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Business Operations Business Models

How Does IKEA Make Money (Business and Revenue Model)

The IKEA business model

How Does IKEA Make Money?
Here’s what you should know:
  • What is IKEA, and how does IKEA work?
  • How does IKEA make money?
  • Sales of Goods
  • Franchise Fees
  • Other Income
  • IKEA’s Subsidiaries, Acquisitions, and Exits
  • IKEA’s profit and revenue
  • What is the IKEA business and revenue model?
  • IKEA’s funding and valuation

How does IKEA make money? Here is a full, in depth, breakdown of their three (3) revenue streams and the different products and services they offer, as well as the IKEA business model, their year over year revenue, and how IKEA works.

What is IKEA, and how does IKEA work?

IKEA is a furniture retail store that designs and sells ready-to-assemble products such as furniture, kitchen appliances, home accessories, and more.

Founded in 1943 by Ingvar Kamprad, IKEA has become one of the largest furniture and home goods stores with 466 IKEA stores worldwide to date.

How IKEA works is: When shopping at IKEA, customers will enter in through their showroom and on to the marketplace – this is where they will do their shopping. If a customer sees something they like, each product has a number and tag on it telling them where to find it and how much it costs. From there, they can take the product number to IKEA’s self-serve warehouse where they will find the product by aisle and bin. Once found, they can head over to the checkout.

Some of IKEA’s competitors include Wayfair, Overstock, Amazon, and other marketplaces that sell furniture and home goods.

IKEA App in Apple App Store | IKEA Business Model | How Does IKEA Make Money? | How Does IKEA Work?
Source: Apple App Store | IKEA

How does IKEA make money?

According to IKEA’s about page, IKEA, to date, has 466 IKEA stores across 63 markets around the world. To add to that, IKEA also had nearly 775 million IKEA.com visitors in 2021.

So how does IKEA make money off of all these stores and website traffic?

Below is a breakdown of how much money IKEA makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 3 ways of how IKEA makes money (in 2022):

IKEA has a revenue model that makes money in three (3) ways – sales of goods, franchise fees, and other income.

#1. Sales of Goods

IKEA makes the majority of its money from selling goods wholesale to IKEA franchisees. In fact, according to IKEA’s FY21 financial results$25.46 billion or 94.8% of IKEA’s total revenue came from the sale of goods in 2021.

How does IKEA make money like this? Well, IKEA franchisees must purchase the inventory for their store directly from IKEA’s product suppliers. Which gives the business directly to IKEA.

IKEA Business Model | How Does IKEA Make Money? | How Does IKEA Work?
Source: IKEA

Note: 94.8% of IKEA’s total revenue came from selling goods wholesale to IKEA franchisees in 2021.

#2. Franchise Fees

IKEA also makes money from franchise fees. Which, in 2021, generated an additional $1.33 billion of IKEA’s total revenue.

To date, IKEA has a total of 466 IKEA stores; all of which are franchised. This means IKEA collects a franchise fee from all 466 stores. Which you can see below.

IKEA Franchise Cost:

  • a 3% annual fee of the franchisees’ net sales
IKEA Franchise Cost | IKEA Business Model | How Does IKEA Make Money? | How Does IKEA Work?
Source: IKEA

Note: All of IKEA’s stores are franchised.

#3. Other Income

The remaining portion of IKEA’s money, $62 million, comes from what they refer to as “other income”.

Other income, according to IKEA’s FY21 financial results, comes from “selling the IKEA catalog (final edition) and other marketing materials created for IKEA franchisees.”

IKEA’s Subsidiaries, Acquisitions, and Exits

To date, IKEA BV has made a total of 2 acquisitions, 6 investments, 5 lead investments, and 1 successful exit.

IKEA Acquisitions | IKEA Business Model | How Does IKEA Make Money? | How Does IKEA Work?
Source: Crunchbase | IKEA

IKEA’s profit and revenue

In 2021, IKEA reported $26.86 billion in revenue.

Note: Because IKEA BV is a privately held company, they are not required to make their annual reporting, such as Form 10-K’s, pubic.

What is the IKEA business and revenue model?

IKEA makes money through a few revenue models that they combine within their company, they are:

  • Franchise business model
  • Wholesale business model
  • Royalty business model
  • Licensing business model
  • Mergers & acquisitions (M&A) business model

IKEA’s funding and valuation

As of 2021, IKEA had a valuation of $18 billion.