The Ikea Effect: How IKEA’s Business Genius Strategy Destroys their Competition.


It’s no secret that IKEA is the world’s biggest furniture store. What is a secret is how IKEA does it and why they’re able to make more money than any other furniture store in the world. It’s all about the experience IKEA provides and the psychology behind it. This blog will discuss the psychology behind how IKEA achieves such a loyal following and how you can apply IKEA’s strategy to your business.

The story of IKEA.

IKEA is a Swedish-founded retail company that sells ready-to-assemble furniture, kitchen appliances, and home accessories. IKEA was founded in 1943 by Ingvar Kamprad at the age of 17. The company’s name comes from the initials of its founder’s name (I.K.) and the first letters of the words “Ingvar Kamprad Elmtaryd Agunnaryd” (the farm where he grew up). 

IKEA began as a mail-order catalog business selling pens, wallets, picture frames, and other small items. In 1948, IKEA opened its first physical store in Almhult, Sweden. IKEA has since expanded to over 400 stores in more than 50 countries. 

IKEA is known for its simple and functional design, as well as its low prices. IKEA’s signature product is the Billy bookcase, which has been in production since 1978. IKEA also offers an online store and an app that allows customers to shop from home. IKEA’s mission is to “create a better everyday life for the many people.” IKEA has been ranked as one of the world’s most valuable brands.

How IKEA successfully used the IKEA effect to disrupt the furniture industry.

The IKEA effect is a business strategy used by the Swedish furniture retailer IKEA. The strategy consists of the company offering low prices on furniture, employing a no-frills design philosophy, and relying on its customers to bring the products back to be refurbished or replaced. IKEA has been successful in using this strategy to disrupt the furniture industry and become one of the world’s largest retailers.

IKEA first introduced the IKEA effect in the early 1990s when it began selling cheaply made, flat-pack furniture in its stores. At the time, traditional furniture retailers were charging high prices for cabinet-made high-quality products that required skilled workers to assemble. IKEA undercut these prices by producing most of its furniture in factories in China and then selling it directly to consumers through its stores. This approach forced traditional furniture retailers to change their strategies or face extinction.

Since then, IKEA has continued to use the IKEA effect to expand its market share. In 2007, the company opened its first store outside of Sweden, in Mexico City. This expansion allowed IKEA to reach a more diverse customer base and challenge more established furniture brands in Latin America.

How IKEA capitalizes on this by understanding their consumers’ psychology.

IKEA is a global furniture retailer that has recently enjoyed significant success. One reason for this is that IKEA has a keen understanding of consumer psychology. IKEA has long been renowned for its affordable and stylish furniture, but the company is also known for its clever marketing tactics. IKEA understands that its customers are looking for more than just low prices; they also want convenience and a hassle-free shopping experience. To meet these needs, IKEA has created a unique shopping experience that is designed to save shoppers time and money. 
The company’s showrooms are full of furniture displayed in mockup rooms, making it easy for shoppers to envision how the pieces would look in their homes. IKEA also offers a wide range of services, including delivery and assembly, that make it easy for customers to get their new purchases home and set up. 
By understanding the needs of its customers, IKEA has been able to create a successful business model that is based on convenience, value, and style.

What makes IKEA innovative?

What makes IKEA so successful? Some say it is their genius strategy, while others believe it is their low prices. In any case, IKEA’s success is undeniable. Here are four reasons why:

1. They focus on the essentials. IKEA doesn’t offer a lot of frills, which saves customers money. While other furniture stores offer more options and features, IKEA’s focus on the essentials keeps customers coming back.

2. They allow customers to customize their furniture. Unlike other furniture stores, IKEA allows customers to customize their furniture to their tastes. This allows for a great variety of options for each customer, which keeps them interested in shopping at IKEA.

3. They keep prices low. One of the main reasons why people love shopping at IKEA is because their prices are always reasonable. Not only do they offer great deals on furniture, but they also have discount days where prices are even lower!

4. They offer a great variety of products. Not only does IKEA offer a wide range of furniture products, but they also have a wide range of products for every need and taste! Whether you’re looking for cheap

What Happened to the Competitors?

The Ikea Effect is a term coined by Forbes in 2006 to describe how the furniture retailer IKEA has been able to dominate the global market for affordable, durable furniture. IKEA’s strategy is based on two key tenets: simplicity and low prices.

IKEA’s success can be attributed to its ability to create an ecosystem of suppliers that helps it keep prices low while still delivering high-quality products. The company does not own any factories and instead outsources all production. This strategy has allowed IKEA to avoid high costs associated with manufacturing, such as labour and overhead. In fact, according to a study published in 2016 by the Boston Consulting Group, IKEA was one of only a few firms in the world with negative gross margins (meaning it lost money on every product it sold).

This success has had a ripple effect on the industry, as other retailers have been forced to change their strategies to compete. For example, Target attempted to imitate IKEA’s price point but was met with limited success due to its higher cost base. Meanwhile, Walmart has developed its line of inexpensive furniture that it sells through its online store and stores across the country.

How does Ikea use the effect to its advantage?

The Ikea effect is a term used to describe a company’s innovative strategy destroying its competition. Companies using this strategy often enjoy increased market share, lower prices, and increased customer loyalty. Ikea is one of the most well-known companies to use the effect, and its strategies are often credited with helping them become one of the world’s leading furniture retailers.

Ikea began by focusing on price. While other furniture stores charged high prices for low-quality products, Ikea offered quality products at low prices. This allowed them to attract a large customer base who wanted quality products at affordable prices.

Next, Ikea focused on design. While other furniture stores were content to offer traditional designs, Ikea offered a wide variety of modern and practical designs. This allowed them to reach a wider audience and appeal to a wider range of customers.

Finally, Ikea focused on quality control. While other furniture stores were content to sell products damaged in transit, Ikea insisted on selling only products that had been thoroughly inspected and tested before being released to the market. This ensured that customers received high-quality products that would last long.

Combined, these strategies have helped Ikea become one of the largest furniture retailers in the world. While its competitors have sought to copy Ikea’s strategies, most have failed to match its level of success.


Overall IKEA is a company that has been able to dominate the home furnishings industry for more than 45 years. They have done this by creating an affordable, easy-to-use product that appeals to a wide range of consumers. However, their success has come at the expense of their competition. In this article, I will discuss how IKEA’s strategy of vertically integrated manufacturing allows them to achieve this success and why it is slowly destroying the competitive landscape.