IKEA's formula for success: Start with price

ALMHULT, Sweden — A 16-foot-tall silver Allen wrench glows in the sun outside IKEA's design headquarters, a symbol of the self-assembly culture that has fueled the Swedish retailer's growth.

IKEA has become an $18.3 billion global phenomenon that prompts the same wild devotion in Saudi Arabia and London as it does in Bolingbrook, Ill. It has done this by selling stylish furniture — which customers assemble with a tiny Allen wrench — and home accessories at low prices.

"I think one of the most interesting things about their philosophy is to start out with a price that the consumer will want to pay and figure out a way to make it," said Ken Bernhardt, a marketing professor at Georgia State University. "That is completely backward from the way other companies do it."

The company keeps a zealous focus on cost control, similar to Wal-Mart's practice of squeezing suppliers and Toyota Motor Corp.'s elimination of waste and errors in manufacturing.

And IKEA keeps growing. The Canton, Mich., store that opened this month is its 28th in the United States. It's 30th U.S. store — and first in Utah — is scheduled to open on a 22.5-acre parcel north and west of I-15 and Bangerter Highway in Draper in spring 2007, and the company plans to have 50 U.S. stores by 2013. IKEA, the world's largest furniture retailer, operates 235 stores in 34 countries with more than 90,000 employees.

Larry Rich, 48, of Royal Oak, Mich., who has shopped IKEA stores in France, Toronto and Chicago, said he is drawn to IKEA for the fun shopping experience and the well-designed products.

"There is kind of that cachet of IKEA. It is one of discovery," Rich said. "It is that experience of looking at the room sets, you can mix and match things . . . and at those price points. Granted, you have to put everything together. I think it's been worth it.

"You are not buying heirloom furniture," he added.

At IKEA's design headquarters in Sweden, examples abound of the retailer's focus on thrift. Many employees ride their bikes to work, even with snow on the ground. Conference rooms are bare-bones, with self-assembled furniture.

The company has been that way since Ingvar Kamprad, now 80, founded it 63 years ago. His initials and those of his farm, Elmtaryd, and his county, Agunnaryd, form the acronym for IKEA.