IKEA is a brand comprising two separate owners. INGKA Holding B.V. owns the IKEA Group, the holding group. At the same time, that is held by the Stichting INGKA Foundation, which is the owner of the whole Group. Thus, IKEA Group is a franchisee that pays 3% royalties to Inter IKEA Systems.
| Aspect | Description | Analysis | Examples |
|---|---|---|---|
| Products and Services | IKEA offers a wide range of furniture, home furnishings, appliances, kitchenware, and home decor products. These products are designed with a focus on affordability, functionality, and Scandinavian design principles. IKEA also provides home design services, assembly assistance, and delivery options for its products. The company’s product lineup includes iconic items such as the BILLY bookcase and EKTORP sofa. | IKEA’s core offerings comprise a diverse catalog of furniture, home goods, appliances, and decor products, known for their affordability, functionality, and Scandinavian design. Additional services, including home design consultations, assembly assistance, and delivery, enhance the overall customer experience. Iconic products like the BILLY bookcase exemplify IKEA’s design legacy. | Furniture, home furnishings, appliances, kitchenware, home decor products, affordability, functionality, Scandinavian design principles, home design services, assembly assistance, delivery options, iconic products like the BILLY bookcase and EKTORP sofa. |
| Revenue Streams | IKEA generates revenue primarily through the sale of its products. Customers purchase furniture and home goods directly from IKEA’s physical stores, online platform, or catalog orders. The company also earns income from its food services (e.g., restaurants and Swedish food market), which enhance the shopping experience. Additionally, IKEA may offer services like home planning consultations for a fee. | The main source of revenue for IKEA is the sale of furniture and home goods through various channels, including physical stores, the online platform, and catalog orders. Revenue is further augmented by income from food services, such as in-store restaurants and the Swedish food market. Services like home planning consultations may contribute additional fees. IKEA’s diversified income streams complement its core retail business. | Revenue from the sale of furniture and home goods through physical stores, online platform, and catalog orders, income from food services (restaurants and Swedish food market), fees from services like home planning consultations, diversified income streams complementing the core retail business. |
| Customer Segments | IKEA serves a broad customer base that includes individuals and households seeking affordable and functional furniture and home goods. The company also caters to businesses, interior designers, and contractors looking for bulk purchasing options. IKEA’s appeal extends to customers of all ages and backgrounds who appreciate good design at an affordable price. | Customer segments for IKEA encompass individual consumers and households in search of affordable and functional furniture and home goods. Additionally, businesses, interior designers, and contractors form a customer segment interested in bulk purchasing options. IKEA’s universal appeal targets customers of diverse demographics who value affordability and good design. | Individual consumers and households seeking affordable and functional furniture and home goods, businesses, interior designers, and contractors interested in bulk purchasing, universal appeal across diverse demographics valuing affordability and good design. |
| Distribution Channels | IKEA primarily operates through its extensive network of physical stores located globally. Customers can visit these stores to explore the product offerings, make purchases, and access various services. In recent years, IKEA has expanded its online presence, offering e-commerce options and home delivery services. The company also maintains a catalog for customers to browse its products. | Distribution channels for IKEA are centered around its vast network of physical stores, which serve as showrooms and retail outlets. Customers can visit these stores for in-person shopping, purchasing, and accessing services. IKEA has expanded its online presence, providing e-commerce capabilities and home delivery services. The catalog serves as a supplementary browsing option for customers. IKEA’s multi-channel approach enhances accessibility. | Extensive network of physical stores serving as showrooms and retail outlets, in-person shopping, purchasing, and service access at stores, online presence with e-commerce options and home delivery services, catalog for supplementary product browsing, multi-channel approach for enhanced accessibility. |
| Key Partnerships | IKEA collaborates with various partners to enhance its product offerings and services. These partnerships may involve suppliers and manufacturers for sourcing furniture and home goods, logistics and transportation companies for efficient supply chain management, and environmental organizations to promote sustainability initiatives. IKEA also partners with designers and artists for limited-edition collections to diversify its product range. | Collaborations with suppliers and manufacturers ensure a steady supply of furniture and home goods. Partnerships with logistics and transportation companies enhance efficient supply chain management. Alliances with environmental organizations support sustainability initiatives, aligning with IKEA’s commitment to sustainability. Collaborations with designers and artists for limited-edition collections add diversity to the product range, attracting design-conscious customers. IKEA’s partnerships contribute to its product quality, sustainability efforts, and design diversity. | Collaborations with suppliers and manufacturers for a steady supply of furniture and home goods, partnerships with logistics and transportation companies for efficient supply chain management, alliances with environmental organizations for sustainability initiatives, collaborations with designers and artists for limited-edition collections diversifying the product range, contributions to product quality, sustainability, and design diversity through partnerships. |
