NEW YORK — Well known for stylish but affordable housewares, Sweden’s Ikea Group is cutting prices on some big-ticket items as it seeks to outfit more homes around the globe.
From couches to bedframes, the price cuts are part of new president and chief executive Mikael Ohlsson’s response to continuing demand for low prices and compact furnishings as the global economy sputters.
Ikea has cut prices 2 percent to 3 percent each year in the past decade, but Ohlsson wants higher-profile reductions: A sofa that cost $699 a year ago now goes for $499; a queen bed frame that went for $299 a year ago is now $199; and a coffee table that was $20 in the 1990s now sells for $7.99.
Ikea is building a 415,000-square-foot store north of Park Meadows mall, which will open next fall.
The 52-year-old Ohlsson says more families have joined Ikea’s mainstays of students and the post-college crowd, especially in the U.S. And many of those families are bringing more generations together under one roof. For them, Ikea is offering more double sinks for bathrooms and more sofa beds with storage underneath.
Ohlsson, who started his Ikea career in 1979 selling rugs, has built on predecessor Anders Dahlvig’s bigger push for flat packaging, which saves the chain on shipping. Since taking the helm in September 2009, Ohlsson has further consolidated packaging.
And he plans to move more manufacturing to the U.S. for more efficient distribution in Ikea’s second- largest market after Germany. Ikea’s first U.S. factory opened two years ago in Danville, Va.
Ohlsson says he draws on his life experiences — his parents were both teachers, and one set of grandparents were farmers — in offering new solutions for customers and new efficiencies for the company. As in farming, he says, there are no quick fixes for the iconic blue-and-yellow big-box retailer, and he must harvest ideas from the field.
He made waves last year with his decision to ease the secrecy that flourished at Ikea ever since Ingvar Kamprad founded the chain in 1943 as a mail-order company.
The company’s first public financial summary shows profit rose 11 percent to $3.47 billion and revenue 1.4 percent to $30.34 billion in fiscal 2009. For the year that ended last month, revenue rose another 8 percent, and Ohlsson plans to release more details.
Q&A
Excerpts from an interview with Ohlsson earlier this month.
Q. How is your approach different from your predecessor’s?
A. I spent the last 16 years in group management. I worked very closely with Anders. In one way, we are continuing that journey. On the other hand, we are trying to make our price range even more attractive.
Q. Speaking of transparency, did pressure from the outside prompt the release of the company’s first-ever earnings report?
A. No. It was just time to do it. Ikea is not on the stock exchange. We are foundation-owned. But it’s important for co-workers to know where Ikea is going. It felt good. It shows that we are strong.
Q. What are the biggest factors affecting shoppers right now worldwide?
A. We see customers are becoming much more value-conscious. . . . Everywhere, we are gaining market share. The tougher the economy, the more we gain market share.
Q. How key is it for you to get inside shoppers’ minds?
A. I started out by selling carpets. I had always felt that it’s in the store with the people, in the factory with the people, in people’s homes . . . where you get input and knowledge. I could never see myself sitting in an office all the time.
Ikea’s chronology
Key points in furniture giant Ikea’s 67-year history:
1943: At age 17, Ingvar Kamprad establishes a business selling pens, wallets, picture frames, jewelry and nylon stockings using money his father gave him for excelling at school. The name comes from Kamprad’s initials plus the first letters of Elmtaryd and Agunnaryd, the farm and Swedish village where he grew up.
1945: First ads appear in local newspapers, and Kamprad begins makeshift mail-order service.
1948: Starts selling furniture produced by local manufacturers.
1951: First catalog.
1953: First furniture showroom opens in Almhult, Sweden.
1956: Ikea starts designing its own furniture to stem competitors’ efforts to get suppliers to boycott Ikea. Flat packaging and customer assembly become part of company’s model.
1958: First Ikea store opens in Sweden, and company branches out to Europe and Canada by 1981.
1982: Ikea Group forms, owned by the Stitchting INGKA Foundation, based in the Netherlands, an ownership structure meant to symbolize independence and a long-term approach.
1984: Catalog runs to 45 million copies in nine languages.
1985: First U.S. store opens in a Philadelphia suburb.
1986: Kamprad retires but remains as an adviser. Anders Moberg becomes president and CEO.
1998: First China store opens.
1999: Anders Dahlvig takes over from Moberg as president and CEO. Company doubles to 270 stores under his leadership.
2000: First store in Russia opens. In co-operation with UNICEF, Ikea launches a program in northern India to address child labor that later expands to include health, nutrition, education and other needs.
2006: Ikea opens in Japan.
2009: Mikael Ohlsson becomes president and CEO, replacing Dahlvig.
2010: Ikea has 280 stores in 26 countries, including 37 in the U.S. Ohlsson plans to add 15 stores worldwide each year for the next five years, each with 300,000 to 400,000 square feet of selling space, an increase of about 100,000 square feet, the equivalent of more than two football fields.
Source: Ikea
Mikael Ohlsson file
Title: Ikea chief executive and president
Age: 52
Home: Netherlands; grew up in southern Sweden
Family: Married; two sons and a daughter
Education: Master of science in industrial engineering, marketing and management at Linkoping Tekniska Hogskola, Sweden
Career: Started with Ikea in 1979 in the carpet department in the Linkoping store. Has since served as a store manager, country manager, marketing manager and managing director for Ikea in Sweden and then as a regional manager from 2000 to 2009. A member of Ikea’s executive management group since 1995.
The Associated Press
