How Ingvar Kamprad Made His IKEA Billions

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How Ingvar Kamprad Made His IKEA Billions

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This man is worth billions This is IKEA tycoon Ingvar Kamprad, age 88. The IKEA empire is worth $53 billion. The Kamprad family owns the whole thing. For tax purposes, the Kamprad family’s reportable wealth stops at $4 billion. More on IKEA’s extreme tax efficiency in later slides… Image source: IKEA.

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Time’s your friend when you start early Kamprad started small, buying matches by the box and selling them piecemeal at a higher price. Ingvar was small, too -- only 5 years old. He founded IKEA at age 17, using a cash reward from his father for getting good grades. IKEA originally sold low-cost household trinkets, like wallets and picture frames.

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The first few tables and chairs Kamprad introduced furniture to IKEA in 1948, five years after starting the company. Early IKEA furniture was locally sourced and manufactured, then sold at low cost. But manufacturers started boycotting IKEA in 1955, pressured by established furniture giants as price wars with IKEA crushed their margins. That was the start of moving furniture builders abroad, keeping costs low without losing control of the process. Image source: IKEA.

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The global market is bigger than Sweden! IKEA started expanding internationally in 1963, opening a store in Norway. The first American store opened in Philadelphia in 1985. China got its first IKEA store in 1998. The store pictured here is a 45,000-square-foot monster opened recently in Chongqing, southwest China. Image source: IKEA Franchising.

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Where IKEA stands today Today, there are more than 300 IKEA stores in 26 countries, with about 50 in North America and nearly 20 in Asia. $40 billion in 2013 sales is nothing to sneeze at, but the company aims for $70 billion in 2020. Investors everywhere would jump on a chance to own the stock, but IKEA remains a fiercely private company. “I decided that the stock market was not an option for IKEA,” according to Kamprad. “I knew that only a long-term perspective could secure our growth plans and I didn’t want IKEA to be become dependent on financial institutions.” So the IKEA billions will stay in the Kamprad family… maybe not forever, but at least as long as Ingvar has a say in the matter.

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Two ultra-wealthy peas in a pod? Ingvar Kamprad has a few things in common with master investor Warren Buffett: Buffett is known to love burgers with cherry Coke; Kamprad gorges on IKEA meatballs. Both have driven old clunkers and live in modest bungalows. Buffett asks billionaires to give lavishly to charity, and leads by example. The IKEA group includes the Stichting INGKA Foundation -- at $36 billion, the wealthiest charitable organization in the world. Running value-driven businesses must be easier when you follow similar rules outside the office. Image sources: Wikimedia and IKEA.

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One global empire, three Dutch foundations Image source: IKEA. The IKEA Group actually includes three foundations in an elaborate tax-management structure. The company left Sweden’s high taxes in 1973, moving headquarters to Copenhagen, Denmark. Headquarters eventually ended up in Delft, Netherlands, as Kamprad donated his IKEA shares to the Delft-based INGKA foundation. Wholly owned by the Kamprad family, the INGKA foundation owns the business operation companies and can only use its cash in two ways: charitable causes and supporting IKEA operations. Think of the Netherlands as a European Delaware – a popular location for registering businesses thanks to company-friendly regulations.

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Kamprad faces some controversy For all his folkiness, Kamprad also has his fair share of critics and scandals: As a young man in the mid-1930s, he supported a Swedish Nazi-style party and befriended its leader. IKEA opened its first Israeli store in 2000, and Kamprad spent two chapters of his book, Leading By Design: The IKEA Story, apologizing for the Per Engdahl episode. Regardless, some will never forgive him. IKEA’s extreme tax efficiency doesn’t seem to fit with Kamprad’s gung-ho support for Sweden elsewhere. IKEA spokespeople say it’s just good business sense.

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It’s never too late to go back home… Ingvar Kamprad is back to his roots after a long trip abroad. He moved to Switzerland in the 1970s, with loud protests against the heavy Swedish tax burden. But since the fall of 2013, he’s back in Smaland, Sweden -- where it all began. Far-right governments have reduced the Swedish tax load in recent years. Kamprad’s second wife, Margaretha, died in 2011, leaving him with few real ties to the Swiss homestead. As IKEA keeps expanding across the globe, its aging father simply went back home. It’s really a small world sometimes.

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