Ingvar Kamprad was born on March 30, 1926 in the province of Småland in southern Sweden. Despite dyslexia, already in early childhood the future billionaire discovered his entrepreneurial skills by starting to sell matches. The child realized that he could earn a little extra money by selling matchboxes bought in bulk at a sale to his neighbors individually. In subsequent years, Kamprad traded in everything: berries, seeds, fish, New Year's decorations, stationery... Trade was also carried out through postal catalogs. In 1943, when he was 17 years old, he founded the IKEA company. The first two letters are the initials of the entrepreneur, the last two come from the name of the family farm Elmtaryd and the local parish of Agunnaryd. Five years later, Kamprad added furniture from local manufacturers to his catalogue. The demand for it impressed the businessman so much that he soon focused entirely on selling household goods.
Kamprad's insight
The business grew, Kamprad hired employees. One of them, Sven Goethe Hansson, proposed a brilliant idea: to create a showroom and display furniture in it. This is how the first IKEA center appeared - in an old workshop building in the city of Älmhult. Gradually, Kamprad moved away from selling other people's furniture; IKEA organized its own production and developed the design itself.
And at some point an insight came. One of the IKEA employees unscrewed the legs of a table that needed to be packaged and shipped to a customer. This is how the famous prefabricated furniture was “invented,” which does not take up much space during transportation and allows you to save on delivery and packaging materials. No less revolutionary was the idea of inviting customers to assemble their own furniture. Firstly, for IKEA, the cost of assembly was thereby reduced to zero. Moreover, without knowing it, Ingvar discovered an important psychological feature of people, which scientists would later call the “IKEA effect.”
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The more effort required from a consumer to obtain a particular product or service, the more valuable it appears.
This effect is successfully used in commerce: this is the queue that needs to be stood in order to buy an already expensive Hermes bag, and the need to get recommendations from two members of closed London clubs in order to become one of them, and Lego sets that need to be assembled, and , of course, furniture from IKEA.
Kamprad saved not only on assembling furniture. The entrepreneur preached an extremely modest lifestyle and demanded the same from his subordinates. In his memoirs and interviews, he claimed that he always tried to fly economy class, drove an inexpensive Volvo for many years, stayed in budget hotels and bought food from farmers before markets closed so he could negotiate a discount. Kamprad also saved on taxes: he lived in Switzerland for several decades, for which he was criticized in his homeland. Years later, the New York Times discovered interesting details of this “modesty”: Kamprad drove a Porsche on the roads of Switzerland, and the house in which he lived was a luxurious villa on the shores of Lake Geneva.
Be that as it may, thrift was firmly ingrained in IKEA's DNA, with even top managers scribbling on both sides of the paper. Confirmation of this can be found in its financial reports (the company is not public, but publishes key indicators). In 2021, its revenue (including sales of goods and services, as well as rental income) amounted to €38.8 billion. Cash accumulated in accounts by the end of 2021 - including through systemic savings - amounted to €23 billion or 43% of assets, despite the fact that goods in production and warehouses are only 4%. This is an incredibly small figure for a retailer that has 422 stores in 50 countries. In terms of debt load, the company is in an extremely comfortable position: the cash cushion exceeds all the company's debts by ten times.
Family
Ingvar always said that the most important thing in his life is family. They were the ones who influenced his life and supported him when IKEA was just taking its first steps.
Talking about his biography, Ingvar Kamprad often joked that trade is in his blood. His mother came from a family of famous merchants of Elmhult. Ingvar's father was not a good entrepreneur and managed the family farm very poorly.
Ingvar's grandfather was the owner of a store where the boy often spent time and sometimes worked part-time. Thanks to his grandfather, Kamprad became seriously interested in commerce. Subsequently, Ingvar will build an IKEA furniture factory on the site of the store. Unfortunately, my grandfather was not a very successful businessman, and, unable to bear the tax burden that fell on the family, he committed suicide. His grandfather's business was taken over by Ingvar's grandmother, from whom he, in his own words, learned strength of character and inherited the ability to trade.
Kamprad himself was married twice and has four children. He and his first wife adopted a daughter from their first marriage. In his second marriage, Ingvar and his wife had three sons, who have now inherited their father’s company.
Kamprad's legacy
If there is one thing Kamprad never skimped on, it was on the services of lawyers - he himself admitted this in an interview with Forbes. Kamprad needed lawyers to create a complex system of ownership and management of IKEA, consisting of trusts and foundations. Back in the 1980s, he actually divided the business empire into two components: IKEA Group and Inter IKEA. The first manages the majority of IKEA stores and shopping centers, while operating as a franchise. The franchisor of the brand is Inter IKEA, the owner of the IKEA trademark and concept, which receives license payments from all franchisees. In the case of the IKEA Group, as the media wrote in the 2000s, we are talking about 3% of turnover. The ultimate owner of the IKEA Group is the Ingka Stichting Foundation trust, registered in the Netherlands, and Inter IKEA is the Interogo Foundation from Liechtenstein.
