Subtitles section Play video Print subtitles I'm at Ikea today. Of course, we're gonna shop around. Ikea. Ikea. Ikea, Ikea store. I love Ikea. I've been shopping online, this morning. I buy a lot of things from Ikea. Yesterday. I love the princess cake. While I was in Miami on vacation last week. The Malm collection, of course. And these at Ikea are $5.99. It was such a great price, I actually grabbed a second one. The Besta cabinet. I don't think addicted, but if I had a bigger allowance to shop there, probably. Welcome to Ikea. The only place in the world where you can snack on Swedish meatballs while you shop for your new Poäng chair or Färgrik mug. Ikea has 433 stores in 53 countries. Three hundred sixty-seven of them are owned and operated by Ingka Group. Despite serious product recalls and food court scandals, Ikea is going strong. There is something about the uniqueness with the yellow and blue and the meatballs and the long way through the stores and maybe the twinkle in the eye as well. That makes us just a little bit more human than others. But that's just speculation. Ikea's combined global and online presence is massive. It brought in $45 billion in retail sales, had 1 billion store visits and 2.8 billion online visits in 2019. Its closest competitor in the home furnishing space, Bed, Bath & Beyond, brought in $12 billion in 2018 in in-store sales. Before the massive blue and yellow warehouses, there was a young Swedish man with a simple idea. "Why are beautiful products only made for a few buyers? It must be possible to offer good design and function at low prices." Ikea was founded in 1943 by 17-year-old Ingvar Kamprad at Elmtaryd farm in Agunnaryd village in Sweden. It started small, selling things like pencils and postcards. In 1948, Ikea started selling furniture. In 2019, it sold seven million Billy bookcases. A major reason people flock to Ikea is its price point. When I hear Ikea, I think of cheap, simple furniture that looks really nice. Ikea falls in the affordable area of the spectrum, but it depends on what you buy. They have beds that start at $99. They have really well designed beds that go up to $500. The Ikea brand is sleek, minimal and affordable. Ikea from its very beginning has focused a lot on its customers building its own furniture and therefore they could offer them cheaper prices. If you're starting out, you're moving into your first apartment, you don't have a lot of money to spend. Keep it simple. Look at Nordic design. Buy some simple Ikea pieces and invest in some really nice bedding, a great rug, cool side tables. Prices are lower in part because Ikea is basically a giant storage facility for furniture parts. It's the warehouse's design that sets it apart. So what a great store will do will allow you the pleasure of discovery. So anytime I hear a retailer saying, "Our consumers want to come in, take some stuff and run out." Yes, they will. If you didn't give them the pleasure of discovery. So a great store will give you the sense of comfort and familiarity and will also give you the pleasure of discovery. And that is when retail becomes retail therapy. The winding maze is designed to make customers stop and shop and spend more than they planned. You walk through an Ikea store and you'll find a number of mirrors. Mirrors placed tastefully here, tastefully there, on a table, on a closet, etc. The brain is entranced with mirrors. Why? Why? When you look in a mirror, you see the most gorgeous human being looking back at you. Ikea plays to the narcissist in each of us. Ikea employs mirrors everywhere through their stores. As you walk by, you have love because you have love for yourself in the mirror. Point number one. Point number two, Ikea uses white everywhere through the store. White cupboards, white closets, white tables. There is almost an App le-esque view. If Apple was to design a closet, it would probably look like an Ikea closet. The brain perceives everything through context. The notion of that white there symbolizes clutter-free, pure, simple, transparent, without saying all those words, through the judicious use of white, that is spotless, Ikea communicates what you aspire for your home. The crisp, clean aesthetic lends itself to a broad audience. But I kea doesn't just sell furniture. Glassware. I would always go to Ikea for glassware, dishes, pots and pans. I love their $500 solid wood bed. Depending on the situation, they have some very nice minimal sofas. I do not shop at Ikea for bedding. Pillows, duvets, comforters, sheets and towels I think are items that you really want to invest in. For families shopping at Ikea, some locations have complimentary daycare . With or without the kids, shopping can be exhausting. Do you know that the most tiring environment for the entire human brain, the most tiring environment, is a retail environment? It is the worst environment for the human brain simply because you're processing so much information. But Ikea has a plan to keep you energized. When I hear Ikea, I think of meatballs. It recognizes that customers need sustenance to keep shopping. Right in the center of most stores, you'll find a cafeteria serving up Swedish fare. But in 2013, horse meat was detected in Ikea's meatballs. The problem was traced