IKEA Opens Up

Oct 05, 2010
George Anderson

By George Anderson

By its own admission, "2009 was a tough year" for
IKEA. The interesting aspect of that admission is that it comes in the furniture
retailer’s first ever financial report.

The privately-held company decided to
publish the document as part of a process to become more transparent to stakeholders
including its employees, customers and vendors. IKEA is not only looking to
provide financial results but to share how it is using revenues and profits
both to run the company and fund its more altruistic ventures, as well.

Lucht, senior consultant at Verdict Research, told The Wall Street
that it was "a good move" for IKEA to be more open."They
have a fantastic reputation for the charity work they do that goes hand-in-hand
with their leading position," he said.

According to the report, IKEA grew
revenues by 3.1 percent in 2009. The increase was a result of opening 15 new
stores during the year. Same-store numbers for the company were actually down
1.1 percent. Profits for the company were up 11 percent in 2009 compared to
the previous year.

Discussion Question: What advantages and/or disadvantages are there to
IKEA’s financial transparency?

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9 Comments on "IKEA Opens Up"

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Ryan Mathews
10 years 7 months ago

The danger of an open policy is that critics will attack. Still wondering how an upside evens that out.

Gene Hoffman
Gene Hoffman
10 years 7 months ago

Openness and integrity are virtues. Now IKEA’s good works can become known to the world and its various stakeholders can deal with IKEA with greater knowledge and respect.

Geoffrey Igharo
Geoffrey Igharo
10 years 7 months ago

There will always be critics and that isn’t a bad thing–it’s good. You actually want to have open and constructive conversations with legitimate 3rd party critics, based on objective data.

But in any case, this move by IKEA means there will be less likelihood of a “news scoop” created by secrecy and an information vacuum. This de-fangs the casual noise makers while allowing for constructive conversation.

Imagine if Apple had been operating under a constant full disclosure policy, rather than hiding the fact that their subcontractors were facing worker dissatisfaction and uprising. Instead of the news amplification by every two-bit headline-chasing blogger who didn’t really care but had nothing better to do, there would have been an altogether different conversation–a conversation conducted on a different level, with people who were genuinely concerned and more likely to have constructive and useful input.

James Tenser
10 years 7 months ago

IKEA has produced an attractive company brochure and disclosed performance data beyond what is required. Not coincidentally, it is able to report modest progress in an economy that may be especially challenging to companies competing in its category.

I tend to favor transparency as a general principle, and I believe it fosters trust. I don’t believe this document will be very compelling to IKEA’s shoppers, but I think it may reassure its suppliers and business partners that it is on a sound footing.

There’s also a chance that this is a way to test investor interest. Could a monetizing event be on the horizon?

Jonathan Marek
10 years 7 months ago

The advantage is that, despite it being a “tough year” as everyone would have expected in their sector, IKEA still has a strong story to tell (growth, comps really not that bad, community participation, etc.). The disadvantage is that this sets a precedent for voluntary reporting that IKEA may or may not want to follow if the story gets harder to tell.

Anne Howe
10 years 7 months ago

When a company voluntarily discloses financial information, I can’t help but believe that it wants more than just suppliers and the finance community to hear about it. In this age of transparency, shoppers hear everything. The trickle down effect of the information IKEA released, in particular the funding of its good works endeavors, will have a subtle, yet powerful impact on what the brand stands for over time. Connecting to the cultural desire for “doing right by doing good” is a solid brand pillar that IKEA can and should be trading on to secure its future brand perception develops as it should.

Craig Sundstrom
10 years 7 months ago

Not to be cynical…much, but I wonder exactly how “transparent” IKEA is really being: can we really expect any privately held company–or any company for that matter–to put out more info than they have to unless they can (try to) spin it to their benefit?

angiretlwire dixon
angiretlwire dixon
10 years 7 months ago

Letting the world know about IKEA’s 11% increase in profits and charitable giving, seems more like a good P.R. move.

I think some ways for IKEA to improve comp sales for next year is to….

1. Show more fully coordinated rooms in their catalogs, instead of primarily featuring individual pieces at a new low retail.

The key to growth in furniture and apparel is multiple item sales.

2. Some customers are focused mostly on price, others are focused on quality. Offer a wider selection of better quality merchandise, (think wood veneers instead of fake wood laminates) to satisfy both types of customers.

Ed Rosenbaum
10 years 7 months ago

IKEA still has a pristine reputation with those who frequent their stores. Opening the books should not hurt them except for those members of the press who think that is their job. I commend them for their charitable focus.


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