when an innocent customer walks into Ikea what they're really walking into is a powerful psychological trap meticulously designed to make them overspend on furniture Ikea is one of the world's strangest but also most Innovative companies and every year they sell more than 50 billion dollars worth of everything from chairs to bookcases to Swedish meatballs today Ikea is the largest Furniture retailer in the world and oddly also among the world's 50 largest restaurant chains but it all started with the dyslexic farm boy who started selling matches for pennies Ikea has a remarkably uplifting Story and there's
tons of Genius business strategies along the way but there is also a darker side to Ikea and the man who started it Ikea's beloved founder has ties to the Nazi party and the company has been accused of avoiding billions in taxes and even using forced labor and quite suspiciously Ikea is essentially the fourth largest charity in the world this is the crazy true story of Ikea and it begins with a horrible [Music] [Music] tragedy in the 1890s Akim cprad a German from an aristocratic family fell in love with a lower class woman named franciscoca to
akim's parents marrying a woman from a lower class class was unacceptable so he and Francisco moved to a tiny village in Sweden to begin a completely new life with his last penny Akim bought a 450 Acre Farm where he Francisco and their children could make a living by selling their harvests but apart from the land a modest house and a few dogs they had nothing else and so after a year in Sweden Akim was in desperate need of a loan unfortunately the local bank refused to give it to him and that's when his Dark Side
overpowered him no one was there to witness this but the Story Goes that when Akin returned home he took his gun shot his dogs and then himself as for his 27-year-old widow francisa she hardly spoke any Swedish hadn't made any friends yet and she was pregnant at the time so she had three helpless children to feed and care for Francisco was completely alone in the world but she was a brave and energetic woman and despite her grief she took on the challenge of a lifetime and made a success of the farm her bills were paid
and her children were wellfed and well educated after Decades of unrelenting perseverance francisa became a respected member of her community her three children were starting their own families and in 1926 her favorite grandson was born ingvar cprad the boy who would later go on to found Ikea and become one of the richest men in the world growing up ingvar's family didn't have much money but he still enjoyed his childhood on the farm Francisco showered him with love and he liked playing with the animals and catching fish in a nearby Pond and even at just 6
6 years old he was starting to show a neck for entrepreneurship with the help of his aunt Ina bought a case of 100 matchboxes for 88 Swedish cents his first customer was his grandmother francisa who bought a matchbox for 3 cents and by selling at that price to people in the local area Ina more than tripled his investment to three Swedish croner around 35 American cents at the time it wasn't much but this let a spark inside ingvar and he became obsessed with buying things as cheaply as he could and selling them for a profit
as inar was growing up he sold Christmas cards candy wall hangings and lincol berries each time he'd then reinvest the money into more Goods to sell making more and more profit each time seeing his entrepreneurial attitude for buying and selling ingvar's father gave him a small loan to start a mini fishing business and by the time he was 11 ingvar had made enough money to buy himself a racing bike and a typewriter for every new business ingvar's first customer was francisa and she always gave Ina the courage to make bigger moves like when he borrowed
around 600 owner so that he could import 500 Parisian fountain pens and now that he was a natural salesman he made his biggest profit yet however Francisco's influence on Ina was not all positive you see Francisco came from a German State called Sudan land which after World War I became part of Czechoslovakia but Francisco was a German who did not feel identified nationally with Czechoslovakia so the happiest day of her life was actually when Nazi Germany and ex Czechoslovakia in 1938 from Francisco's point of view the Nazis were reuniting Germans with Germans so they were
like saviors to her unfortunately Francisco was so passionate about the Nazis that her politics rubbed off on ingvar he was too young to form his own opinions and plus the horrifying realities about the Nazi regime hadn't come to light yet so ingvar was totally indoctrinated into the Nazi ideology by his family in his teen years he even recruited a few friends into the Swedish Nazi party and later on this would come back to haunt him it was also in his teen years that inar moved to a boarding school he often struggled with his classwork especially