back to a European supplier and only affected European stores. Ikea pulled all meatballs until this issue was resolved. Despite this news going viral, the iconic dish remains on the menu. Another Ikea classic: the cinnamon bun. Its placement near the exit is no accident. There's a part of the brain that fires every time you pay. Right? And so by having the scent of baking, of warmth, of sugar in particular, that takes the stress out, they get down the stress of payment. And therefore the experience is memorable without it overwhelming you with how much money you spent out there. But whether you buy Ikea furniture in the store or online, once you open the boxes, it's time to get to work. The problem with Ikea was you realized that the closet was so minimalist and beautifully designed. But, oh my God. There are 10 million parts I got to put together to get the minimalistic design. What I don't like is that you have to put everything together by yourself. Like, I want a delivery! Deliver it to me and put it together. Like, what if you're a single mom? You don't have anybody to do that for you. However, according to a 2011 study by Harvard Business School, you are more inclined to value an item you built yourself. The study even named this phenomenon the "Ikea Effect." But many customers don't want to assemble their own furniture. One of the other really big trends we're seeing is a shift toward services. So you have people like Amazon that are offering convenience. Now, all of a sudden, it's not just how good is a product in your store, it's what kind of simplicity can we offer our customers? The Besta cabinet is the most versatile. It stands on legs. You can hang it on the wall. Anything you need the Besta unit to do, I highly advise it. Hire TaskRabbit to put it together and hang it on the wall. It'll just make your life easier. So in 2017, Ikea acquired TaskRabbit. Now, for a flat fee, Ikea customers can hire TaskRabbit to do the assembly. Since the acquisition TaskRabbit's, furniture assembly tasks have gone up from 2 % to 10 %. There's been a lot going on with Ikea lately. Since 2010, the company has recalled millions of products. The most infamous, the Malm line of chests and dressers. Ikea is recalling 29 million dressers for a second time after the product was blamed for the death of an eighth child in May. Consumers are being asked to secure the items or return them. It still sells these items today. Ikea is currently making some necessary changes to its business model. One of the new things, if you like, is the investments in digital. Well, we have given ourselves three years to make a massive transformation. So if you want to do it at home on a Tuesday evening when the kids are to bed and things are done, we will try to bring our solutions and our knowledge digitally to you. It's investing in its online presence, delivery services and opening smaller stores. The majority of Ikea stores are operated by Ingka Group. Its operating income, one measure of profits, was down 26 % in 2018. Ingka Group says the drop in profits is part of the plan. Ikea will close its only U.S. factory at the end of 2019. Ikea Group, the owner of most Ikea furniture stores worldwide, says it plans to cut 7,500 jobs over the next couple of years. Those cuts will be focused on administrative staff positions. At the same time, however, the group also says it will create 11,500 new positions as it expands with new store formats and online. Ikea thrives on a business of quantity, not quality. You can say that Ikea is the fast fashion of home furnishings because it does produce relatively inexpensive products that may seem disposable because of the, say, average quality. You know, whether or not Ikea is sustainable because of that functionality of encouraging people to buy more. True sustainability would be people buying better quality things that last longer. And that results in fewer purchases. But that is not how corporations work. It seems like customers don't work that way either. Depending on the country, people will say that they care about the climate. They care about sustainability. But if there's a higher price tag, to that, it will deter some people. It's very easy to design a sofa for $3,000, but to do a comfortable sofa with good quality that the kids can jump up and down in with removable covers, you can wash them, that is made of sustainable foam that you can bring back in the supply chain and make a new sofa. And it's beautiful and comfortable at the low price is very, very difficult. So our fascination is around that problem, not to make something expensive. Ikea alone used 18 million cubic meters of commercial wood in 2018. It's making a conscious effort toward sustainability. As of 2018, Ikea's Ingka Group owns around 445,000 acres of responsibly managed forests. Combined, that's bigger than Alaska. Ingka Group has planted 3.6 million trees and had harvested 700,000 trees in 2018. The clock is ticking. So it's time for companies like us to commit and start working out our plans and live with that we might not have all the answers, but we will find them in the decade or so to come. While the company aims to make internal changes, it's also focusing on extending the life of products it's already sold.