“Only those who are asleep make no mistakes”
— Ingvar Kamprad
As the afternoon sun sets in Epalinges, Switzerland, an elderly man of 85 parks his two-decade old Volvo in front of an unpretentious bungalow. Many would not believe that a multi-billionaire leads such an ordinary lifestyle. Yet, Ingvar Kamprad, founder of IKEA, one of the most renowned companies in the world and center-stage for its economically priced furniture, is known for both his humbleness and his frugality. The Swedish-born, self-made man of German descent opts to grocery shop in the afternoon when prices are lower, encourages IKEA employees to use both sides of paper when writing, and flies economy class.
An extremely private man, Kamprad is also an innovator, an egalitarian and a devote promoter of “Going-Green” actions. He is known to value treating all people respectfully and even calls his employees “co-workers.” Kamprad seems to have been born with an innate entrepreneurial keenness, not only developing his business model prior to any other furniture seller, but also never borrowing money or issuing a single share of stock. In fact, some say the reason for IKEA’s success stems from Kamprad’s unfaltering commitment to his Swedish roots that constantly remind him of where he comes from and what he stands for. Still others may assert that his shrewd wealth management strategies may be the genius behind his fortunes.
His extraordinary success story begins with a career that started at the young age of five. Growing up during the Great Depression on Elmtaryd Farm outside the village of Agunnaryd in Sweden’s southern province, the barely school-aged Kamprad demonstrated skills of an apt entrepreneur by selling matchsticks to neighbors. Kamprad soon discovered that if he bought large quantities of matchboxes from Stockholm, he could then re-sell matches individually while still making a profit. By the time he was ten, the young Kamprad was travelling to nearby villages on his bicycle, expanding his business. With a larger selling area, Kamprad added to his basket of offerings. Thus, the man who would one day own the largest home-furniture retail company in the world began his career selling small, everyday, mundane household objects. Matchsticks, flower seeds, Christmas decorations—these were the beginning commodities of a young boy that would become a world-renowned tycoon.
In 1943 when Kamprad was 17, his father gave him a small amount of money for his successful school achievements. With this money was born IKEA—an acronym for Kamprad’s initials followed by the farm and village in which he was raised. This first IKEA sold primarily pens, wallets, jewelry, and nylon stockings among other objects. IKEA began producing furniture in 1948 but did not open its first retail-furniture store until 1958 in Älmhult, Sweden.
Today of course, IKEA is an international household name known for its trendy, Scandinavian furniture designs that are sold at affordable prices. IKEA’s continued global expansion has financially benefited the company. In the fiscal year 2010, 12 new stores opened and sales increased by 7.7 % to 23 billion Euro compared to the previous year. Keeping prices low has also been a secret to IKEA’s success, with the company actually lowering its prices over the past 10 years on average 2-3%. Not only was IKEA able to decrease its long-term debt by 213 million euro in FY2010, but also the company’s total assets increased from 37.1 to 41.3 billion euro.
It’s the only way in which I can understand the needs of my customers.
— Kamprad on his thrifty lifestyle.
According to the Forbes’ March 2011 list of world billionaires Kamprad ranks at 162 with a net worth of $6 billion. However, the exact wealth of IKEA’s founder is debatable. In 2010, Forbes ranked the Kamprad family in 11th place,but with a fortune of $23 billion. In 2004, Sweden’s business magazine Veckan Affärer claimed the Swede to be the wealthiest man alive, based on the net worth of IKEA, estimating his fortune to be somewhere between $50-90 billion. However, both Kamprad and IKEA deny such allegations.
The reason for such varied conjectures on Kamprad’s wealth began after IKEA’s success skyrocketed in the ‘60s and ‘70s. Ingvar felt that excessive Swedish inheritance rates and wealth taxes could jeopardize not only the company, but also his family. With this, Kamprad moved both company and family to Denmark in 1973 and began planning perhaps what some believe is the secret of IKEA’s wealth management. Kamprad started a foundation in Switzerland where he then founded a plethora of companies in different countries with varying tax regulations. Among these companies are two untaxed foundations, the Stichting INGKA Foundation and Interogo Foundation, which play vital roles in the control and ownership of IKEA.
In 1982, Kamprad founded Stichting INGKA as a charitable Dutch foundation intended to revolutionize architecture and interior design. Kamprad donated 100% of the equity in his company to the foundation, which not only relinquished his ownership of IKEA but also created the world’s biggest charity, surpassing even the Bill and Melinda Gates Foundation. Still, Kamprad asserts that he retains the title of Senior Advisor for the company. Since Stichting INGKA is considered a Dutch charity, it is not required to pay taxes even for the revenue gained from the IKEA business. The Economist has noted that this may be a tax avoidance scheme on Kamprad’s part.
Amidst the controversy of Kamprad’s wealth and ownership of IKEA, in 1994 a Swedish newspaper released information that in the 1940s Kamprad had been a part of a pro-Nazi, Neo-Swede movement led by Per Engdahl, a Swedish fascist, called Nordic Youth. Kamprad has been quoted saying his involvement with the Nordic Youth was “the greatest mistake of his life.” He has also admitted that he suffers from alcoholism, which reached its peak during the ‘60s and ‘70s. Kamprad says now he “dries out” three times a year to help him battle the addiction.
While Kamprad may be secretive and parsimonious, there is still no doubt that he is a man in favor of the masses. He is often seen walking through an IKEA store with a contemplative look as he attempts to place himself in the shoes of a customer. If he’s not prowling through the vast floors, then he is talking with a “co-worker” hoping for input on how to better the company. For over 60 years, blue and yellow IKEA buildings have symbolized not only the Swedish flag and affordable home retail, but also a man from a Scandinavian country who came from nothing to build a global empire.
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© Thomas White International, Ltd. 2018