By Jeremy Caplan Tuesday, Nov. 18, 2008
Anders Dahlvig, Chief Executive of Ikea.
Shannon Stapleton / Reuters
Anders Dahlvig recently hit the 10-year mark as CEO of Ikea. Under his leadership, the Swedish furniture giant has nearly tripled its number of stores and employees, and committed to a broad new slate of policies on the environment. The company maintains a mixed reputation on quality, though, in the midst of an increasingly tough economic climate. In a series of recent conversations, Dahlvig spoke with TIME's Jeremy Caplan about why the tough business climate works in Ikea's favor, where the company plans to expand, and what Ikea is doing to be greener.
TIME: How is Ikea faring amid the current economic turmoil?
DAHLVIG: This is a really good time for us. The way we've set up our business, we're planning for a climate like this all the time. We have a very conservative policy when it comes to borrowing money. We basically only use our retained earnings and don't borrow very much. We also have a very conservative policy when it comes to how we place our cash and our liquidity. We don't place anything in equities, so we haven't lost a dime so far. And the way we position our brand is as good value for the money. People know when they have less money what Ikea stands for. We're seeing new customers in our stores and it's a good time for us to take market share. In the U.S., we were 16th among furniture-only retailers a few years ago, and now we're number two.
Aren't people spending less in your stores?
The average check is going down a little bit, and the number of visitors is reduced. People are coming less often to the stores. During these times we have to be more creative when it comes to promotions and price reductions. For example, we're running promotions where we reduce prices on top-selling products to attract people to the stores. We're also using our restaurant to attract visitors with things like free breakfast. It's strange that people will go all the way to Ikea for $5 or however much a free breakfast is, but the reality is that people actually do that.
Some critics of Ikea say that your furniture is easy to break, hard to assemble, and heavy to transport. What's your response to that?
The quality is improving. Assembly may be difficult for some people, but we're trying to make it as easy as possible. Our philosophy is that people have more time than money. If you have to trade off between paying more or having someone else do the assembly, many people would make that trade off.
And what about the idea that Ikea contributes to a culture of over-consumption?
Any retailer wants people to buy more. But we're not trying to build products people should throw away in a few years to buy another one. We use raw material very efficiently. We're far more advanced than other furniture retailers at using less material in our products. I would foresee that in the not-too-far future solid wood products won't exist in our product categories. Resources are limited, so we use techniques where the wood is in the frame, but basically empty inside. That makes it less heavy to transport, and dramatically reduces the amount of material we use.
Has the U.S. market been weaker than the European markets lately?
The sales decline here [in the U.S.] has been stronger than in most European countries, but the downward trend in Europe is worsening. What we are seeing here is coming to Europe as well. It will last at least 12 months. It will get worse before it gets better. A lot of jobs are going to be lost in the next few months. People are scared and that will keep them from shopping. We haven't reached the worst yet.
What are your goals for Ikea over the next five to ten years?
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