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Serendipity – Walmart & IKEA

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“When Sam Walton opened stores in rural areas, far from big cities, was he thinking it might be a strategic, disruptive innovation?

“Man, I was all set to become a big-city department store owner,” he wrote about opening his first store. He was looking at St. Louis. “That’s when Helen spoke up and laid down the law.”

His wife announced, “I’ll go with you any place you want so long as you don’t ask me to live in a big city. Ten thousand people is enough for me.” He ended up in Bentonville, Arkansas, population: 3,000, in part because “I wanted to get closer to good quail hunting, and with Oklahoma, Kansas, Arkansas, and Missouri all coming together right there it gave me easy access to four quail seasons in four states.”

The result was the leaf in the tornado.

“It turned out that the first big lesson we learned,” wrote Walton, years later, “was that there was much, much more business out there in small-town America than anybody, including me, had ever dreamed of.”

IKEA

“While we’re on retail, let’s talk about furniture.

In 1948, a 22-year-old Swede named Ingvar Kamprad, with a small mail-order business selling Christmas cards, pens, picture frames, and the like, added furniture to his list. He advertised items from local designers. His business grew enough to threaten larger Swedish furniture-store owners. They had him banned from exhibiting at the usual trade fairs (a carpet-dealer friend once smuggled him into a fair in the back of a Volvo by throwing a carpet over him).

In response, Kamprad filled a large, empty warehouse in the Swedish countryside with samples of his furniture for customers to see before they ordered off his list. That was the first IKEA showroom. An employee trying to stuff a table into his Volvo realized he could save space by removing the legs and storing them under the table. Because shipping costs were rising, they decided to try the same trick in shipping to customers. Customers went for it, and self-assembly was born. Orders grew.

Furniture-store owners retaliated by forbidding designers to work with Kamprad. He was forced to hire his own designers.

“That led to original IKEA brands and style—furniture you own but can’t pronounce: Poäng, Alvangen, Grundvattnet.

Once Kamprad began building his own furniture, the store owners banned their wood suppliers and other manufacturers from working with him. So Kamprad went to Poland and discovered high-quality suppliers—for half the price. He passed the discounts on to customers. Business, of course, grew. Years later Kamprad wrote, “Who knows whether we would have been as successful as we were if they [the Swedish furniture manufacturers] had offered us an honest fight?”

In 1965, IKEA opened its first store in Stockholm. There were so many customers that the store manager let customers go directly to the warehouse at the back of the store and take their own items. Which gave birth to self-service warehouses. All future stores were designed to allow customers to shop the warehouse.

In 2017, IKEA annual sales exceeded $44 billion. Visits to the 403 stores in 49 countries reached nearly one billion.

None of the defining elements of what became the planet’s largest furniture store began with the idea of “disrupting” an industry. They were all small, crazy ideas explored by Kamprad and his team, in a desperate bid to survive.

Excerpt From Loonshots

Written by amitdipsite

July 8, 2019 at 4:53 am

Posted in Uncategorized

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