How Ikea keeps its prices low


Nicholas McComber / Getty Images

IKEA is more than just a furniture store. It is a cultural phenomenon that has spawned jokes, memes, and comical sketches and has become as beloved to furniture shoppers in the United States as it is in Sweden, the home of its founder.

Small Business Spotlight 2022: GOBankingRates Celebrates Small Business Across the United States
Check Out: 9 Best Dollar Tree Items for Fall 2022

While everyone loves to make fun of the way the Swedish furniture company brings you all of their signature furniture together on your own, the truth is that it’s cheaper than a lot of its competitors.

Bonus offer: Open a new Citi Priority Account by 1/9/23 and earn up to $2000 cash reward after completing required activities.

Keeping costs low has been part of the IKEA model since Ingvar Kamprad founded the company in the 1950s (the IKEA name derives from Ingvar Kamprad’s initials as well as Elmtaryd, the family’s farm, and Agunnaryd, the town he grew up in).

The entrepreneur has always wanted to do more than just make a profit, according to the IKEA website, and they’ve been creating affordable products for everyone in the company right from the start. So how does IKEA keep its prices low?

mass production

One of the big costs that furniture companies have to incur is the cost of production – the labor and machinery involved don’t come cheap. IKEA is keeping its prices for consumers low by mass-producing many components, according to House Digest. Make the process more efficient: Many parts are used in multiple furniture designs (for example, you might find the same style of legs on a dining room table and office), enabling higher production quantities at a lower cost.

Bonus offer: Find a checking account that fits your lifestyle. $100 bonus offer for new checking account customers.

Take part in our survey: Are you struggling to keep up with your utility bills?

bulk buy

Mass manufacturing products means that IKEA also buys items in bulk, which is the best way to earn a discount in the manufacturing process. Just like you, the consumer, pay less for bulk items at places like Costco or Sam’s Club, IKEA gets a break in cost for mass production, according to House Digest.

flat packing

The very thing IKEA is known for — assembling your own furniture — is not just a way to save space in the warehouse but part of a strategic money-saving system that Kamprad used when he founded the company, according to IkeaMuseum.com. Kamprad had seen the packaging used by another Swedish company and knew the idea of ​​saving money (and saving space) when he saw one.

High sales volume

You won’t find IKEA in many small towns. That’s because IKEA’s business model relies on high-volume sales, which allows it to generate profits that keep costs low for customers. That’s why IKEA stores can generally be found in cities with a population of 500,000 or more where people need to buy furniture frequently – such as renters, college students, and families.

Bonus offer: Bank of America Bonus offer of $100 for new accounts online. See page for details.

price before design

While IKEA tries to be innovative in design, it never does so without considering costs. According to QuerySprout, all products are priced before the design is made, with the consumer in mind. The price makes up everything from the design to the materials to the cost of moving the item.

Self service, serve yourself

IKEA is a unique experience in more ways than one. As you wander the product aisles of the showroom, you are unlikely to encounter any arrogant staff trying to persuade you to buy something, as you might in regular furniture stores. This absence of hard-working employees, and the focus on self-service, is another way IKEA saves money on labor costs and transfers the savings to customers. Sometimes this can be frustrating if you have a question or trouble finding something, but veteran IKEA shoppers find out soon enough.

The customer transports the goods

Another smart way to save money from IKEA is to let consumers pick up their flats and take them home the same day they shop. By shipping fewer items, IKEA saves a significant amount of money and can pass on some of that savings to customers.

Don’t forget the food

Perhaps the smartest idea at IKEA has nothing to do with furniture at all; It’s the food court, where you can buy delicious items like IKEA’s famous meatballs, marinated salmon, and a variety of pastas, appetizers and desserts.

According to QuerySprout, IKEA purposely sets food prices to be the lowest in a 30-mile radius, and it works: IKEA shoppers spend nearly $2 billion on food alone each year. The primary goal of selling food is to attract customers, improve their experience, and possibly keep them in the store for longer.

More from GOBankingRates

%d bloggers like this: