Ingvar Kamprad was a particularly energetic 17 year old when he registered IKEA. The company was named after himself, the farm he lived on and the parish he came from: Ingvar Kamprad Elmtaryd Agunnaryd. In fact Elmtaryd farm was where a lot of the operation took place. When Ingvar moved to Gothenburg to start business high school, his parents Berta and Feodor had to step in.
The birth of IKEA
Filling a gap.
The trading company IKEA was registered on the 28th of July, 1943. But it was a far cry from the furniture company we know today. In his early years as an entrepreneur, Ingvar Kamprad imported pens, watches and nylon stockings, learning the ropes of purchasing step by step. But after some problems with import licences he started looking for new opportunities, and decided to focus on furniture. A business model gradually took shape when he realised that there was a major, interesting opportunity between the customer and manufacturer.
If you wanted to be a successful businessman, you had to figure out the simplest, most cost-effective means of distribution from the factory to the customer.
Ingvar himself claimed not to be that good a student at high school, but when he attended the lectures on, he was struck by something that came to be crucial. He noted that the main efforts in commercial operations focused on efficient production, but very little effort, if any at all, focused on distribution. It was as if the streamlining at the factory suddenly vanished once a product had been produced. The process was slow and inefficient, and the distribution was outdated. Why was this? Ingvar himself has said that it was during these lessons at business high school in Gothenburg that he decided his future lay in distribution. If you wanted to be a successful businessman, you had to figure out the simplest, most cost-effective means of distribution from the factory to the customer. Between lessons, Ingvar could be found in the school library, where he would read export and import ads in the trade papers. Surely he too could import goods from abroad? So he wrote some letters in broken English to different manufacturers, and started importing.
The next five years, starting in summer 1943, were very busy for Ingvar. After high school in Gothenburg he worked for a short spell as an office clerk, and then did his military service in Växjö, southern Sweden. Meanwhile, his business started growing. In order to carry on running a business during military service, he talked his way into evening leave, which meant he could work from a rented office in town. This is where he spent his evenings, nights and weekends. Working day and night continued when he later did his officer training at Karlberg in Stockholm.
But what is it he’s selling? As a young boy he sold matches and fish he had caught in Lake Möckeln. Later it was Christmas cards, seeds, pens, wallets, nylon stockings and costume jewellery. He even tried importing shoes and lighters from Switzerland. By now he has concluded that the most cost-effective distribution is to be found in pens – directly from the factory to the customer. His customers are newsagents, watchmakers, pen shops, book stores and rural stores. He communicates with his customers in small brochures, sales letters and price lists, often written in an open, honest tone. He also pays personal visits, finding it easy to make contacts with his cheery, open manner. Customer care was something Ingvar had learnt early on, back when he would keep a customer register on his typewriter on the farm. Country folk are still his customers. People whose everyday lives he is familiar with. People who have grown up with little money, where every penny counts.
Pens and watches seem to be his most successful products during the 1940s. Even so, he is relatively naive and does some bad deals. On one occasion he meets a businessman in Gothenburg who is selling a basic, yet good quality, ballpoint pen for just 2.50 kronor (EUR 0.25) – an excellent purchase price! Ingvar in turn intends to sell them to his customers for 3.95 kronor (EUR 0.39) – also a brilliant price when similar pens cost as much as 15 kronor (EUR 1.50). But on delivery it turns out that the purchase price has gone up to 4 kronor (EUR 0.40), which means a loss of 5 öre (EUR 0.005) on each one he sells. Getting it wrong and learning from your mistakes is a crucial part of the IKEA corporate culture today. But at the time, Ingvar was in tears on the way home from Gothenburg with several hundred pens he would have to sell at a loss. The deal had been done at the lower price – but it turned out that the handshake had meant nothing. Even so, overall Ingvar’s pen business was a great success. So great, indeed, that it laid the foundation for his future business dealings. For example, he became the general agent for French company Etablissement Christian and their Evergood pens, and he also started selling to specialist retailers.
But as we know, nothing in life is free. Reading Ingvar Kamprad’s business correspondence from the 1940s reveals how much effort was needed to ensure the right quality of the pens he purchased. He also felt that the bureaucracy around import licences was problematic, if not impossible. Looking for a solution of his own, Ingvar started working together with a supplier to produce his own pen. After selling just 300, however, he could barely call that a success.
At the end of the 1940s, Ingvar discovered that his main rival – Gunnar’s Factories in Alvesta – had started selling furniture, successfully. By this point, Ingvar realised that his future did not lie in selling pens. But perhaps furniture could be worth focusing on…? For those who have never been to Småland and seen Lake Möckeln surrounded by thick forest, it was a place with many small furniture factories. In fact most of Småland was full of skilled carpenters making furniture. So the move from imported pens from Paris to wooden furniture from Småland was not really such a big leap. The opportunity was right there – right in front of Ingvar’s eyes, in the forests of his childhood.