Why was such a complex structure needed? The Economist magazine wrote in 2006 that with the help of trusts and charitable foundations, Kamprad simply minimizes the tax burden. The anti-globalization organization Attac (set up to study the taxes paid by multinational corporations) calculated that the IKEA Group's tax payments in 2012 amounted to €695 million, which corresponds to a total tax rate of 17.8%. Inter IKEA paid €58 million in taxes, which corresponds to 11.6%. In both cases, we are talking about extremely low levels of tax burden for most world economies. And the Swedish television channel SVT stated in 2011 that the Interogo trust alone would allow IKEA to save €2.3-3.2 billion in taxes by 2031. Kamprad himself argued that his main goal was much more noble: to protect IKEA from takeover or possible family conflicts.
The Ingka and Interogo trusts belong to themselves, but the Kamprad family retains seats in the management bodies (Ingvar himself retired from the operational management of IKEA only in 1998, and left the board of directors completely in 2013). Formally, both trusts are charitable. But most of their funds are reinvested in the IKEA business - this was one of the elements of tax savings, wrote The Economist. However, IKEA is also involved in philanthropy, albeit on a more modest scale. For example, Ingka Stichting annually invests about €150 million in affiliate programs. In 2021, one of the largest grants for €40 million was received by the We Mean Bussines coalition, which supports green energy initiatives. Interogo engages in private equity and venture capital investments (through Nalca, which supports companies in the Nordic region) and invests in real estate and financial assets.
“I gave it to IKEA. We retained control in the company, but now we have no money,” one of the businessman’s biographers quotes Kamprad as allegedly saying to his sons back in the 1980s.
This is not entirely true. After the restructuring of IKEA, the Kamprad family retained ownership of the Ikano Group holding, registered in the tax haven of Curacao, part of the Netherlands Antilles. Ikano Group is engaged in banking and insurance business, development, and also develops IKEA in Southeast Asia and Mexico. The holding belongs to Kamprad's sons: Jonas, Matthias and Peter. Forbes estimates their combined wealth at $3.3 billion. This is significantly less than the $28 billion figure that Forbes estimated Kamprad's wealth at before his lawyers, with documents in hand, proved in 2011 that IKEA's core business was irrevocably transferred to trusts. And these figures are completely incomparable with the fortune that the thrifty Kamprad left after his death. According to the Swedish tax authorities, it amounts to 1.24 billion Swedish kronor (approximately $140 million). Half of this sum will be equally divided between the three sons of the founder of IKEA and their adopted sister Annika Kielblom. The second half will actually be donated to Sweden and will be used to support businesses in Norrland, the northern region of the country.
Early years and first business
Ingvar was born in 1926 in a parish hospital and became the first-born in the family. The boy spent the early years of his life on a farm near the town of Älmhult. And when he was 7 years old, the family moved to Elmtard, where Ingvar’s father began managing the farm. Things were not going very well; the family managed to make ends meet only thanks to the fact that Ingvar’s mother persuaded her husband to rent out rooms to guests.
Ingvar himself recalls that they all lived in one room at that time; the rest were occupied by guests. This may have led to the fact that until the end of his life he would remain an unpretentious person and a “herd animal” (as Kamprad called himself).
Around the age of five, Ingvar Kamprad begins to become interested in money and ways to earn it. The aunt helps buy the boy one hundred boxes, which the boy will subsequently sell at a fair and make his first profit. A little later, he will start selling postcards, catching fish and selling it to his neighbors. He is driven by the desire to earn money and help his father.
Later he would sell ballpoint pens, which at that time were new to the stationery market. He would do this for quite some time, importing pens from France, he sold them at a significant premium in Sweden, and even once gave a product presentation, during which he promised each guest coffee and a bun. More than a thousand people attended the presentation, and Invar almost went bankrupt.
How was IKEA created?
In 1943, Invar entered the school of commerce. Kamprad’s very first business idea was the sale of small items: fountain pens, lighters, saws. He imported goods at low cost, then sold them in different cities in Sweden.
The idea of going into furniture making first came to him in the post-war years. According to Ingvar Kamprad, he decided to found IKEA in order to bypass his long-time rival retailers. The young man purchased several pieces of furniture and placed an advertisement for sale in the newspaper. There was only one problem: furniture is a very expensive product. It’s hard to believe that at the beginning of the last century it cost a lot of money and not everyone could afford to buy furniture. Most people made it themselves.
Ingvar set himself an ambitious task: to make furniture a consumer product. To achieve this, the furniture needed to be greatly reduced in price. By 1950, the entrepreneur hires three more employees and transfers to them the day-to-day care of the company. He himself goes in search of cheap furniture.
Ingvar Kamprad begins the history of IKEA with the search for small local manufacturers with the best prices. And he succeeds superbly. Competitors, seeing a threat in Kamprad's pricing policy, also begin to reduce prices for their products, but cannot keep up with him.
Fighting competition
Low prices allowed IKEA to quickly become one of the leading companies in the country. This, naturally, did not suit the competitors. An unfair struggle for the buyer began. Competitors spread unpleasant rumors about IKEA and its young leader.
