Key of IKEA

Bill Agee of IKEA says innovation begins with a culture of courtesy and a sense of community.

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It’s not every day that hot, spicy cinnamon is the first thing you smell when you go shopping for furniture. But it is the sweet scent of sticky buns in the oven that greets shoppers as they approach the front doors of IKEA’s New Haven, Connecticut, store.

Bill Agee, marketing chief of IKEA U.S., agrees that sugar and spice is not a bad way to say “hello” to customers, but says it’s just a coincidence. “It’s not planned,” he says. “It’s just that the HVA system wafts out into the parking lot at some of our stores.”

Either way, the aroma certainly helps put shoppers in a pleasant mood before they take an escalator up and begin winding through the store, following IKEA’s well-planned path through a Scandinavian wonderland of tables, lamps, chairs, sofas, dressers, beds and … meatballs.

You have tried IKEA’s meatballs, haven’t you? It’s actually a good idea to eat before you venture into the store, because you’ll likely be there for a while. You can get a full plate of IKEA Swedish meatballs for just $4.95. They’re served on real dishes, with real utensils, along with drinks in real glasses.

Sure, it’s quick-serve, but with “real restaurant” trappings — except that you must clear your own table afterwards. A well-placed sign explains that clearing your own table enables IKEA to offer a quality meal at a low price.

As Bill puts it: “At IKEA, it’s this idea that, ‘you do a little and we do a little’ … and together we save.” A Princeton poli-sci major who went into the advertising agency business before joining IKEA about 15 years ago, Bill suggests that this simple idea is behind much of what drives innovation at one of the most innovative retailers in the world.

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What is the connection between Swedish design and American life?

The connection between Swedish home design and how it lands here in America is really manifested in many different ways. We all have an interest in creating light in our homes, even if we’re living out in the desert where perhaps light, at least during the daylight, is not such a big problem.

Our experience in Sweden, where the days are very short for half the year, gives us a real appreciation and expertise in lighting. Of course, it’s important wherever you’re living not only to be pleasant and functional, but also to be low-energy and economical.

When I was in your restaurant, the lights were off.

Yes, during daylight hours the windows usually let in enough natural light. Any company today needs to be extremely conscious of their energy costs, so in that sense I don’t look at ours as a brilliant example. But for the last 15 or 20 years we have been seriously combining our need to be a low-cost company with the obvious opportunity to be a responsible company.

We went through the retrofitting of all of our lighting fixtures to be low energy many years before others did. We use natural light in our warehouses and in our stores whenever possible. It’s part of our global effort. This is not just something we decided to do here in America. We take all of these things pretty seriously.

Has IKEA always had the maze-like format?

The natural path, as we call it, has been our format from the very first store, or shortly thereafter. To set up all the rooms, there wasn’t a natural way to do a traditional store with aisles. So, to accommodate the room settings, it was really the only way to do that without feeling very closed in and boxy.

Do all the stores worldwide have the same look and layout?

The merchandising is generally the same. The colors and the trade dress are the same — everything is pretty similar. But it’s not cookie cutter in the sense that we don’t just send out a merchandising solution and have it implemented exactly the same way in all of our stores around the world.

The lighting department will have completely different dimensions in Seattle versus Budapest, for example. Or the sofa area will come in at a different angle. So, plan-o-grams don’t work for us. But the gist of it, from a consumer perspective, is approximately the same.

What brought IKEA to Brooklyn?

This was an opportunity that we had planned for for a very long time. I’ve got to tell you, it took guts and a lot of very hard work on the part of the U.S. organization, working very closely with the city of New York, the mayor and many community organizations to make that happen.

But we are so thrilled to be there. We had such an exciting day when that store opened — to see IKEA with a view from the restaurant to the Statue of Liberty and the bottom of the battery in lower Manhattan. It was really cool.

How does IKEA make itself part of the neighborhood?

We need to help people understand what we’re all about and become part of that community before we can be accepted. We try to be true to ourselves, focus on those things that we are good at and stay away from those things that we’re not good at or that we don’t know anything about.

How did that play out in Brooklyn?

We went into an area where there was a lot of lost opportunity. It was waterfront. It was not accessible to the people living in the community. It was actually only accessible by water and yet there was such a heritage there that we wanted to protect. We did quite a lot more than is typical for us for any IKEA site in the rest of the world in terms of preserving, but also in terms of preparing, the land.

