IKEA was founded in 1943 on a vision of offering “a wide range of well-designed, functional home furnishing products at 180 prices so low, that as many people as possible will be able to afford them.”
In 1956, the stores introduced furniture through the “flatpacking” method: furniture was sold in pieces and customers assembled it at home. By reducing transportation, assembly, and inventory costs, IKEA was able to scale aggressively, locating wherever it had willing customers.
IKEA’s ability to leverage the work done by its customers enabled it to grow to 433 stores in 49 global markets, serving more than 957 million customers for a retail revenue of €41.3 billion in 2019.
Identify How Others Can Create Value for You for Free
In 1956 IKEA adopts flatpack, ready-to-assemble furniture that is easier and cheaper to transport from factory to retail centers. The company sees an opportunity in getting the customer to take over that part of the value chain.
Develop a Value Proposition
Because of flatpacking, IKEA can keep more furniture in stock and offer more affordable prices than competitors. Customers find the modular pieces they want to purchase in IKEA’s open storerooms, then transport and assemble them at home.
Reap the Operational Savings from Getting Others to Do the Work
IKEA reaps substantial operational cost savings from getting customers to perform part of the work. Since storerooms also act as warehouses, customers select furniture, pick up the flatpacks, then transport and assemble them all at their own cost.
Modular Design and Manufacturing
Flatpacking, price differentiation, and customer assembly encourage IKEA to embrace a very modular, simple, clean, and minimalist design for which the company is known globally, which also simplifies manufacturing.
Overall Savings from Flatpacking
Flatpacking doesn’t just enable cost savings from enlisting customers to do part of the work: it leads to overall cost savings in the manufacturing, storage, and mass transportation of furniture from factories to retail centers.