IKEA
This episode is flat-packed with counterintuitive lessons about how this folksy mail order business from the Swedish countryside came into your living rooms and bedrooms and dining rooms and kitchens.
Welcome to all the new Acquired Briefing subscribers. In the last 30 days we’ve grown by 37%, and we now have more than 1,400 subscribers. If you’re enjoying these deep dives on iconic companies, please share the briefing with anyone you think would appreciate it.
The IKEA episode is my all-time favorite episode of the podcast, so I’ve been looking forward to sending out this week’s briefing for months. I hope you enjoy.
IKEA may be the most singular company ever studied on Acquired. They’re a globally scaled, $50B annual revenue company with no direct competitors — yet have only ~5% market share. They’re one of the largest retailers in the world — yet sell only their own products. They generate a few billion in free cash flow every year — yet have no shareholders. And oh yeah, they also sell hot dogs cheaper than Costco! (Sort of.)
This episode is flat-packed with counterintuitive lessons about how this folksy mail order business from the Swedish countryside came into your living rooms (and bedrooms and dining rooms and kitchens and bathrooms and patios and garages and backyards) all over the globe!
Kyle’s Rating: 10/10
This is my favorite Acquired episode hands down—Ben and David deliver their peak storytelling while unpacking Ingvar Kamprad's extraordinary vision and discipline. I'm blown away by how Kamprad had such a clear mission to bring well-designed furniture to the masses and executed flawlessly, building a $50 billion empire purely off profitability without ever taking external capital beyond that initial 500-krona loan. The way they trace IKEA's evolution from matches and pens to global furniture dominance, highlighting Kamprad's strategic frugality and long-term thinking, showcases everything that makes Acquired special.
Company Overview
Company Name: IKEA
Founding Year: 1943
Headquarters Location: Älmhult, Sweden
Core Business: IKEA dominates global furniture retail, specializing in affordable, well-designed, flat-packed home furnishings that it sells through a unique combination of catalog, showrooms, and large-scale stores.
Significance: With $50 billion in annual revenue and nearly 900 million store visits yearly, IKEA's innovative retail model and relentless focus on low prices have made it a global leader with no direct competitors, capturing a 5.7% share of the fragmented furniture market.
Narrative
IKEA's story unfolds across four distinct eras, each marked by pivotal innovations that shaped its rise to become a global retail giant. The narrative reflects Ingvar Kamprad's singular vision and frugality, rooted in his Småland upbringing, and his relentless pursuit of serving "the many" with affordable, quality furniture.
Matches and Pens (1926–1947)
Ingvar Kamprad's entrepreneurial spark ignited at age five on a farm in Småland, Sweden, when his aunt helped him buy bulk matchboxes from Stockholm, which he sold at a 3x markup to local farmers. Kamprad said: "Selling things became somewhat of an obsession for me." This period saw him trading a variety of small goods—Christmas cards, wall decorations, garden seeds, cigarette lighters, wallets, file folders, and notably fountain pens, which became a niche hit.
By age 12, in 1938, he took a 500-krona loan (about $63) from a local bank—the only capital he ever raised—to import 500 fountain pens from Paris, repaying it quickly. In 1943, at 17, Kamprad incorporated his trading as a company called IKEA, named after his initials, village and farm. Operating from a shed, he sourced goods via trade publications, acting as a capital-light agent, often drop-shipping without holding inventory. David notes, "He's the first drop shipper.”
Furniture + Catalog (1948–1952)
In 1948, Kamprad pivoted to furniture after noticing competitors' success, a move he later called "an accident that found my life's calling." This shift capitalized on unmet rural demand for affordable, accessible furniture, previously limited by sparse, high-margin traveling salesmen. Kamprad sourced furniture from local Småland manufacturers, who handled delivery, allowing him to focus on low prices and selection.
