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How Ikea Designs Its Sexy Price Tags

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The Swedish retailer dominates markets in 32 countries, and now it's poised to conquer North America. Its battle plan: Keep making furniture less expensive, without making it cheap. By Lisa Margonelli, October 2002 Issue

Sunday at Ikea, and there's a circus in the living room at the Swedish furniture retailer's jam-packed Emeryville, Calif., store. A dozen Pöang armchairs (think of a cross between a dentist's chair and your grandmother's lap) are on display and all are occupied: one by an upside-down 4-year-old wearing a tutu, another by a pregnant woman with her feet up, a third by a teenager doing homework while his family shops, and another by a young student whose mother nags, "It grows on you, and it's only $79." Every chair has a potential buyer sitting in it, or prodding it, or circling it like a lion around a tethered goat. A hissing noise emanates from a hydraulically operated robot over in the corner that's demonstrating the chair's sturdiness by pushing on the seat of a sample model -- over and over and over again. Ikea sold a million Pöangs last year alone. Many were purchased here at the 274,000-square-foot Ikea flagship in Northern California. When it first opened two years ago, 20,000 shoppers showed up to fill the building; sales at the store have been running at double Ikea's initial forecasts ever since. So this summer, Ikea broke ground on another store, 40 miles away in East Palo Alto. And it's building a third outlet 20 miles to the east in Dublin, just for good measure. The same scene has been played out across North America, where Ikea has launched 24 stores since 1985. The most powerful furniture retailer on planet Earth -- with 175 stores in 32 countries -- is about to get even bigger. The Swedish invasion has only just...