The History of IKEA

In 1943, a 17-year-old named Ingvar Kamprad registered a small trading company on his family's farm in Småland, southern Sweden. He wasn't selling furniture yet: he sold pens, wallets, watches, nylon stockings and picture frames by mail. The name he gave it was an acronym built from his initials and the places of his childhood: IKEA, for Ingvar Kamprad, Elmtaryd (the farm where he was born) and Agunnaryd (the nearby village). Eight decades later, those four letters identify the largest furniture seller on the planet.

A boy, an acronym and mail order

Kamprad was born in 1926 and had an unusual commercial instinct from childhood: he bought matches wholesale in Stockholm and resold them one at a time at a profit. IKEA began as a natural extension of that logic. In 1948 he added furniture to the catalog and discovered that was where the real business lay. In 1951 he printed the first IKEA catalog, a publication that over the years would become one of the most widely distributed printed works in the world.

The problem was trust. Selling cheap furniture by mail raised suspicion: if it costs so little, must it not be bad? To answer that doubt, in 1953 Kamprad opened a showroom in Älmhult, where customers could touch and compare the furniture before ordering. It was the seed of the whole store experience IKEA would later perfect.

The leg that wouldn't fit in the car

The innovation that defined IKEA was born from a trivial logistics problem. In 1956, designer Gillis Lundgren was trying to load a leaf-shaped side table, the LÖVET, into his car for a catalog photo shoot. It wouldn't fit. He took the legs off and packed it flat. From that gesture came the idea that changed everything: if furniture travels disassembled and the customer builds it at home, you save on space, transport, storage and labor. Flat-pack packaging became the backbone of the model.

Wasting resources is a mortal sin at IKEA.

That line, taken from The Testament of a Furniture Dealer that Kamprad wrote in 1976, captures the obsession that holds the whole business together: every cubic centimeter saved on a pallet is money passed on to the final price.

The price war and leaving Sweden

IKEA's low prices angered Sweden's furniture industry, which pressured suppliers to stop selling to it. Far from sinking Kamprad, the boycott forced him to design his own furniture and to seek cheaper manufacturing abroad, first in Denmark and then in Poland, where he secured supply rights in 1962. That autonomy gave him a decisive cost advantage.

The first proper IKEA store opened in Älmhult in 1958. In 1963 it made its first international leap with a store in Nesbru, near Oslo, Norway. Then came Switzerland in 1973 and West Germany in 1974, which would become its biggest market. The formula —vast out-of-town stores, a maze-like route, self-service in the warehouse— repeated from country to country.

An ownership structure built like a vault

Behind the cheap furniture sits one of the most complex corporate architectures in the world, designed so that IKEA could neither be bought nor conventionally inherited. Kamprad split the business in two:

• Retail operations are controlled by the Ingka Group, under a Dutch holding owned by the INGKA Foundation, created in 1982. The foundation has no shareholders and cannot be acquired.
• The brand, concept and franchise system belong to Inter IKEA, whose franchisor charges a 3% fee on every store's turnover, ultimately controlled from a foundation in Liechtenstein.
• A 2006 investigation by The Economist described this structure as almost impossible to buy and highly efficient at minimizing tax.

Kamprad was also legendarily frugal: he flew economy, drove an old Volvo and reused tea bags, despite ranking among the world's richest people. He died in 2018 at 91. His past was not free of shadows either: in 1994 his youthful ties to a pro-Nazi Swedish movement came to light, something he called the greatest mistake of his life.

Meatballs, Billy and the end of the catalog

IKEA is also a collection of icons. The BILLY bookcase, designed by Gillis Lundgren in 1979, has sold more than 140 million units. The Swedish meatballs, introduced in 1985 to stop hungry customers from leaving the store, now number in the billions each year. And the catalog, which at its 2016 peak printed around 200 million copies in dozens of languages, was discontinued in 2020 after 70 years, beaten by shoppers' digital behavior.

Today IKEA spans more than 500 stores across more than 60 markets, with retail sales around 45 billion euros. The deeper lesson is the one Kamprad kept repeating: the deliberate decision to side with the many, not the elite.

We have decided once and for all to side with the many.

Takeaway for your business: IKEA didn't win by having the prettiest furniture, but by redesigning the entire chain —catalog, packaging, store, assembly— around a single price target. When a business chooses who it wants to serve and aligns every operational decision with that choice, price stops being a sacrifice and becomes a strategy.

Sources

• Inter IKEA Systems B.V. — https://www.inter.ikea.com/-/media/interikea/igi/financial-reports/english_the_testament_of_a_dealer_2018.pdf
• The Washington Post — https://www.washingtonpost.com/news/morning-mix/wp/2018/01/29/nazi-past-followed-ikea-founder-ingvar-kamprad-to-his-death/
• Fortune — https://fortune.com/2020/12/07/ikea-catalog-2021-stops-publishing/
• CNN Business — https://www.cnn.com/2022/04/30/business/why-ikea-sells-meatballs
• Britannica Money — https://www.britannica.com/money/Ingvar-Kamprad