There was a lot of clean up that needed to be done. But it’s got a great promenade there. It’s got some parkland. Even the parking area is rather hidden, so it’s not just one big parking lot. A lot of trees have been planted and the docks have been repaired along with the lighting structure where the ferries go back and forth. So, it’s really quite a delightful area now.

You also did a lot of work on transportation.

Yes. One of our goals with any of our stores is to decrease the number of people who arrive in private cars. We’ve been really successful in certain countries of the world, but not as much in America. So, the Brooklyn store really provided us with an opportunity to see if we could get to our long-term goal of 50 percent of shoppers arriving via public transportation.

I’m happy to say that we did achieve that goal. The last thing the neighbors wanted was a line-up of cars coming in and out of the store area. So, we have a public bus and a private shuttle out to two of the subway stations, and then the boat line coming from Manhattan, which is quite popular.

How do you promote a new store opening?

The general matter is to take advantage of the excitement that is typically already out there in the marketplace. There is a lot of word-of-mouth about IKEA and the customers in our existing markets tend to do a very good job sharing with their friends and families the benefits of IKEA. It’s about taking the energy that is already out there and ratcheting it up.

There are some misperceptions about IKEA because it is different things to different people. To your daughter it might be some stuff for her dorm room, but to you or your spouse it’s maybe something for the family room. So, we explain that it’s just furniture and how good quality is possible at a low price. That’s what we call the “concept communication.” It’s also another element of opening the store.

Is there a typical IKEA shopper?

I should start by saying we’ve always had a very broad audience. We’ve pursued that intentionally because we feel we have a home furnishing product for virtually every life stage, income and demographic.

However, we know that certain segments will come to us more easily than others. Certainly, we recognize the importance of young families. That is a key customer group for us. Another big group is young people who are living away from home for the first time.

How do you get insight into your shoppers?

We do a couple of things. We do something called Brand Capital, which is our proprietary research, which we do annually here in the U.S. along with every other market in the IKEA world. It consists of a variety of questions related to the store experience as well as the home experience, living with the product as well as demographics.

Then we have our in-store research, and that’s done twice a year among a broad segment of customers. Again, it’s done consistently around the world. Then, finally, we have special research that we do to track awareness and perceptions. That is done individually in each market, but it is very consistent from one market to the next in terms of the methodology.

How has the recession affected innovation at IKEA?

The recession has definitely pushed us to be more aggressive in terms of our presence on the web. It’s pushed innovation in terms of how we drive traffic to our stores. So, it has been in many ways a good challenge for us.

The current economy also allows us to try things that may have been sacred cows in the past. It really demands that we try different approaches. This is a great time to be more innovative, and to call out the things that really aren’t working.

Has the recession changed the way you merchandise the stores?

It has brought us back to basics. It has reminded us that pocketbooks are thin, which has always been a primary tenet of IKEA. It has reminded us that we need to be active merchants in our stores and that we need to be actively selling and presenting our products.

This fiscal year, which began in September, we’ve been doing an activity that’s called “Seize the Day,” where we’ve taken some of our best-selling items and offered them at unbelievably low prices on a limited time basis, which is typically not been part of our strategy.

What we’re doing is really just good, old-fashioned retailing, where we’re getting an unbelievable number of people responding to amazing offers. We’re selling as much as three years’ worth of merchandise in one day in some cases.

What is the relationship between your in-store, on-line and your catalog merchandising?

Our goal is to take our shoppers from traditional media to online media to store media — drawing from the strengths of each of those media — and show a home furnishing solution that people can recognize from medium to medium to medium. The simpler the message, the more success we will have in breaking through in all three media.

We also provide online tools that help prepare shoppers for the store visit. The serious home-furniture shopper really plans things and we need to provide all the tools necessary to help them do that.

Why do you invest so heavily in your catalog?

The catalog is part of the IKEA concept, and we do invest significant amounts of marketing in the catalog. One part of that is the size. It’s about a 350-page catalog every year, and features about a third of our range.

Another part is the catalog’s broad distribution, which is unusual. We have a goal of going out to a majority of households in our trading areas with the catalog in the hope that, while it may not impact a purchase today, it at some future point will.

So, we are very different in terms of the basic rules of marketing, which would suggest that before you invest in a big product like a catalog, make sure that you’re sending it to a customer who’s already been to the store. That’s not how we see it.

The other thing is that the prices are guaranteed through the whole year and the idea is that, over time, the catalog becomes a reference book, kind of like the way the telephone book used to be.

How does IKEA encourage a culture of innovation?