| Key Resources | IKEA’s key resources include its extensive network of physical stores, a wide range of product offerings, supply chain and logistics infrastructure, partnerships with suppliers and manufacturers, a global customer base, a strong brand identity, and a commitment to sustainability. These resources collectively enable IKEA to provide affordable and functional furniture and home goods while maintaining a sustainable and socially responsible image. | Key resources for IKEA encompass its vast network of physical stores, a diverse product catalog, a robust supply chain and logistics infrastructure, strategic partnerships with suppliers and manufacturers, a global customer base, a strong brand identity synonymous with affordability and functionality, and a commitment to sustainability and social responsibility. These resources empower IKEA to offer affordable, functional, and sustainable furniture and home goods. | Extensive network of physical stores, diverse product catalog, robust supply chain and logistics infrastructure, strategic partnerships with suppliers and manufacturers, global customer base, strong brand identity associated with affordability and functionality, commitment to sustainability and social responsibility, resources for providing affordable, functional, and sustainable furniture and home goods. |
| Cost Structure | IKEA incurs costs related to manufacturing and sourcing of products, including raw materials, labor, and transportation. Other expenses include operating costs of physical stores, employee salaries and benefits, marketing and advertising campaigns, design and innovation efforts, and sustainability initiatives. IKEA also invests in quality control and compliance with environmental standards. Costs can fluctuate based on production volumes and sustainability commitments. | Costs associated with IKEA’s operations include expenses for manufacturing and sourcing products, covering raw materials, labor, and transportation. Additional costs encompass operating physical stores, employee compensation, marketing and advertising initiatives, investments in design and innovation, sustainability efforts, quality control measures, and adherence to environmental standards. The scale of production and sustainability commitments can impact operational costs. IKEA manages its expenses while pursuing affordability, sustainability, and innovation. | Costs related to manufacturing and sourcing (raw materials, labor, transportation), operating physical stores, employee salaries and benefits, marketing and advertising campaigns, design and innovation investments, sustainability initiatives, quality control measures, compliance with environmental standards, cost management aligned with affordability, sustainability, and innovation goals. |
| Competitive Advantage | IKEA’s competitive advantage stems from its commitment to affordability, functionality, and Scandinavian design, making well-designed furniture and home goods accessible to a wide audience. The company’s extensive physical store network offers an immersive shopping experience. IKEA’s emphasis on sustainability and social responsibility resonates with environmentally conscious consumers. Limited-edition collections and collaborations with designers add uniqueness to its product range. | IKEA’s competitive advantage is based on its dedication to affordability, functionality, and Scandinavian design, democratizing well-designed furniture and home goods. The vast network of physical stores provides an immersive and interactive shopping experience. IKEA’s sustainability and social responsibility efforts align with the values of environmentally conscious consumers. Limited-edition collections and designer collaborations introduce novelty and exclusivity to the product lineup. IKEA’s unique positioning is driven by these factors. | Dedication to affordability, functionality, and Scandinavian design, democratization of well-designed furniture and home goods, extensive network of physical stores offering an immersive shopping experience, commitment to sustainability and social responsibility, alignment with environmentally conscious consumers’ values, introduction of novelty and exclusivity through limited-edition collections and designer collaborations, unique positioning in the furniture and home goods market. |
IKEA Group, the retailer vs. Inter IKEA Systems, the worldwide franchisor
IKEA’s organizational structure might sound a bit confusing at first, but I looked into it to see how its business model works so that you could gain clarity on that.
Put it shortly, IKEA as a brand comprises two separate owners. INGKA Holding B.V. owns the IKEA Group, the holding group.
At the same time, that is held by the Stichting INGKA Foundation, which owns the whole Group. IKEA Group is not the owner of the brand; managed by Inter IKEA Systems B.V., part of Inter IKEA B.V., which owns the IKEA Concept.
Thus, IKEA Group is a franchisee that pays 3% of royalties to Inter IKEA Systems.
More in detail.
The IKEA organization is peculiar.
While many believe that IKEA as a concept and IKEA as a store are owned, operated, and run by the same people.
In reality, the organization of this company is way more complicated.
At this stage, it is critical to make a distinction between two entities: the IKEA Group, run by INGKA Holding B.V., and the IKEA worldwide franchisor, run by Inter IKEA Systems B.V.