He launched IKEA News, initially an advertising supplement in farming publications, which evolved into a standalone catalog, scaling demand nationwide. The furniture, as a high-dollar purchase, yielded significant absolute profits even at low margins. By 1949, Kamprad secured a weekly supplement in Sweden's largest farmer's paper (285,000 circulation), railing against middlemen:
“You may have noticed that it is not easy to make ends meet. Why is this? You yourself produce goods of various kinds—milk, grain, potatoes, et cetera—and I suppose you do not receive too much payment for them. No, I’m sure you don’t, and yet everything is so fantastically expensive, to a great extent that is due to middlemen. Compare what you receive for a kilo of pork with what the shops ask for it. In several areas, it is unfortunately true that goods that may cost one krona or two krona to manufacture, costs five krona, six krona, or more to buy. In this price list, we have taken a step in the right direction by offering you goods at the same price your dealer buys for, in some cases lower.”
This cemented IKEA's mission, as articulated in The Testament of a Furniture Dealer: "to create a better everyday life for the many people by offering well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them."
Furniture + Catalog + Showroom (1953–1960s)
The early 1950s brought price wars and quality issues in mail-order furniture, eroding consumer trust. In 1953, Kamprad opened the first IKEA showroom in Älmhult, a radical idea to let customers "convince themselves" of quality, as he wrote: "Come and see us in Älmhult and convince yourself." Ben and David call this "the first time mail order combined with a showroom," drawing thousands with free coffee and buns.
By 1955, sales hit six million krona, with 500,000 catalog subscribers. Competition intensified, with rivals locking IKEA out of trade fairs, prompting Kamprad to design proprietary furniture. The accidental invention of flat-packing—removing table legs for storage—slashed costs and enabled scalability, as Ben notes: "This is where IKEA becomes IKEA."
The 1950s saw IKEA serving rural farmhouses, but urbanization (75% of Swedish farms closed from the mid-1950s to mid-1960s) shifted demand from families on the farm to young, urban customers. Kamprad's visit to Milan apartments, seeing outdated farmhouse furniture, inspired modern, space-efficient designs like the BILLY bookcase.
Sourcing from Poland in 1961, leveraging Soviet-era capacity, scaled production cheaply, with Poland making 50% of IKEA's furniture by the decade's end, including the $9.99 LACK table. The 1965 Stockholm store, with self-service warehouses, marked the modern IKEA, doubling revenue. A 1971 fire led to a redesigned store with self-checkout and Småland playrooms, perfecting the model.
Global Expansion and Challenges (1970s–Present)
The 1970s saw "blitzscaling" across Europe, Canada, and Asia, funded solely by profit dollars, reflecting Kamprad's frugality and 100% ownership. Ben and David admire this, noting IKEA's $2 billion revenue by the 1980s. Kamprad's 1976 Testament codified IKEA's ethos, while his move to Denmark (1973) and Switzerland (1978) avoided Sweden's high taxes, creating a dual-foundation structure (Inter IKEA and Ingka) for longevity. The U.S. entry in 1985 proved a blockbuster but revealed missteps in assuming market homogeneity. E-commerce in the 2000s challenged IKEA's model, flattening revenue from 2007–2010. Small urban stores and the 2017 TaskRabbit acquisition ($50–$75 million) showed adaptation, but e-commerce (26% of 2024 revenue) pressures margins. Kamprad's death in 2018 ended an era, but IKEA's $50 billion revenue, €25 billion cash, and 860 million store visits underscore its dominance, though Ben and David question its e-commerce future.
Timeline
1926: Ingvar Kamprad born in Småland, Sweden.
1931: Kamprad begins selling matchboxes at age five, marking his trading obsession.
1938: Takes a 500-krona loan (only capital ever raised) to import fountain pens.
1943: Founds IKEA as a mail-order trading firm, selling matchboxes, pens, Christmas cards, seeds, lighters, wallets, and file folders.
1948: Adds furniture to IKEA News catalog, sourcing from Småland manufacturers.
1949: Secures weekly supplement in Sweden's largest farmer's paper (285,000 circulation).
1953: Opens first IKEA showroom in Älmhult, combining mail order with physical exhibition.
1955: Sales reach six million krona; catalog subscribers hit 500,000.
Mid-1950s: Invents flat-pack furniture (Max table) after competitors block supplier access.
1961: Partners with Polish manufacturers, scaling to 50% of IKEA's furniture by decade's end.
