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You know they don't tell you, "Don't lay on the bed."
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You're supposed to lay on the bed.
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[Narrator] If you've ever visited an Ikea,
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you've likely encountered
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their store's endlessly winding floor plan.
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This layout can be confusing, but that is by design.
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Ikea may be the biggest furniture retailer on the planet
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but it's certainly not conventional.
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The Swedish furniture giant asks its customers
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to build their own products
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and it stores and distributes those products
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in minimalist flat packed boxes.
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So, how have these retail strategies,
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as well as their famous Swedish meatballs
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contributed to the company's runaway success?
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This is the economics of Ikea,
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a look at the innovative business practices
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that have transformed modern life.
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[Sarah] When you step into an Ikea,
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you immediately sort of are put into this maze like
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path of different rooms.
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[Narrator] Ikea's store layout is a fixed path design
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which means there's a designated road
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that all customers must follow
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that guides you through the store in one direction.
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[Sarah] It's not a grab a carton of milk
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and get out kind of store, it's the opposite of that.
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It's very much set up to spend a day,
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think about rooms you know, dream about what you really want
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your bedroom to look like.
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[Narrator] The floor plan of most Ikea stores
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resembles a maze that curves about every 50 feet
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to keep customers curious about what comes next.
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Since an average Ikea store is around 300,000 square feet
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or five American football fields,
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that means a lot of walking.
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An Ikea is to some frustratingly winding
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but really it's laid out as an experience
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to get you to buy more.
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[Narrator] Ikea is famous
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for putting its customers to work.
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Unlike most furniture retailers
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that sell products preassembled, many of Ikea's pieces
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have to be built by their customers.
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But why?
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As many couples and their therapists will know
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building your own Ikea cabinet can be challenging.
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The big idea behind the Ikea effect is
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consumers are more attached to have more positive feelings
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towards objects or things that we've put effort into.
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And that we actually think
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that they're more valuable because of that.
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[Narrator] The term Ikea effect was first coined in 2011
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by researchers who noticed a similar phenomena
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in other products and businesses.
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When instant cake mixes were first introduced in the 1950s
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they didn't sell well.
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And then they said, "Let's add a fresh egg."
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It was this idea that we wanna feel
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like we're just participating enough to not feel guilty
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about taking a shortcut.
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[Man] When you make a cake from a mix which do you want?
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A fresh egg cake or a cake made with dried eggs?
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A higher, lighter, tastier cake, why fresh eggs of course.
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The idea that we should love building products
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isn't necessarily what Ikea intended.
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[Narrator] If you've ever shopped at one of Ikea's
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massive warehouse stores
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you're likely aware of the unconventional product names
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but what you may not realize is that in creating these items
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Ikea sometimes comes up with the price tag first.
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So we have a classic example that they could talk
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about all the time is the $1 light bulb.
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But they had this idea that a $1 LED light bulb,
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you know this new type of light bulb
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would be hard to achieve, but if they could achieve it,
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lots of people would buy LED light bulbs.
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So they just sort of designed backward
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with the price point in mind.
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[Narrator] That obsession with low prices
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is a large part of why Ikea is the world's
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largest furniture retailer.
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Today, Ikea has 445 stores operating in 52 countries.
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You know obviously if you go into a student dorm room,
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you're gonna find a lot of Ikea,
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but you'll also find some Ikea products
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in a wealthy person's home.
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And that's really what they're going for.
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[Narrator] Today, Ikea is the very definition
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of mass market appeal, but when the company first began
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as a Swedish mail order business in 1943,
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well-designed furniture tended to be expensive.
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And as a result out of reach for most,
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or seen as a serious long-term investment.
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Ingvar Kamprad, who founded the company as a teenager,
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pushed forward the idea that furniture could be flat packed
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to massively reduce the cost of shipping and transportation.
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So flat packing is really the largest arguably
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Ikea invention that really led to the company's growth.
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And the idea is that instead of buying, you know,
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a piece of furniture I'll put together, it's deconstructed
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into a flat pack, where you can fit more in a truck.
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You can fit more in the Ikea warehouse
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and you can also get it in your car.
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And the trade-off is you know
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you put it together at the end.
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[Narrator] Flat packing is a practical aspect
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of the philosophy that has long guided Ikea's success
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called democratic design.
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It's this idea that everything is imbalanced
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both price, form, function, the aesthetic,
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the sustainability.
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[Narrator] This vision
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to create a better everyday life for the many people
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was sent forth more than 30 years ago by Kamprad
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in a manifesto now presented to every Ikea employee.
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And they talk about it almost religiously,
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and fundamentally it's this idea
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that when designing a product they think about
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it can't just be really cool looking,
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it can't just be functional,
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it has to be all of those things.
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[Narrator] So despite the long shopping trips
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and the DIY, customers can't seem to get enough of Ikea.
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Perhaps it's as simple as labor leaves to love.