The ‘IKEA Effect:’ Behind the Company’s Unique Business Model | WSJ The Economics Of

A large part of IKEA’s success stems from its policy requiring its customers to build their own furniture. Given how ubiquitous IKEA is today, it can be difficult to appreciate just how innovative some of its business practices were when they were first introduced.

WSJ explores some of the strategies the Swedish company has used to become the world’s biggest furniture retailer including the behavioral psychology behind the ‘IKEA effect.’

0:00 Build-your-own products
0:46 Store layout
1:53 The ‘IKEA effect’
3:08 Mass market appeal
4:23 Democratic design

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#IKEA #Furniture #WSJ

[cameralance]

Dear WSJ, please do more of these "The Economics of" videos! They are great!

[sarahelisabeth]

i love the maze concept. i get why it could be annoying, but it honestly just feels like an adventure. a huge factor for me is also how the rooms are the way items are displayed. i loved it when i was younger and i still love it now bc you can visualize what something will look like in real life. also, the stuffed animals are so cute!!!! idk if that’s a huge selling detail for most but oh my golly that is one of my favorites and i don’t even buy stuffed animals anymore

[isaka]

Actually IKEA is moving away the “maze” concept. I work a at a newly built store in Sweden that instead of forcing people through a specific path has an “organized shortcut” that allows you to go to any department directly. You don’t have to go through check-out to pay, the staff carries smartphones that can be used to pay. The the warehouse is automatic, robots picks the items for you. Also, in some bigger cities IKEA has smaller inner-city stores where you can only order the items for home delivery, skipping the warehouse concept completely.

While this has been the IKEA way for a long time, it might not be the future concept of IKEA.

[Xhadp]

I think the secret to their success is through having cheaper products then everyone else. While they feel much cheaper than other products with a premium price tag it still holds the value you get with it. I also think that having a modernized look also helps sell their products rather than going for one specific look like rustic or antique.

[theIdlecrane]

I've built all of my kids' beds with ikea (among lots of other things), I do relish the opportunity to build something for them by hand with love. I like the new fresh cut timber smell of their product, always signifies to me a new phase in life. I own really expensive furniture, but I also love my ikea pieces in equal measure.

[sagasvensson]

As an avid ikea hopper. I'm always surprised that people get confused by the maze and most people don't know that they have built in shortcuts that lead you straight through the department store. You can clear an Ikea in under 10 minutes start to finish including picking up your item and go through the register.

[iracingrookie]

i know a guy who runs one of their german stores and said they even have their own forests that grow their wood, their own mills to process it and the trucks to distribute it.
its probably one of the most efficient companies on earth

[johnmosier]

If someone ate a cake like that in front of me, I think I would go insane

[SteveMorton]

Here in France they do include maps of the departments so you can take short cuts in the store to get to the bit you want to quickly. We love it shop there quite often for things for the home.

[hobotify]

IKEA seems to be able to read my mind. Whenever i need a new piece of furniture, i already have some sort of design in mind before even going shopping. Sometimes i even draw a CAD model. Then i go to many different furniture stores, browse online, but somehow IKEA always seems to be the closest to what i initially imagined. Just some examples:

- I wanted food storage containers for my kitchen (not ikea), and they had just the right size to fill up my shelves perfectly, without gaps.
- Wanted to color match my office desk and bookcases to my floor and windowsills - every other furniture store was offering a million different colors and textures, but none of them were quite right. IKEA has 4 colour optins, one of them fit perfectly.
- Wanted durable, scratch-resistant dining chairs without upholstery so my kids couldn´t ruin them by scribbling on them or spilling something - IKEA again.
- Now i´m looking for metal patio furniture so i would´t have to worry about oiling wood or ruining rattan, and so i could just powerwash it all when needed. Guess what, IKEA just introduced an all-aluminium patio set.

Their couches and chairs are really ugly and uncomfortable though.

[majkcan]

What's really frustrating is saying the store size in imperial units and then converting it to football fields for the Americans.

[mori]

Ikea is like Zara, you can mix and match with your expansive goods. And never goes wrong.

[geetaphuyel]

This is my fourth WSJ “The Economics of” video in same seating. Please keep posting these videos.

[CliffordAttwood-pb]

From the thoughtfully placed embellishments to the flawless stitching, it's pure perfection kkuwan

[itaykatabi]

I work at IKEA's restaurant so this hits close to home, and no, I can't navigate through IKEA without getting lost either

[mnalneagl]

Wish IKEA would roll back it's product design and quality the early 2000s, like the GRUNDTAL & SALTSKÄRR wall mount medicine cabinets, adjustable wall bracket shelving ANTONIUS, the grey metal framed cream colored shelve (can't remember/find the name) kitchen shelves, UDDEN/VARDE free standing kitchen cabinet system; and the "personal" drawers/files previous gen to the MOPPE currently on sale (can't find the name of these either... they were nice enough to be in Architect's offices). They HAD A LOT of really clever useful things... and now well, they just seem cheap.

[tangiblewords]

The Ikea effect is a really interesting concept to apply to businesses that don’t sell physical products. In those situations, businesses might have to find creative ways to find ways to have the “labour causes love” and to implement democratic design for B2B companies. I’m interested in how these concepts could be applied in different ways for different industries.

[ohedd]

Another thing IKEA does is decoy pricing. They present an item in three styles, for example; white, black, and in oak. While the white and the black appear to be of similar quality (same materials, only different paint), the one in oak appears to be more upscale. So they price it like this:

White: $40
Black: $60
Oak: $65

What customers intuitively think is that the White item is an unusually good deal, or that the oak item is an unusually good deal. Or both. In reality it's just the black item that's overpriced, and it acts as a decoy to put the other two items in better light.

[darshita]

we move to different cities every 2-3 yrs and ikea has been best for us, compact packaging, good utility and functional features and amazing quality.

[GierlangBhaktiPutra]

I love the fixed path. It makes me sure that I have seen everything. Anyway I love IKEA because its a decent products with a decent price. As a person that catch allergy easily, I can easily compare that other furniture brands (in Indonesia) do not give me great experience building them.