown and this video really helped me understand the hype
Would love to see “the economics of DJI”! Is that dow jones index or the drone company? Noticed it teased in the intro.
People don’t like the “maze” concept of ikea but I love it! Its really fun for me to go through all the sections
Well, compared to other furniture stores their layout isn't a maze at all! And if you've been to IKEA a few times, you know the layout, and you can always check the map for shortcuts. Also, you can skip the "exhibition" upstairs completely if you don't need bigger items like a couch or a kitchen!
I love the ivar shelves, they've been my companions for 20+ years, through many moves, I've expanded them, split them to fit different rooms, gone from shorter sides to fit sloped ceilings to the highest sides, some old parts my kids scribbled on with markers when they were little now live in our garage, and some parts have moved out with the eldest when he moved out. I'm sad some parts aren't available anymore, but they have introduced some new things that are pretty cool, too. And the biggest plus is, they sell a variety of boxes and other storage containers that fit those shelves perfectly, while being super affordable. No other furniture shop I know has anything like it.
In IKEA China stores, signs for shortcuts are well displayed. There is even one from entrance to exit directly.😂
i must be a unicorn, for i plan my items on the app, check available stocks, head straight to market hall or warehouse and grab what i need in under an hour. i never get meatballs and i never walk the showroom path....
Or better yet, order what you want online and just drive there to pick em up. Thats what i did to at least save on shipping fee.
Same here. When I want something from the market hall, I just enter through the checkout area and arrive immediately where I want.
@@dta_yoon not every country has curbside collection
We had a habit of just strolling through their stores and wouldn't know hours going by, even though most of the time, we don't buy anything..lol
One my stress therapy place 😊
Levi's jeans: Shrink-to-fit
IKEA jeans: Cut-to-shape
In India, we just call the local carpenter to come and assemble Ikea furniture pieces for a fee. When a professional carpenter assembles furniture, the chances of it wobbling or squeaking later are greatly minimised. Saves time and effort too. Not everyone is nimble with their fingers or has the time or willingness to brainstorm the assembling and reassembling of pieces till they get it right. 🙂
culture issue
I'm surprised this didn't talk about Ikea's complicated corporate structure that makes it a technically non-profit entity. I think the flat packing has nothing on not paying taxes. Seems like an important aspect of its economics.
Ditto. I had the same thought
These videos seem only to state the rather obvious.
I had no idea. Thank you for that. Fascinating insight into how the world really works.
Interesting to note that IKEA shut down one of its trail inner-city stores in Coventry, UK because it didn't really work with the odd floor plan and a city centre location.
thats because coventry is horrible :(
Have you ever walked thru ikea for hours, only to find the pieces of the items you want are Out of Stock, and you’re left with nothing but meatballs…? *reality*
That's what makes it so great
@@aad1709 what ??????
I check for availability on the website of my country. Also check the number of the shelf and where the product is and go directly to pick if I don't want to wonder around the store.
I know my apartment is full of Ikea stuff. And I love how they relatively inexpensively have the option of having your furniture assembled professionally.
labour leads to love ... nice concept
Like this series.
Thanks for watching!
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The best of the best
My husband and move a lot, so we can't deal with heavy, fancy furniture. If our IKEA furniture gets damaged when we move, it's no big deal. Also love the unusual designs.
Beautiful
It is very interesting to explore what strategies IKEA uses to attract more customers. One thing that I did not know is their "labyrinth" complex store layout. This deliberate layout often leaves shoppers pleasantly disoriented, subtly encouraging impulse purchases. Also, they have a good pricing strategy (they use lower prices compared to its competitors). Finally, they are using flat packs, which ease the process of loading packs into vehicles. Together, these elements contribute to IKEA's success in attracting and retaining a diverse customer base.
Ouch! A lesson in stripping screws at 5:37 made my heart drop. Good video otherwise!
I was thinking the same thing! RIP the drill bit
Amazing video
I mean, you don't have to go throught the maze. Taking the ones I know of (Two in Oslo, one in Bergen), you can skip quite a lot:
- There are the normal shortcuts that cuts through a lot.
- You can go from the entrance up the stairs and right by is the cafeteria
- You can go straight from the cafeteria to the 1st floor.
- You can go straight from the first floor "entrance" to the warehouse section.
- You can go straight from the entrance to the first floor "entrance".
+ The usual shortcuts shown on the map.
So if you go there a bit more often than once in a while, you can get where you want to go rather fast.
The thing with building it yourself is that you can do what want you with it. I have seen so many people make bookcases built-in with the Billy bookcases. I’m not kidding.
Very interesting
😬 at the screws spinning in the particle board
(I get that it’s just building a prop, but just so everyone knows: it doesn’t really matter if you use a power drill even though some manuals state not to, just use it at a slow speed so you don’t tear up the particle board)
It's still relatively expensive in my country compare to local product which cheaper and much better material. I built like 6 times cheaper a kitchen set using better material (solid wood) than ikea used. It's good design though.
Same here in India.