because he had dyslexia but whilst at school Ina was continuing his business by selling watches pens belts and wallets to his schoolmates this oneman operation was looking like a real business so Ina figured why not make it a real business as a graduation gift Ina's father gave him the money for the firm's registration fee and so in 1943 the trading company Ikea was officially created ingvar was just 17 at the time and the business had no physical shop it was a simple mail order company buying cheap goods and reselling them at a higher price just
like ingvar had done all through his childhood in fact this tiny shed near his home is where he kept packages that were to be picked up for delivery as for the name that was pretty simple too the I and K in IKEA stand for Ina camrad the E stands for Elm tude the name of the family farm and the a stands for auna rud the nearby Village so how exactly did Ikea go from this shed to a billion doll B business [Music] [Music] Empire in the first days of Ikea ingbar was as energetic as ever
he imported all the products that had sold well from his youth like pens and watches and then upgraded the business by adding even more products I was doing okay but Ina's education still wasn't complete right after graduating he began studying business and commerce and his parents agreed to take over some of Ikea's workload for the time being in business school Ina was able to take his natural talent for entrepreneurship and fill in the gaps of things he didn't know yet for example ever since his childhood Ina had wondered why many products were so cheap to
make but so expensive to buy he knew from experience that the manufacturing cost of a regular pen was less than 1 Swedish Cent but buying it from a grocery store cost 10 cents it wasn't that one particular grocery store was just charging a massive premium if that was the case other stores would just lower their prices and steal their customers Ina figured the problem was that most businesses focused all their efforts on efficient production and Manufacturing but very little effort was focused on distribution Ina realized Ikea's success rested on how efficiently their distribution was set
up finding the most cost efficient way to get products from factories to customers after all Ikea was importing the same products as everyone else so the only way to get an advantage over the competition was simply to be a more efficient business this was tough at first all while running AIA from a distance with the help of his family inba studied business worked as a store clerk and even did military training so the business was anything but efficient and Ina worked extremely long hours day and night but after 5 years of this ingvar finally had
the freedom to run Ikea fulltime and he wanted to go bigger so in 1948 he decided to add Furniture to his product line this was great timing as after World War II the Swedish government built lots of new affordable housing that all needed Furnishing demand for cheap furniture was high and so furniture sales soon overtook the other small items ingar was selling plus there were a handful of small furniture makers in the area so it was easy enough to buy it from them in bulk and then sell the individual pieces for a profit what wasn't
easy for inar was keeping track of all the different items he was ordering you see because of ingvar's Dyslexia he couldn't keep track of all the different codes for the individual items so instead he decided to give them more memorable names for example bathroom items were named after Swedish bodies of water desks and chairs were given male Scandinavian names and children's products were given the names of Scandinavian mammals and birds when Ina sent out a broer advertising Ikea's new furniture offerings with these eye-catching names a lot of mail orders came in as Ikea expanded the
family farm was cleared out in order to manage the workload and every member of the camrad family helped out however they could the family was a business and the business was a family before long inar had hired a staff of eight people and he greeted everyone with a hug and considered them his family as well Ikea's Fay into Furniture was a massive success and it was growing steadily but there was a massive problem on the horizon you see Ikea was a mail order business they would mail out brochures advertising their products and then customers could
mail them back with an order the problem was that Ike was just one of hundreds of mail order retailers that also sold furniture and they all bought it from the same suppliers with so many sellers in a single Market Ikea and other businesses had virtually no way to stand out other than lowering their prices but this meant Ikea's profit margins were getting dangerously thin the only way to mitigate this was to cut costs but that meant the quality of the furniture suffered and mail order Furniture was getting a terrible reputation inar knew that if Ikea
didn't evolve soon it's days were numbered but that's when he remembered what he learned back in business school if inbar could design a more cost-effective distribution pipeline than its competitive Ikea could cut costs without sacrificing quality this way they could lower their prices and still make a big profit to do this inar re imagined Ikea's entire business model first he bought a large rundown department store for around $1,600 it was a steal and after paying $75,000 for renovations Ina beautifully designed the store with Ikea's main Furniture offerings then Ina canel most of ia's product lines