While the IKEA Group takes care of the centers, retail, customer fulfillment, and all the other services related to IKEA products.
Inter IKEA Systems B.V., the owner of the IKEA Concept and the worldwide franchisor of IKEA stores, takes care of the processes, distribution of products, training of its staff, and other related activities in line with the franchising agreements.
Inter IKEA and IKEA Group have separate owners and logic of business:
- IKEA Group, which runs IKEA stores, is the franchisee and is owned by a holding called INGKA Holding B.V., which in turn is owned by the foundation Stichting INGKA.
- Inter IKEA Systems, owner of the IKEA Concept, which is the worldwide franchisor and owned by Inter IKEA Holding B.V.
Let’s dive more into IKEA’s unusual ownership structure.
IKEA Group Holding’s ownership structure
The INGKA Holding B.V. is the holding of the group. At the same time, this is owned by the Stichting INGKA Foundation, which is the owner of the IKEA Group.
As a foundation, the profits generated from IKEA activities can be used in two ways: either reinvested in the IKEA Group or they can be donated for charitable purposes through the foundation.
The foundation is based in the Netherlands. The image below explains quite well how the IKEA Group is organized:
Inter IKEA Holding ownership structure
According to the Inter IKEA website, “Inter IKEA Holding B.V. (located in the Netherlands), is the owner of IKEA range and supply (IKEA of Sweden AB and IKEA Supply AG), production (IKEA Industry AB) and franchising (Inter IKEA Systems B.V.) businesses. This structure simplifies and improves the IKEA franchise system, creating better conditions for increased customer focus and future expansion.“
Thus, Inter IKEA Holding B.V. comprises:
- IKEA range and supply (IKEA of Sweden AB and IKEA Supply AG), takes care of 9,500 products in the IKEA range, 24 purchasing offices, and 1,000 home furnishing suppliers in 51 countries as of 2017.
- production (IKEA Industry AB) counts 40 factories operated by IKEA Industry as of 2017
- franchising (Inter IKEA Systems B.V.) counts 11 separate franchise agreements via Inter IKEA Systems B.V.
As remarked on IKEA’s franchisor website:
Around the globe, a large number of companies operate under the IKEA trademarks. All IKEA franchisees are independent of Inter IKEA Group. A large group of franchisees are owned and operated by INGKA Group. Inter IKEA Group and INGKA Group have the same founder, and a common history and heritage, but have operated under different owners and management since the 1980s.
The ownership changes came into effect on 31 August 2016.
Once again, I want to remark that The Inter IKEA Group structure is now composed of three core businesses:
-
- Franchising,
- Range and supply and
- Industry.
While IKEA Group is owned by INGKA Holding B.V., which is owned by the Stichting INGKA Foundation.
Inter IKEA Group is owned by Interogo Foundation, based in Liechtenstein, and established in 1989.
Its main purpose is “to own and govern Inter IKEA Group and to invest in Inter IKEA and thereby in the further expansion of the IKEA Concept, in order to secure the independence and the longevity of the Group and the IKEA Concept.”
What is the IKEA Group business model?
The IKEA Group business model is a franchisee that pays a 3% fee to Inter IKEA Systems B.V., which acts as a franchisor.
As of 2022, the company recorded over €27 billion in revenues.
The revenue increased slightly to $25.23 billion in 2019.
In 2020, the revenue dropped to $24 billion.
The revenue recovered in 2021, reaching $25.53 billion.
The highest revenue was recorded in 2022, at $27.34 billion.
And over €700 million in profits.
Profits experienced significant growth in 2020, rising by 16.9% to reach 1.73.
In 2021, profits dropped by 17.3% to 1.43.
The most substantial decline occurred in 2022, with profits falling by 50.3% to 0.710.
At the geographical level, Europe, with Germany, brings in 15% of the revenues, while US has 14%.
The revenue growth since 2008 has been quite fast. The IKEA Group went from €21.5 billion in 2008 to €36.3 billion in 2017, an almost 70% increase.
What is the Inter IKEA Systems business model?
Inter IKEA Systems B.V. follows a franchising business model.
The stores are operated via franchising agreements that will pay a 3% franchise fee.
On the other hand, the franchisees (the stores paying the fee to Inter IKEA Systems) have in exchange, the right to operate the stores under the IKEA concept and IKEA brand.
Thus, they gain access to systems, methods, and procedures that go from staff training, manuals, store layouts, display concepts, and so on.
Three main operating segments give the source of revenues for this group:
Total revenues in 2017 amounted to €23 billion.
