The Idea that Revolutionized the Furniture Industry

The growth of real estate is directly linked with the global furniture industry. For comfort and luxury, attractive, stylish and decent furniture is preferred. IKEA is one of the furniture brands globally. It is obsessed about cost. It cuts costs at every possible opportunity. This cost cutting helps them to sell a BILLY bookcase every 5 seconds. But exactly how do they make things so cheaply?  

The answer is…!! 

Reverse Engineering 

They start with the price and reverse engineer every single process.  

What makes their customer back ? 

It's only the price. 

The retailer starts with what they want to charge for an item. Then design and choose the materials to get it at that price. 

And how do they do it? 

They use cheaper materials.

IKEA’s employee says;  “If we take the LACK side table, and if you were to cut through it for some reason, you would see it's cardboard, and that's so much cheaper and lighter. " 

That's not the only clever way the brand keeps costs low. They make a lot of their products white. The white ones are cheaper because they make more of them. Everyone likes white. Most people buy white furniture from IKEA. Therefore, the company makes more white items. If you can supply the same product all over the world and never have to change it, can you imagine the economies of scale?  They are astronomical. 

But they have  also managed to sage on transport costs by making things stackable. There are tons of items in IKEA that you can stack on top of each other. The famous one is something called the PS 2002 watering can. Who would have thought that a watering can could be stacked on top of each other? 

A stackable product means you can fill every inch of space in a lorry and cut down on transport costs. That saves the company an enormous sum. It means the shopper can buy a watering can for £ 1.25 only. 

Ivar's brainwave idea to create Flatpack  furniture back in the early fifties also helps keep costs down. Flatpack is a genius idea because it saves IKEA money at every single stage. Flatpack is the word that is synonymous with IKEA. Really, they introduced the consumer to this notion of flatpacks. For logistical purposes, the transportation of the goods is a lot cheaper if it's flat packed and not already built.  But also the damage that you would get in transit, just won't happen. You get the consumer to build it themselves. 

So, you are taking out all that kind of labour costs. Because once you've chosen what you want to buy, there's a whole lot of heavy lifting still to do, which in turn reduces staffing costs. It's kind of on you. That's the contract you make with IKEA when you shop there. No one's going to help you.  

With the Swedish retailer, IKEA buys the ultimate "do it yourself  model ". It then goes into the back of the consumer's car that the consumer has paid for. The consumer put the furniture  together himself. The company doesn't take much pain for itself but makes it easy for both the consumer and the company. This is how IKEA works.