and sent out an advertising brochure announcing that they were now exclusively a furniture and domestic products business this would simplify the supply chain massively ingvar's new distribution strategy was now in motion Ikea would mail out catalogs just like they used to but customers would actually come to the store to buy a piece of furniture because of this Ikea no longer had to worry about shipping which reduced their distribution cost massively and thus let Ina achieve his initial goal maintain quality lower prices and still make a big profit no other Furniture business had combined mail order
with a retail location so Ikea was pioneering a new and risky strateg but on opening day in 1953 inar saw a line of more than a thousand customers lined up outside Ikea he was actually worried that the Swedish buns he was giving out for free wouldn't be nearly enough for everyone or worse that the rundown building he bought would collapse under the weight of so many people thankfully though the building held and more buns were cooked just in time ingvar described that day as one long Rush of constant and joyous work and since Ikea's consistent
quality and lower prices were irresistible to customers the following days didn't disappoint either the IKEA store became something of a local tourist attraction with people coming in from all over Sweden Ina even built a hotel with a pool right next to it it also helped that people had been skeptical of ordering low priced furniture from mail order catalogs so allowing people to come and see it themselves in store was hugely popular but by still sending out mail order catalogs Ikea could still reach customers in a very wide area and thus iners gamble was a big
success but on a larger scale Ikea was still just one player in a massive industry and the biggest Furniture retailers saw Ikea's new methods as a threat ingvar didn't know it yet but Ikea had just made some powerful [Music] enemies in the mid 1950s Ikea was growing at record pace and to a large group of Swedish furniture dealers this was alarm all of Ikea's competitors still used the standard mail order model which meant they couldn't match Ikea's prices without becoming unprofitable because of this the National Association of furniture dealers tried everything they could to destroy
Ikea before it outgrew them now at the time trade fairs were a crucial part of how Ikea and other furniture dealers got customers most of them just showed off brochures of their Furniture but Ina actually brought it with him and since his prices were unbeatable customers always flocked to Ikea's stands because of this the other furniture dealers tried to use their influence to disrupt Ikea in any way they could firstly they complained that trade fairs were just for showing items not selling them like Ikea did and so they managed to get Ikea banned from selling
anything at the trade fairs but inar responded by creating subsidiary companies and selling furniture through them instead the furniture dealer's counter move was to ban all selling at trade fairs but Ina answered by showing off how much lower Ikea's prices were compared to theirs the furniture dealers then banned every exhibit from showing prices to which inar responded by setting up his own trade fairs in Sweden's largest cities it got to the point where the furniture dealers got Ikea and even Ina personally banned from attending or hosting any trade fairs but even then Ina still had
them beat he snuck into a Trade Fair rolled up inside of a carpet and so despite every attempt to destroy Ikea the furniture dealers were unable to stop inar he was always too crafty for them they compared Ikea to a monster with seven heads every time they cut one off another one grew in its place and Ikea was now growing incredibly fast so before it could Eclipse them all the furniture dealers delivered one final and potentially deadly attack to Ikea in a letter to all Swedish Furniture suppliers the National Association of furniture dealers put it
plain and simple if you sell to Ikea we will no longer buy from you in an instant Furniture suppliers began cutting ties with Ikea they could either sell to one small but growing company or to the entire industry and the choice was obvious for the vast majority of suppliers only a few Furniture suppliers remained loyal to Ikea but even they used fake addresses removed the logos from their vehicles and made secret deliveries in the middle of the night in order to avoid associating themselves publicly with Ikea this time the threat was real Ikea had a
ton of customers waiting to buy furniture but no way to supply them and Ina had to act fast in order for Ikea to survive firstly he made sure to reward the few suppliers who were still helping him out whereas most furniture dealers took around 3 or 4 months to pay their suppliers Ina made sure they were paid within 10 days at most and treated like royalty secondly Ikea started making its own designs many furniture dealers refused to work with suppliers who sold them the same products they sold to Ikea but Ina realized if Ikea made