1965: Opens 500,000-square-foot Stockholm store with self-service warehouses; sales double.
1971: Stockholm store fire leads to redesigned store with self-checkout and Småland playrooms.
1973: Expands outside Scandinavia; Kamprad moves to Denmark to avoid taxes.
1976: Writes The Testament of a Furniture Dealer, codifying IKEA's mission.
1978: Kamprad settles in Switzerland; IKEA splits into Inter IKEA (brand) and Ingka (stores).
1985: Opens first U.S. store in Philadelphia; adds meatballs to menus.
1986: Kamprad steps down as Ingka president, remains influential.
1994: Kamprad's fascist past surfaces; he apologizes.
1998: Enters China, a major market.
2000: Enters Russia, piloting MEGA shopping centers.
2007: Revenue hits $20 billion; e-commerce challenges emerge.
2014: Opens small urban stores, starting in Hamburg.
2017: Acquires TaskRabbit for $50–$75 million.
2018: Kamprad dies at 91; IKEA invests heavily in e-commerce.
2021: Discontinues catalog after 220 million copies at peak.
2022: Exits Russia, selling 14 MEGA complexes post-Ukraine invasion.
2024: Operates 476 stores in 63 markets, with $47 billion revenue.
Notable Facts
Singular Scale: IKEA's $50 billion revenue and 5.7% market share make it the only globally scaled furniture retailer, with no direct competitors.
Self-Financed: Kamprad built IKEA from a 500-krona loan in 1938, repaid quickly, to a $50–$100 billion empire without external capital, always owning 100%.
Frugality Culture: Kamprad's flashlight store inspections and unfinished furniture backs reflect a cost-cutting ethos that drives low prices, like the $9.99 LACK table.
Store Visits: 860 million annually across 476 stores (unclear if unique or total visits).
Restaurant Scale: IKEA's restaurants, serving 700 million annually (2017), rank as the world's sixth-largest chain by visitors, with 30% of store visits for food alone.
Financial Metrics
Revenue: $47 billion annually (2024), growing at ~5% yearly.
Operating Margin: Ingka's margin fell from 8% (2017) to 3–5% (recent years), likely due to e-commerce.
E-commerce Share: 26% of revenue in 2024, up since 2018.
Cash Reserves: Ingka holds €25 billion; Inter IKEA Foundation estimated at €50–$100 billion.
Employees: 216,000 coworkers, slightly down year-over-year.
Market Share: 5.7% of the global furniture market.
Sales per Square Foot: ~€320 ($350) per foot, compared to Costco ($1,800) or Walmart ($600).
Testament of a Furniture Dealer
The Testament of a Furniture Dealer, written by Ingvar Kamprad in 1976, serves as IKEA's guiding manifesto, akin to Bezos' shareholder letters, codifying nine principles to ensure a "better everyday life for the many." Ben and David praise its clarity, with Kamprad's frugal, merchant mindset shining through. Each principle reflects IKEA's strategy of low prices, functionality, and long-term focus, exemplified in operations.
The Product Range – Our Identity: IKEA offers well-designed, functional products at low prices. Quality matches consumer needs, not excess; e.g., a durable tabletop uses costlier finishes, but a bookcase shelf stays basic to save cost.
The IKEA Spirit – A Strong and Living Reality: A culture of enthusiasm and cost-consciousness drives innovation; e.g., flat-packing emerged from necessity, cutting transport costs.
Profit Gives Us Resources: Profits fund growth, not extravagance; IKEA reinvests all earnings, like building the Stockholm store with profits from Älmhult.
Reaching Good Results with Small Means: Frugality maximizes value; e.g., unfinished BILLY bookcase backs reduce costs without compromising function. Kamprad writes, "Expensive solutions to any kind of problem are usually the work of mediocrity."
Simplicity Is a Virtue: Simple processes lower prices; e.g., self-service warehouses eliminate staff costs, as seen in the 1965 Stockholm store.
Doing It a Different Way: Innovation through contrarian thinking; e.g., sourcing from Poland in 1961 secured cheap, high-volume production.