Perhaps that's the reason why there are no IKEA stores in many places like Africa and Latin America
The success of IKEA is contributed by how it greatly reduce assembly cost, transportation cost, and R&D cost from the price tag.
80% of production cost is determined in R&D phase. IKEA has packing and installation in mind in the very beginning of designing the product.
The result is a very compact packing. This greatly reduce transportation cost and storage cost. An assemble friendly product, so you can shift the assemble cost to the consumer. That becomes 0 in the price tag. The last, a very long lasting product. In favor of economy of scale, the production cost and R&D cost on average reduced. You can easily see some products that are 10 or even 20 years old in IKEA. And they can keep making the price lower.
Glad they included shortcuts for regular customers who just want specific things.
Saludos gente maravillosa y bella y feliz llequeeee
habla en inglich aqui nadie te entiende
Ther's another key feature of the flat package, it makes transport much easier. Probably truer in Europe than te US, but in big cities, a lot of people don't have a car, regardless of income level. Only Ikea can sell you a king size bed which you can take home under your arm by bus/metro. Also applies to the people with tiny urban cars where regular furniture would never fit. I remember getting all the furniture for my first apartment in one single trip with a VW Polo.
1:18
It's not a quick shopping.
It's about thinking about home and how to organize it. It takes time for that. And the maze is important to make sure that you got everything needed for your home or your plan or for a piece of furniture. If you had to go to IKEA then plan 3hrs to 6hrs of shopping time. It will be worth it.
You can have amazing meatballs at the end or in the middle of your shopping.
You have to use your own judgement to decide whether their products last long. Cos some stuff are really good, especially their tables.
ive had a ikea desk for 12 years, its still holding strong lol
Yeah you can't get everything but if you spend a little more you can definitely get the longevity
@@oslowcloud you judge the quality to think about the longevity
I will never be friends with anyone who does not share my love of IKEA
I hate Ikea because of my deep hatred for Sweden
@@Nellerkillerstrains shut up
@@Nellerkillerstrains KING
Can I be your friend
Thanks for including football fields as a measuring unit. 😇
Nice video.
keep on continuing with this series, it's very insightful
I imagine ikea’s furniture assembling itself in the future.
With all these new tech and robotics seems pretty possible.
It’s not just Ikea who designs its space layout to make people buy more. Unconsciously, grocery stores are also designed to make you buy more than just what you just just intend to buy in the first place. It’s all marketing!
I usually go to ikea to do my walk exercise. lol
IKEA is not a good quality product, it came to Asia expecting us to assemble our own furniture, it does not work for us. We pay to buy, we want services.
I think there could have at least been a reference to the Bauhaus here. The main concept of Bauhaus was to integrate art, craftsmanship, and technology to create functional, aesthetically pleasing designs for the masses. The precursor to Ikea's democratic design mentioned in the video.
Ikea is opening its world's biggest store in Manila this year! Hoping to get a taste of their famous Swedish meatballs
what a nice infomercial. i hope you got paid well to publish this.
Nice
Before IKEA: Whoa you're so fit, I bet you go to the gym everyday
After IKEA: Whoa you're so fit, I bet you go to IKEA everyday
OK, but I would say the fact that most people can transport the furniture themselves, the fact that the furniture is generally much lighter than others, and the fact that most of the furniture can typically be disassembled without damage all mean that people will be more likely to buy something that doesn't require several people for transport and can be moved to another residence easily.
The price is also nice.
I always heard that ikea was amazing and had lots of variety as a kid (something like that), but when I actually went their it felt like a place for green-plants grandma's. It's probablt because of my area's out of date fashions.
curious why no stores in central and south america. anyone know?
I've actually been on a date in IKEA.
One of the best dates I've had :D
EE about to throw hands at that title.
Good product
the moroccan sahara anmi
Philippines already opened the world largest Ikea warehouse in the world in 2022 and its a hit！
2¢:
Parking: expensive.
Restaurant: Great, food is fresh, reasonable prices, good meal sets always.
Food Store: Some stuff can be pricey but good deals are majority.
Furniture & Home Accessories: The words " self assembly" sounds fun and easy...the same as dietsa at the book store, learning to play an instrument at the music store, excercise machine watching the infomercials...
[ I'm a tecnical worker].
The table this monitor is on right now was assembled by me (not from IKEA, to be fair) and from day 2 I've not liked it because I built it (and not very well, despite trying my best). So no, labour doesn't lead to love. I think highly of IKEA for the quality of what they sell and the reasonable prices. I thought the title was going to talk about employees, honestly.
It is the Gruen Transfer, the overwhelming and confusing layouts that cause customers to lose focus and make unplanned impulse buys
Appealing and awesomely attractive
Ikea is a very good store with original products! 😊
This episode was brought to you by...
Nothing gives you a sense of superiority like being Swedish and thus able to comprehend, often entirely without effort, IKEA's product names. // Det finns inget som ger samma känsla av överlägsenhet som att vara svensk och därmed kunna förstå IKEAs produktnamn, ofta utan någonsomhelst ansträngning.
Labour leads to love - IKEA
i love ikea.