some minor adjustments they could claim it was an entirely different product and win some suppliers back and finally Ina secured an emergency supply of wooden chairs to be made in Poland just a few years later Poland became one of Ikea's key suppliers because was completely Out Of Reach from Ikea's Swedish enemies back home thanks to all this Ikea was able to dodge a potentially devastating attack from its competition in ingvar's words the boycott only made Ikea stronger and now they had a stable Foundation of suppliers to rely on and Unique Designs unlike anything else on
the market and all of this would lead to a very unusual breakthrough [Music] [Music] one day when Ina finished photographing one of Ikea's new tables as they were packing it back up one of his employees had difficulty fitting it into his car he noted that the table used up a lot of empty space so he suggested something that would change Ikea's course forever why not take off the legs shortly after they got their first prototype you could screw and unscrew the table's legs into position easily and and Ina instantly realized how beneficial this would be
to Ikea selling items sold in pieces that are flattened to make transport easier or flat pack Furniture as they called it would be another turning point for Ikea because now they could take a piece of furniture apart Ikea's packaging became much more compact this meant the furniture could be stored and transported more efficiently and cheaply they spent less on packaging materials and there was much less chance of an item being damaged in transit in other words flat packing instantly cut the company's costs and made distribution faster fter and safer and remember prior to the 1950s
you'd normally be waiting a while for your furniture to be made and delivered but now you could take it home with you the same day it was win-win plus all of this had another positive effect on Ikea's customers researchers discovered a cognitive bias which they called the Ikea effect where they realized consumers value products more highly if they've been partially involved in making them because many of Ikea's Furniture pieces now came in Parts customers actually had to build them at home and by physically putting the items together themselves they had a sense of Pride and
ownership over the item which meant more of an emotional attachment to it and so they valued the item more highly for Ika this meant their customers had a higher level of loyalty to the brand and so finally after a decade of battling with their competitors stuck in their old ways Ikea had evolved beyond their influence Ina knew that Ikea was now perfectly positioned for Rapid expansion and his plans were more ambitious and Stranger than ever before before we get to to the next chapter it's time to answer a question I get a lot how do
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decided to open a new store that was bigger and better in every way for the location ingvar chose Stockholm the capital of Sweden but instead of a spot in the Heart of the City he picked a location way outside basically in the countryside this way Ina got a massive discount on real estate so the IKEA store could be huge it was about the size of 8 and 1/2 football fields and had three separate floors but if Ina was going to take on such a massive project he needed to perfect Ikea's concept and this is where
he showed his true Brilliance inar designed the store in a way that exploited every aspect of his customer psychology it worked like this when a customer entered Ikea they took a slip of paper to write down a code for every item they were going to buy so they didn't have to carry anything around the shop despite its fast size the store had just one entrance and one exit which wasn't always the easiest to find people could wander around the different areas for a while but generally everything flowed in a single direction as customers were guided
through the entire store in a one-way path it was almost like a bit of a maze with curves every 50 ft to keep customers intrigued about what would be coming up next this also meant you were basically forced to look through all departments and see every item in the store before reaching the exit you don't just pop in and buy one thing you see everything they have to offer encouraging impulse buys for things you hadn't even planned to purchase with this in mind inar designed the layout in three main stages first was the showroom which
was meant for bigger expensive things like kitchen and bedroom furniture then came the market line which was meant for smaller cheaper items like silverware and decorations and finally there was the warehouse where customers picked out the packages with the codes they wrote down and paid for them however whilst ingvar's design seems innocently logical on the surface there are three brilliant psychological tricks going on behind the scenes firstly every exhibit inside the store exploited something called the gruin effect which means a displays layout and lighting are designed to draw people in and make them take their