Concentration – Important to Our Success: Focus on core competencies; IKEA designs all furniture in-house (e.g., POÄNG chair) to control costs.
Taking Responsibility – A Privilege: Ownership of decisions ensures accountability; e.g., Kamprad's flashlight inspections enforced cost discipline.
Most Things Still Remain to Be Done – A Glorious Future!: Continuous improvement fuels growth; e.g., optimizing the POÄNG chair's price from $350 (1988) to $130 (2016).
Democratic Design
Introduced in the 1990s, IKEA's democratic design optimizes five pillars—form, function, quality, sustainability, and low price—to make well-designed products accessible. Ben and David praise this as core to serving "the many."
Form ensures aesthetic appeal.
Function prioritizes utility.
Quality tailors to need, not excess.
Sustainability, emphasized early, includes renewable energy investments and recycled materials.
Low price drives "breathtaking" offers (e.g., $9.99 LACK table, 20 million sold annually).
Flat-Pack Furniture
The invention of flat-pack furniture, or "knock-down" (KD) furniture, in the mid-1950s marked a pivotal moment for IKEA, driven by competitive pressures and Ingvar Kamprad's ingenuity. As IKEA dominated Sweden's furniture market, rivals boycotted suppliers and excluded IKEA from trade fairs, threatening its supply chain. To counter this, Ingvar began designing exclusive furniture, starting with the Max table. The flat-pack concept emerged serendipitously when employee Gillis Lundgren, dismantling a table for a catalog photoshoot, removed its legs to save space. Ingvar recognized the potential: "We can design these things to come off on purpose… fit a hell of a lot more in those trucks."
Flat-packing revolutionized IKEA's model by:
Reducing shipping costs, as more units could fit in trucks.
Reducing labor costs, shifting assembly labor to customers.
Minimized transit damage.
Enabled customers to transport furniture in smaller vehicles, aligning with the urbanizing customer base of the 1960s
Counterintuitively, it also builds brand loyalty. Assembling or building an item generates a sense of accomplishment and personal investment, leading individuals to perceive the finished product as more valuable.
These efficiencies fueled "breathtaking prices." Ben and David note that while Sears Roebuck used flat-packing earlier, IKEA popularized it globally, expanding it across its range by the late 1950s. This innovation, born from necessity, strengthened IKEA's scale economies, enabling unmatched cost leadership. Flat-pack is a cornerstone of IKEA's $47 billion empire and its mission to serve "the many" with affordable, functional design.
Hot Dog Policy
Introduced in 1995, inspired by Costco's $1.50 hot dog combo, IKEA's Hot Dog Policy mandates 20 "breathtaking price" products across categories, priced at least 50% below competitors, as Ben and David highlight. Named after IKEA's $1 hot dog (cheaper than Costco's), it ensures minimal profit without loss, driving volume. Examples include the $9.99 LACK table (20 million sold yearly) and the $130 POÄNG chair, down from $350 (1988). Kamprad designed backwards from price, optimizing supply chains (e.g., LACK's scrap wood construction). The catalog strategically promoted these to drive store visits, reinforcing scale economies. David notes: "It's criminal not to buy these." Though less effective online, this policy cements IKEA's value proposition, making quality furniture accessible to "the many."
Naming Conventions
IKEA's product naming, rooted in Kamprad's alleged dyslexia, uses Scandinavian place names and terms instead of codes, enhancing memorability and brand identity. Ben and David note this creates a cultural connection, reinforcing IKEA's Swedish roots.
Sofas and coffee use Swedish locations (e.g., KIVIK sofa).
Beds use Norwegian locations (e.g., MALM bed).
Textiles use Danish names.
Lamps use Swedish lakes (e.g., ÖRSLJÖ lamp).
Outdoor furniture use island names (e.g., ÄPPLARÖ table).
This system, starting in the 1950s, simplifies catalog navigation and aligns with IKEA's "sense of place," making products feel personal and accessible, unlike competitors' sterile model numbers.