There is absolutely an expectation at IKEA that, with our flat organization structure, everyone contributes. Whoever you are within in the IKEA organization, you’re expected to contribute your ideas — your new ideas, your old ideas or whatever it may be — and every idea is welcome.

That means that many more innovative ideas rise to the surface, get watched, and actually get executed than in a traditional, hierarchical organization.

The other thing is that we’re a very process-oriented company, meaning that we have three basic processes: creating, communicating and selling the home-furnishings offer.

Each of these three processes has a matrix structure, so that there is somebody like me, a matrix partner, who is responsible for “communicating the offer” in every country in the world. We are equals and we are in constant communication, which means ideas can spread very quickly.

How does that work with product development?

When it comes to product development, we are extremely innovative because we are operating on our own. We’re not part of the furniture industry here in the U.S., although we do a lot of manufacturing here now. We’re not part of the design community in Sweden, although we have a lot of designers from there.

Our independence has a lot to do with our innovation because we don’t know any better. I’m sure everybody is working in oak this year when it comes to bedroom sets, but we’re working in pine. What the heck is that all about? We feel that we are, to a certain extent, operating outside of standard operating procedures.

How does your office layout affect innovation?

Well, first of all, everybody has the same desk arrangement. That, of course, leads to an accessibility that is rarely found in American companies. A lot of companies talk about that, but when you actually get down to it, the CEO has his or her own office. You will not see that at IKEA. Everybody here works in the open landscape.

The other thing is the gathering areas. Many companies might have a cafeteria or something like that. But we have something we call the Great Room, which is a combination eating, socializing and kitchen area, which you can visit and use at any time of the day.

Then there’s this idea of having the unscheduled room. We call them “huddle rooms” here in the United States. Instead of always having to book a room to have a meeting, these rooms are available at any time. It definitely adds to the spontaneity and to sharing ideas without a lot of structure and organization around it.

Have the IKEA hackers influenced any new products? (see sidebar below)

Officially, we say no — of course not. But, in reality I do believe that, at the very least, the hackers get us thinking about some of the products in different ways. It really is an amazing group.

The amount that those IKEA hackers do and the number of creative solutions they have for using our products is incredible.

How do you see the goal of customer service at IKEA?

Customer service has always been kind of a challenge because we are not a self-serve store, but a self-select store. We’re not out there actively selling to the customer, but we are there to answer questions.

So, we focus on areas where customers have told us they need expert reassurance, such as kitchen planning, living room storage and mattresses, for example.

What keeps you up at night?

It is questions like that!

It’s how do we reach a broader group of customers. We’re not big in the United States, we have 36 stores. We’re accessible to 100 million people.

The challenge is, how do we reach out with limited means to a broader group of customers — from a marketing perspective — and convince them of the great offer we have?

There is a preconception that, when it comes to home furnishings, you have to spend $2,000 on a mattress or $1,500 on a sofa. And what we’re offering is that kind of quality at a fraction of the price. We really need to reassure our customers about what we stand for — and that it is value.

As people become more careful with their money, prestige becomes less important and value becomes more important, we become the natural choice for a much broader swath of the population than ever before.

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Sidebar: IKEA Hackers

Some people look at a pair of red plastic salad bowls at IKEA and see a pair of red plastic salad bowls. Michael F. Zbyszynski saw a speaker array. “It’s all about not accepting what’s presented for sale as it is,” says Michael, “about not just doing a ‘paint by numbers’ of your life.”

Michael is actually just one of an apparently growing coterie of “flat-pack” hackers who view IKEA’s products as raw materials and share their “re-inventions” at www.ikeahacker.blogspot.com. Among the re-inventions are a dress made from a shower curtain, a table made from broken chairs and a guitar made out of a tabletop.

However, while some IKEA hackers have a certain utility in mind, others are going for something like art. For example, Christine Domanic used “an old IKEA side table” to create the “Weiner Bench,” which is “festooned with fat pink crocheted tubes.”

Mona Liss, IKEA’s PR director, embraces the hackers, attributing the trend to “this invisible aura of IKEA, something in our DNA that is inviting and unspoken,” adding, “we’re a culture that’s asked to challenge conformity, to speak outside the box.”

[Source: Penelope Green, The New York Times, 9/6/07].

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BILL AGEE is marketing director of IKEA U.S., which he joined as an advertising manager in 1993, later becoming a deputy store manager, managing director of IKEA communications, and global advertising manager.

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