Ikea Is Not Your Typical Big Box Retailer

It seems like every weekend you hear about a friend or neighbor making their yearly journey to Ikea.  Generally, it is a family voyage that includes a drive across the state, hours shopping in a giant labyrinth of Swedish furniture, awful Ikea food, more hours shopping and then another car ride home with cheap furniture protruding from the trunk.  But why?  How did Ikea become the go to place for modern furniture?  Furthermore, is Ikea living up to its responsibilities? 

Frankly, it is a travesty to design that Ikea is ‘known’ for affordable contemporary furniture.  Sure, it’s the perfect place to go if you need a king size bed for less than $150.  However, does anyone ever question how Ikea can offer those unreasonable prices?  There is a common, correct, assumption that big-box retailers like Target and Wal-mart take advantage of the natural economies of scale.  However, lumping Ikea in with those retailers is a dangerous assumption.  The typical big-box chains can negotiate fantastic pricing on name brands because of their sales volume.  Ikea does something entirely different: they manufacture most of their products themselves.  They aren’t negotiating with anyone!  In other words, you can stop by Sam’s Club and buy a Phillips surround sound system at a great price.  You cannot stop by Ikea and purchase a Sealy mattress.

This distinction is terribly important when you begin looking at pricing.  For argument’s sake let’s consider a $2,000 bed you might find at a small furniture store.  That bed was likely made overseas and cost the store roughly $1100 to procure with materials costing more than $1,000.  Ikea would sell a similar bed using a different tactic.  They realize average “market” price for a bed is $1,600 so they decide to sell one for $400.  They work backwards from there, stripping value out of the bed to get their actual cost well under $200.  Instead of real wood veneer they use laminate.  Rather than orthopedic slats they use flat pine.  Rather than using fibreboard designed for furniture, they create lighter, cheaper fibreboard that will warp over time. 

In truth, Ikea’s size does provide a distinct advantage when it applies to purchasing raw materials.  Furthermore, they could import and sell the same exact products for less.  However, more often than not, they don’t.  So, next time you are seeking cheap contemporary furniture, consider what you’re getting for your money.  The old adage holds true: if it’s too good to be true, it because Ikea stripped out every bit of quality to make it appear that way…