Ikea CEO Anders Dahlvig on Surviving a Bad Economy

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Shannon Stapleton / Reuters

Anders Dahlvig, Chief Executive of Ikea.

Anders Dahlvig recently hit the 10-year mark as CEO of Ikea. Under his leadership, the Swedish furniture giant has nearly tripled its number of stores and employees, and committed to a broad new slate of policies on the environment. The company maintains a mixed reputation on quality, though, in the midst of an increasingly tough economic climate. In a series of recent conversations, Dahlvig spoke with TIME's Jeremy Caplan about why the tough business climate works in Ikea's favor, where the company plans to expand, and what Ikea is doing to be greener.

TIME: How is Ikea faring amid the current economic turmoil?
DAHLVIG: This is a really good time for us. The way we've set up our business, we're planning for a climate like this all the time. We have a very conservative policy when it comes to borrowing money. We basically only use our retained earnings and don't borrow very much. We also have a very conservative policy when it comes to how we place our cash and our liquidity. We don't place anything in equities, so we haven't lost a dime so far. And the way we position our brand is as good value for the money. People know when they have less money what Ikea stands for. We're seeing new customers in our stores and it's a good time for us to take market share. In the U.S., we were 16th among furniture-only retailers a few years ago, and now we're number two.

Aren't people spending less in your stores?
The average check is going down a little bit, and the number of visitors is reduced. People are coming less often to the stores. During these times we have to be more creative when it comes to promotions and price reductions. For example, we're running promotions where we reduce prices on top-selling products to attract people to the stores. We're also using our restaurant to attract visitors with things like free breakfast. It's strange that people will go all the way to Ikea for $5 or however much a free breakfast is, but the reality is that people actually do that.

Some critics of Ikea say that your furniture is easy to break, hard to assemble, and heavy to transport. What's your response to that?
The quality is improving. Assembly may be difficult for some people, but we're trying to make it as easy as possible. Our philosophy is that people have more time than money. If you have to trade off between paying more or having someone else do the assembly, many people would make that trade off.

And what about the idea that Ikea contributes to a culture of over-consumption?
Any retailer wants people to buy more. But we're not trying to build products people should throw away in a few years to buy another one. We use raw material very efficiently. We're far more advanced than other furniture retailers at using less material in our products. I would foresee that in the not-too-far future solid wood products won't exist in our product categories. Resources are limited, so we use techniques where the wood is in the frame, but basically empty inside. That makes it less heavy to transport, and dramatically reduces the amount of material we use.

Has the U.S. market been weaker than the European markets lately?
The sales decline here [in the U.S.] has been stronger than in most European countries, but the downward trend in Europe is worsening. What we are seeing here is coming to Europe as well. It will last at least 12 months. It will get worse before it gets better. A lot of jobs are going to be lost in the next few months. People are scared and that will keep them from shopping. We haven't reached the worst yet.

What are your goals for Ikea over the next five to ten years?
We will probably increase our presence in developing countries. For these past 10 years our focus has been on existing markets. We've entered only two new markets in 10 years time: Portugal and Japan. That's very little compared to our earlier history. That will change quite a lot over the next 10 years. We'll see seven or eight new markets being opened up in that time frame, 90% in developing countries. I hope India will be on the map, and on this continent maybe Mexico. We also have a goal to have 100% renewable energy sourcing for our stores.

You mentioned entering seven or eight new markets: what are the others?
In addition to India and Mexico, the possibilities include countries like Ukraine, Slovakia, Croatia and Serbia. These are not huge markets but they're new markets for us. We're also discussing some of the former Soviet Republics, like Kazakhstan. Also South Korea, which is not a developing country, but it's a huge market. (Read "5 Best Places to Travel in a Recession".)

How else is Ikea's strategy changing?
We decided to reduce the pace of our expansion from 25 stores a year down to 15. We realized that expansion had gone a little too fast, and we needed to slow down for a while, for two or three years. And we are experimenting with bigger formats. We are now putting up our stores next to shopping centers, which we want to build ourselves.

What was your reaction to the recent U.S. presidential election?
I was happy to see such a strong turnout, and Obama ran a fantastic campaign in terms of getting people out to vote. As a company, it's always been our policy not to take a stand in politics. But I have a fear that protectionism will increase, especially now, in bad times. And not just in the United States. I see the signs of that. Pressure is increasing from the public on government officials to increase trade barriers. It takes strong leaders to resist the temptation, because [strengthening trade barriers] will be to the detriment of the economy over time. (Read world leaders' view of Obama's win.)

How do you think being a political leader differs from leading a company like yours, with more than 100,000 employees?
Business leaders are not scrutinized by the public and the media in the same way that the president and other politicians are. That's a huge difference. It's easier for us to execute things. When you're leading a company you have a mandate to change and to do things that feels a lot stronger than I can see for politicians. The way the political systems are set up — with a senate and congress, for instance, it's tremendously difficult to get from idea to execution.

Do you have a replacement candidate in mind to be the next Ikea CEO?
No, I don't. We don't have a system like GE had, where they pinpointed three candidates. We should have two or three candidates, but we don't. I could have done a better job on it. I think about it all the time, and it's part of my responsibility. I still have work to do on that.

How much of your own home is furnished with Ikea products?
About 50 percent.

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