Retail
IKEA's retail playbook, perfected by the 1965 Stockholm store, creates a destination experience, as Ben and David compare it to "Disneyland in the potato fields." Located on city outskirts with highways and ample parking, stores open until 7 PM to suit post-work shoppers. Customers navigate showrooms, pick flat-packed items from self-service warehouses, and take them home, minimizing staff costs. Cafeterias, offering low-margin meals like meatballs (6th-largest chain by visitors), and Småland playrooms prolong visits, boosting sales.
The MEGA shopping center concept, piloted in Russia (2000), surrounds IKEA with partial competitors (e.g., Home Depot-like stores), capturing rent and marginal customers. Smaller urban stores, started in Hamburg (2014), adapt to city dwellers, with IKEA owning real estate (e.g., San Francisco's Market Street) for urban renewal and profit. This playbook leverages scale and experience, ensuring low prices and high engagement.
Scaling
IKEA's scaling, driven by profit reinvestment and frugality, achieved "blitzscaling" in the 1970s across Europe, Canada, and Asia, reaching $2 billion by the 1980s without external capital. Ben and David highlight Kamprad's 100% ownership and low margins (mid-30%) enabling rapid reinvestment, unlike competitors like Walmart, which used family capital. Poland's 1961 partnership secured cheap, high-volume production, scaling to 50% of output. The showroom-catalog model drove demand, with 500,000 subscribers by 1955.
Japan's 1975 failure (large furniture, cultural resistance to self-assembly) taught IKEA to adapt locally, succeeding upon re-entry in 2006. The U.S. struggled due to assumed homogeneity, but local franchising (e.g., Seattle's Boeing warehouse store) tested innovations. Frugality—unfinished backs, minimal staff—maximized cash for expansion, though e-commerce later strained margins.
E-commerce Struggles
IKEA's e-commerce struggles stem from a model built on physical store strengths—flat-packing, self-service, and customer transport—that clash with online retail. E-commerce, 26% of 2024 revenue, requires costly delivery networks and third-party logistics, eroding margins (Ingka's fell from 8% to 3–5%). Customers save $400 on a $700 order by self-transporting, as Ben's TaskRabbit estimate shows, but online orders negate this. IKEA's control over demand via catalogs vanished online, where competitors like Wayfair thrive. Deliberately avoiding e-commerce until 2018, IKEA faced flat revenue (2007–2010), and Ben questions if it's profitable, noting: "The game of e-commerce does not incorporate IKEA's strengths." Urban stores and TaskRabbit help, but online retail disrupts IKEA's cost structure, challenging its low-price ethos.
Corporate Structure
IKEA's dual-foundation structure, established in the 1970s, splits into Inter IKEA Systems (brand/IP) and Ingka Holdings (stores), designed for tax efficiency, independence, and longevity. Ben and David liken it to "Fort Knox for IKEA," ensuring no government or family can disrupt it. Kamprad, abhorring public markets—"Going public is like wetting your pants, it feels nice and warm for a little while, but then…"—created a structure to avoid shareholder pressure, enabling long-term focus.
Inter IKEA Systems: Based in Liechtenstein, it owns the IKEA brand, designs products, and manages supply chains. It licenses the concept to franchisees, earning a 3% royalty on $47 billion in sales ($1.4 billion annually). The Inter IKEA Foundation owns it, with its purpose ensuring IKEA's continuity, holding €50–$100 billion in cash for reinvestment.
Ingka Holdings: Operates 400 of 476 stores, generating $47 billion in revenue. The Netherlands-based Stichting Ingka Foundation owns it—a charitable entity donating €200–€300 million yearly to climate and poverty causes—and it holds €25 billion in cash for store expansion and investments like Ingka Centers.
Cash Flow: Inter IKEA sells $27 billion in goods to franchisees, who sell to customers. Ingka pays 3% royalties to Inter IKEA, retaining 85% of profits for reinvestment and 15% for charity. Both foundations amass cash, ensuring financial independence.
Purpose: The structure minimizes taxes (saving $1 billion, 2009–2014), protects against takeovers, and neutralizes family disputes (Kamprad's sons lack control), aligning with Kamprad's intense long-term focus, as David notes: "Time is what IKEA optimizes for."