time wandering around the more time customers spent inside Ikea the more likely it was that they made an Impulse decision to buy some piece of furniture in fact research suggests that the majority of purchases at Ikea are unplanned secondly since the store was so huge and it only flowed in One Direction it meant that customers better write down the code for the more expensive products at the beginning right away because otherwise they'd have to walk all the way to the end and start the entire maze again from scratch which could take hours and thirdly since
more expensive items were at the beginning of the store by the time customers got to the cheaper items near the end the price of a new decoration seemed like a bargain compared to that of a massive dining table again this price anchoring leads to more impulse purchases as a result of all this Ikea became more of an experience than a typical shop you could spend hours there however inar did notice one problem in the mornings Ikea was usually full of customers but business always slowed down after lunchtime when customers went out for a meal but
what if people didn't leave to get food then they could spend all day there inar figured that by opening a restaurant inside Ikea the food sales would not only generate extra money but people would stay at Ikea for more time and even better if the food was good people might come in just for a bite to eat and end up buying some furniture as well with these strategies in place Ikea was making more money than ever but Ina also had a stroke of good luck you see at the time Ikea was considered the cheapest Furniture
business in Sweden but low prices can often lead people to thinking a product is of low quality as well but when an impartial Swedish design laboratory gave every item a quality test comparing Ikea products with more expensive competitors the results were astounding Ikea actually had superior quality across the board previously Ikea's quality had been stigmatized because of its lower prices but thanks to this report Ikea was now seen as both the financially sound and the more tasteful option because of this when Ikea's next new store opened in 1965 more than 18,000 people showed up on
its first day ingvar's expansion plan was working better than he could have ever dreamed and Ikea was growing like never before by 1973 Ikea was making tens of millions every year and had over a thousand employees although oddly enough Ina still ran it like a small family business the main office was in an old barn on the Family Farm and yet they now had a successful formula they could replicate anywhere however Ina wanted Ikea to live forever long after he was gone and this would lead to a very controversial [Music] [Music] plan ingvar's dream was
for his children to inherit the business but Sweden's inheritance taxes were extremely high so instead Ina hired an army of lawyers from all over over the world their mission was to make Ikea independent of any single country and protect it from any harmful Outsiders trying to take it over it took Ikea's lawyers more than S years of making shell companies foundations and trusts in every tax Haven in the world but in the end Ikea's corporate structure became an impenetrable and untaxable Labyrinth the original Ikea company became owned by a holding company whose profits are moved
to a tax exempt nonprofit who later indirectly moves its money into the stitching Inka Foundation which which is based in the Netherlands completely apart from this is a trust which owns a Dutch holding company which owns another holding company in Luxembourg which owns Ikea's intellectual property if you're thinking all of this sounds very confusing you're right and that's just a grossly oversimplified version the point is that Ikea's complicated structure has led to controversy with many accusing the company of reorganizing itself in order to avoid paying taxes today 50 years after this restructuring took place the
foundation ingvar created is technically the fourth largest charity in the world but either way in the time it took Ikea to become a tax exempt Dutch charity ingvar was busy replicating the success in his first STS across the rest of the world and perfecting the formula even more each time by the end of the 70s there were more than 20 new Ikea stores in countries like Canada Switzerland and Australia and Ina's plans for the 80s were even more ambitious however Ina wasn't prepared for what was coming next the dark shadow of his past was catching
up to him and it would launch him into the biggest control Ries of his life before we get to the next chapter I want to help you save time and money with today's video sponsor shipstation ship station integrates everywhere you sell online including Amazon Etsy eBay Shopify and more ship station then makes it easy to automate shipping tasks and manage your business's orders in one simple dashboard you can print shipping labels compare rates organize every shipment and automate delivery notifications and when you use ship station you get discounts up to8 89% of USPS and UPS