Companies are prohibited from participating in exhibitions. Things were reaching the point of absurdity. Once, the founder of IKEA, Ingvar Kamprad, was banned from participating in an exhibition held in a building that belonged to him.
In addition, because the price of the furniture was very low, consumers began to complain about its quality. Products were still sold through advertisements and catalogs, so buyers, when purchasing furniture, could not evaluate its quality. An immediate solution was required. And Ingvar finds him. He organizes his own exhibition of his own furniture at the factory, this solves two problems at once: buyers see the product and there is no dependence on competitors. Things got better, and five years later Ingvar and his company managed to open a full-fledged store on the top floor of the factory.
By the end of the eighties, IKEA warehouse stores had already covered all of Europe, not only Western, but also Eastern. Kamprad even tried to break into the market of the Soviet Union, but failed. He managed to open his first store in Russia only in 2000 in Khimki. Now on the territory of Russia there is also.
Another innovative approach was the opportunity to try out furniture. Anyone could sit on a chair and see how comfortable it was or lie on an IKEA bed. This is still allowed to visitors in the company's trade pavilions.
Fascist?
Kamprad has been accused more than once of being Nazi sympathizers. In one of his books, Ingvar Kamprad said that his grandmother was a fan of Hitler and tried to instill in him a love for Nazi Germany.
In 1994, letters from one of the Swedish pro-Nazis were published. They mentioned that Kamprad was an activist of the New Swedish Movement group, which expressed racist views. A real scandal broke out! Workers and consumers demanded an explanation. After this, Kamprad published a letter entitled "My Biggest Fiasco", in which he regretted his participation in the Nazi organization. In addition, it is worth mentioning that one of Ingvar’s best friends was refugee Otto Ullman, a Jew by nationality. Subsequently, Otto will help Ingvar open his first business and greatly influence his vision of finance.
Notes
- [svt.se/svt/road/Classic/article/615/jsp/Render.jsp?a=2510239&d=149146&index=0&popup=true State Security Service document on Kamprad’s activities]
- [svt.se/2.22620/1.2510115/nya_avslojanden_om_kamprads_nazi-forflutna Nya avslöjanden om Kamprads nazi-förflutna. SVT.se]
- ↑ 123
[lenta.ru/news/2015/10/31/ikea/ The founder of IKEA paid income tax in Sweden for the first time in 42 years: Companies: Finance: Lenta.ru] - [www.20min.ch/finance/news/story/Ikea-Gruender-bleibt-Reichster-in-der-Schweiz-20977817 Ikea-Gruender bleibt Reichster in der Schweiz] December 4, 2009 (German)
- ↑ 12
Kamprad, Torekul, 2013. - www.gazeta.ru/news/business/2011/09/19/n_2015461.shtml The head of IKEA will allocate €100 million to charity after publications about his Nazi past
- [www.forbes.com/lists/2010/10/billionaires-2010_The-Worlds-Billionaires_Rank.html The World's Billionaires - Forbes.com]
- [www.forbes.com/profile/ingvar-kamprad/ Ingvar Kamprad & family. The Swedish billionaire is the year's biggest loser]
- [topics.bloomberg.com/bloomberg-billionaires-index/Bloomberg Billionaires Index]
- [www.forbes.com/profile/ingvar-kamprad/ Ingvar Kamprad & family]
State
Kamprad is called the most modest billionaire. Despite their savings or even thanks to them, from 2005 to 2010. he was one of the ten richest people in the world according to Forbes. True, in 2011 Ingvar left this list with the title of “main loser.”
As of January 2021, according to Bloomberg sources, Kamprad's fortune was estimated at $58.7 billion.
What is the secret of success?
Kamprad's small company grew into a huge corporation. IKEA has conquered the world and is rightfully considered one of the most successful companies in the world. Some will say that you were lucky, it was a good time. But, without a doubt, without Ingvar, without his desire for trade, economy and simplicity, the company would not exist.
Now the IKEA development strategy is being studied in many universities around the world. Each one highlights its own key points. But we will focus on the Commandments of the furniture dealer, which Kamprad left for his employees. They describe the IKEA concept and, in my opinion, their secrets to success:
- To create beautiful and high-quality things at low prices so that as many people as possible can buy them.
- The IKEA spirit is passion, personal responsibility and a desire to help others. Show concern and encourage each other.
- To make people's lives better, we need resources. Especially in the field of finance.
- Achieve good results with limited means. Any designer can design an expensive table, but it is important to be able to create a beautiful and functional table that is affordable.
- IKEA has simplicity in everything, even in its management structure. There are no barriers between employees or complex rules. Kamprad against bureaucracy.
- IKEA is following its own path, looking for new ways to grow and questioning its actions to stay ahead. “Why” is the key word in the company.
- Concentrate your efforts on the main thing and don’t get scattered. You don't need to do everything, everywhere and at once. Concentration is important for success.
- Only the one who sleeps makes no mistakes. You need to allow yourself to make mistakes. Make decisions and take responsibility.
- Don't stop there. Constantly asking what else can we do better tomorrow? Happiness is not in achieving a goal, but in striving for it.
