(Editor’s note: Terry Boyd also contributed to this IKEA post.)
It’s the definitive expat moment: You move to Europe and you hit the local IKEA to furnish your new digs. And, yeah, you have some meatballs because shopping IKEA to furnish even the most modest home is like an 8-hour journey of possibilities.
IKEA has always temped shoppers with snacks as affordable as its furniture, but suddenly it appears executives at the Delft, Netherlands-based home-furnishings giant (you thought it was Swedish, but see below) are cooking up something far more ambitious.
Several news outlets have reported the company is now considering an actual Ikea restaurant chain in city centers across Europe rather than the suburbs where IKEA locates its home-furnishing mega-stores.
What’s IKEA up to?
IKEA has a very profitable IKEA Food division that produces all those meatballs, salmon, salads and cookies that shoppers can stop to savor during those long treks through the retailer’s gigantic stores. Sort of like stopping at Samarkand for the night on the old Silk Route.
The food has always been a way to keep shoppers in the stores. In fact, IKEA calls meatballs its “best sofa-seller.”
“It’s hard to do business with hungry customers,” Gerd Diewald, head of IKEA US’s food operations, recently told Fast Company. “When you feed them, they stay longer, they can talk about their [potential] purchases and they make a decision without leaving the store.”
IKEA has sold more than 11.6 billion Swedish meatballs since it first started expanding its retail chain in the 1980s. The retailer’s own research determined that nearly a third of its store customers now go there just to eat.
Food sales are up about 8 percent annually since IKEA began its store overhaul program in 2015, enlarging its dining areas. The company now serves some 650 million diners a year, in 48 countries worldwide.
Still, IKEA Food is clearly the tail on the elephant. While its sales in 2016 were a pretty hefty $1.6 billion, that was just a fraction of the company’s overall $36.5 billion revenue.
But now, in a case of the tail passing the elephant, IKEA may be considering going into the food business. It feels it has the brand name. And the know-how.
“The mere fact that we don’t need so many square feet to do a café or a restaurant makes it interesting by itself,” Michael La Cour, IKEA Food’s managing director, told Fast Company. “I firmly believe there is potential. I hope in a few years our customers will be saying, ‘IKEA is a great place to eat — and, by the way, they also sell some furniture.’ ”
Oh? That sounds like a strategy-in-motion.
Last year IKEA opened a pop-up restaurant in the trendy Shoreditch district of East London. They’ve also tested pop-up restaurants in Paris and Oslo. And guess what … guests work with the chef to assemble the meals.
You can’t make this up.
So, positive marketing information, experimental test runs and teasing commentary from IKEA executives. When is IKEA ready to make the broad sector switch? This year? Next year?
“Ingen kommentar ännu,” is the official response from the publicity-shy company. It means, loosely, nothing to say – yet.
What you didn’t know about IKEA:
As we were putting together this post, we kept thinking IKEA was based in Älmhult, Sweden where it opened it first store back in 1958. Alas, no.
As al-Jazeera posted in 2014, IKEA is technically a Dutch charity with a piece in the tax-avoidance capitals of Luxembourg and Lichtenstein. Well, there’s a lot more to it than that. The corporate structure is divided into two main parts – operations and franchising – composed of for-profit and non-profit corporations.
In what is possibly the cleverest tax dodge ever (not to mention the most complicated corporate structure), a majority of its 300-plus stores are controlled by INGKA Holding, based in Delft, Netherlands. In turn, the non-profit Stichting Ingka Foundation, created in 1982 by IKEA founder Ingvar Kamprad, owns INGKA Holding.
According to Wikipedia, INGKA Foundation is officially dedicated to promoting “innovations in architecture and interior design.”
The net worth of the foundation exceeded the net worth of the much better known Bill and Melinda Gates Foundation (now the largest private foundation in the world) for a period. However, most of the Group’s profit is spent on investment; the foundation expects to spend €45 million on charitable giving in 2010 (compared to the Gates Foundation, which made gifts of more than $1.5 billion in 2005.)
So, the company that represents the communal ideal of Sweden, is the most successful tax avoidance mechanism ever designed.