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yet with ship station go to shipstation ./n to sign up for your free 30-day trial today that's shipstation.com slm [Music] magnates during the 80s Ikea was growing at its fastest rate ever but Ina still saw everyone involved in the company as family he was famous for meeting employees with a big bear hug getting to know as many of them as he could and all around being loved by by everybody however not many people outside of Ikea personally knew inar he was just the owner of some giant swedish furniture company so when a journalist discovered that
ingvar had been an avid Nazi Enthusiast in his youth his entire reputation was at stake in 1994 the journalist reached out to ingvar for comment to which ingvar wrote back saying he was willing to talk openly about everything after all Ina was indoctrinated into Nazi ideology through his grandmother but he was too young to think independently now that the terrible reality of the third right was public information he changed his views completely so inar thought that by being totally transparent about everything any controversy would go away once people heard his story however the journalist had
come across two documents alleging that ingvar had attended a fascist meeting as late as 1958 at that point World War II had been over for a decade and Ina was 32 years old this was no longer a story about an innocent boy who had been indoctrinated by his family it was a story about a mature businessman who might just be an active Nazi and when the story broke out newspaper in all of Europe circulated the rumor Ika went into crisis mode and demanded answers from its founder ingbar wrote an open letter to everyone openly explaining
the story of his indoctrination his involvement with the Swedish Nazi party expressing his regrets and begging for everyone's forgiveness as for the accusation that he was an active Nazi ingvar disproved it by saying that 1958 the year of the alleged meeting had been the year when Ikea's first store was being heavily renovated he was simply too busy with work to worry about politics in fact inar had not attended any such meeting and despite the news Fiasco this initial story caused Ina had done one thing correctly he was honest about everything and when people heard his
version of the story the controversy died down at least that was until 1998 this time another news story broke out alleging that inba had financed the start of Ikea by borrowing Nazi money again another barrage of headlines rolled out in the newspapers but inar didn't really care about the claim that he had borrowed money from the Nazis he was Furious that anyone thought thought he'd borrowed money at all in his words they could have accused me of murder but not of borrowing money in the entire lifespan of Ikea Ina had never taken out alone so
the claim was totally false this time though Ikea's employees didn't demand answers instead they offered their full support for Ina and he was so grateful that he broke down in tears however rumors of ingvar's involvement with the Nazis never completely went away for example throughout his life he had remained acquainted with a Swedish Nazi activist and Holocaust Den an Ina even invited him to his wedding and called him a great man it's also known that in the'80s some of Ikea's suppliers in East Germany were using forced labor and it's very likely that Ikea's Executives were
aware of it and did nothing to intervene but either way despite the controversies surrounding inba's past Ikea was on its way to Conquering the world throughout the '90s Ikea built more than 70 new Mega stores and became one of the world's strongest Brands and in 2008 Ikea took the throne as the world's largest Furniture retailer Ikea's sucess uccess and the fact the company had remained private meant inar became one of the richest people in the world and yet he still maintained his Frugal lifestyle he lived in the same house drove the same old Volvo for
20 years and always flew economy Ina passed away at 91 years old in 2018 today Ikea has well over 450 locations and so it's not surprising that some crazy stories have happened at Ikea stores there's a few troubling ones like when a 12-year-old boy ran away from home and got lost in an Ikea for 6 days but there's also some heartwarming stories too like the couple who met for the first time at their local Ikea and decided to have their wedding there as well whatever you think of Ikea there's no denying it's one of the
most fascinating companies around they've sparked several important retail innovations that other companies around the world now use and the story of ingbar's family goes to show what endless perseverance can achieve but if you want to hear the story of another Scandinavian company that makes you build what you buy you have to check out the messed up history of Lego just click the thumbnail on screen now and I'll see you there in a second cheers