Powers
Scale Economies: Ben and David identify scale economies as IKEA's core power, using $47 billion revenue and €25 billion cash to redesign processes (e.g., LACK table's board-on-frame) for the lowest prices, as David notes: "No one can match their price and quality." High-volume products like the POÄNG chair (30 million sold) reinforce this moat.
Playbook
Corporate Structure: David likens it to "Fort Knox," minimizing taxes ($1 billion saved, 2009–2014), preventing takeovers, and enabling long-term focus, with no shareholder pressure.
Frugality as an Edge: Ben highlights unfinished BILLY backs, minimal staff, and flashlight inspections, maximizing reinvestment for scale (e.g., Stockholm store funded by profits).
Lean into Swedish Roots: David notes IKEA sells a "sense of place" via meatballs and "Hej!", differentiating it like luxury brands but for "the many," driving engagement.
Contrarian Working Capital: Ben cites high inventory levels to secure supplier discounts and availability, leveraging €25 billion cash, as the BILLY bookcase's timelessness ensures sell-through.
Supply Chain: David praises strategic sourcing, moving from product-level to category-level bidding (e.g., armchairs globally), and technology transfers (e.g., board-on-frame), building deep supplier ties (1,600, 11-year average).
Quintessence
David: N-of-1 Company: David calls IKEA unique, with no global furniture rival, built on scale economies, frugality, and a foundation structure, creating a $50–$100 billion empire with €50–$100 billion cash, unmatched in retail.
Ben: Kamprad's Vision: Ben emphasizes Kamprad's 100% ownership, frugal personality, and desire to serve "the many" as necessary conditions, yielding a vertically-integrated, low-margin brand unlike any other.
Carveouts
Ben's Carveouts:
Detroiters: A Netflix comedy by Tim Robinson, praised for its story-driven humor, making Ben "die laughing."
11-inch iPad Pro: Ben loves its thin design and vibrant screen, ideal for reading research like Worldly Partners' IKEA study.
David's Carveouts:
The QB School: JT O'Sullivan's YouTube channel, breaking down NFL quarterback film, deepening David's strategic appreciation.
Ice Cube at the World Series: David admires Ice Cube's solo performance at Dodgers Stadium, captivating the crowd while rapping across the field.
Acquired Universe Crossover
Walmart: Sam Walton took family capital, unlike Kamprad's self-financed growth. Walmart's retail triangle (price, convenience, selection) contrasts with IKEA's "price, price, price" focus, though both leverage scale economies.
Costco: David highlights Jim Sinegal's admiration for IKEA's KD (knock-down) furniture, with Costco's founders visiting a Canadian IKEA pre-launch. IKEA's $1 hot dog likely mimics Costco's $1.50 combo, but IKEA's mid-30% gross margins exceed Costco's 13% due to designing products in-house.
Amazon: Ben compares Kamprad's "most things remain to be done" to Bezos' "Day 1" ethos, emphasizing continuous improvement. Both prioritize customer value, but IKEA avoids external capital, unlike Amazon's venture funding.
Hermès: David notes both sell a "sense of place" (Swedish for IKEA, Parisian for Hermès), but IKEA targets "the many" with low margins, while Hermès serves the few with high margins, yet both operate as vertically-integrated global brands.
Additional Notes
Episode Metadata:
Number: Fall 2024, Episode 3
Title: IKEA
Duration: 3:19:38
Release Date: November 17, 2024
Related Episodes:
Costco (Season 13, Episode 2, 8/20/2023)
Walmart (Season 11, Episode 1, 7/18/2022)
Amazon.com (Season 11, Episode 2, 8/16/2022)
Links:
The frugality-as-strategy angle really stands out here. Kamprad's unfinished bookcase backs aren't just cost-cutting, they're a whole philosophy that somehow built a €50-100 billion foundation without external capital. What clicked for me is how flat-packing didn't just slash logistics but actually created brand loyalty through assembly effort—kinda wild that making customers work harder makes them value the product more. The dual-foundation stucture is genius for long-term thinking, though I'm curious how e-commerce margins squeeze this model going forward.