As reported on Inter IKEA website “The acquisition (of IKEA of Sweden AB, IKEA Supply AG, and IKEA Industry AB—and their related businesses, which was completed on 31 August 2016) has had a substantial positive impact on the result.”
From the Inter IKEA Group Financial Summary for 2017, it is interesting to look at the simplified overview of its franchise system:
The whole franchise system consists of:
- IKEA assignments, in which the sales and supply, productions, and communications.
- IKEA franchise agreements with INGKA (owner of the IKEA Group) and other 10 franchisees.
The IKEA Franchise System in A Nutshell
As specified on Inter IKEA official site:
As the IKEA business was expanding in the early 1980s, IKEA founder, Ingvar Kamprad, realised that he needed to protect the IKEA Concept. After a long search, Ingvar decided that a franchise system would be the best choice for IKEA. It would allow for international expansion while protecting the underlying concept and stimulating an entrepreneurial spirit. Inter IKEA Systems B.V. is the IKEA franchisor who continuously develops the IKEA Concept and ensures its implementation in all markets. IKEA franchisees run the day-to-day retail business and pay a franchise fee. Together, the companies in the franchise system develop and improve how people discover and interact with IKEA and IKEA products. Inter IKEA Systems B.V. has assigned other IKEA companies to develop the range, supply and communication. IKEA of Sweden AB develops the IKEA home furnishing product range, IKEA Food Services AB develops the IKEA Food & Beverages product range, IKEA Supply AG manages purchasing and distribution and IKEA Communications AB produces IKEA communication. The diagram below shows a simplified overview of the IKEA franchise system. Inter IKEA Systems B.V., IKEA of Sweden AB, IKEA Food Services AB, IKEA Supply AG and IKEA Communications AB are companies within the Inter IKEA Group. Inter IKEA Group also includes other companies like IKEA Industry AB. The IKEA franchise system is people-oriented and encourages everyone to contribute. It forms an interdependent framework and lays a solid foundation for the IKEA Brand while enabling a scalable and dynamic value chain. Last, but not least, it answers Ingvar Kamprad’s three desired intentions: allowing and encouraging IKEA to remain entrepreneurial; enabling international growth; and keeping the IKEA Concept strong and consistent.
Key Highlights
- Separate Owners: The IKEA brand comprises two separate owners. The IKEA Group, responsible for retail, customer fulfillment, and other services related to IKEA products, is owned by INGKA Holding B.V. This holding company is in turn owned by the Stichting INGKA Foundation, which owns the whole IKEA Group. On the other hand, Inter IKEA Systems B.V., part of Inter IKEA B.V., owns the IKEA Concept and acts as the worldwide franchisor for IKEA stores.
- Franchise Model: The IKEA Group is a franchisee and pays a 3% fee to Inter IKEA Systems B.V., the franchisor. The franchisees gain the right to operate IKEA stores under the IKEA concept and brand, along with access to systems, methods, and procedures.
- Complex Structure: IKEA’s organizational structure might sound complex, but it involves clear distinctions between the IKEA Group and the worldwide franchisor, Inter IKEA Systems B.V. The two entities have separate owners and manage different aspects of the business.
- INGKA Foundation: As a foundation, the profits generated from IKEA activities can be reinvested in the IKEA Group or donated for charitable purposes through the Stichting INGKA Foundation.
- Inter IKEA Group: The Inter IKEA Group is owned by Interogo Foundation, based in Liechtenstein, established to own and govern Inter IKEA Group and invest in its expansion to secure its independence and longevity.
- Revenue and Profit Growth: As of 2022, the IKEA Group recorded over €27 billion in revenues and over €700 million in profits. Over the years, revenue has shown significant growth, increasing from €21.5 billion in 2008 to €27.34 billion in 2022.
- Geographical Revenues: Europe, with Germany, brings in 15% of IKEA’s revenues, while the US accounts for 14% of revenues.
- Inter IKEA’s Role: Inter IKEA Systems B.V. develops and ensures the implementation of the IKEA Concept in all markets, while IKEA franchisees handle the day-to-day retail business and pay franchise fees.
- Protection of IKEA Concept: In the early 1980s, IKEA founder Ingvar Kamprad decided on a franchise system to protect the IKEA Concept, allowing for international expansion while maintaining the underlying concept and encouraging entrepreneurial spirit.
- People-Oriented Franchise System: The IKEA franchise system encourages everyone to contribute, forming an interdependent framework and a scalable, dynamic value chain, while keeping the IKEA Concept strong and consistent.
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