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(Regina Garcia)
(Regina Garcia)

How Ikea seduces us Add to ...

1. A fashionista runs the place

Kerri Molinaro wasn't a big fan of Ikea stores. A cavernous warehouse was not her idea of homey. She did like the Swedish retailer's cheap and cheerful home furnishing designs; she even had bought one of its ubiquitous Billy bookcases. But the shopping excursion had been a chore.

Nonetheless, on a sunny April day 18 years ago, Molinaro showed up for a job interview at Ikea Canada. Why, the young fashion retailer wondered, was the Swedish icon courting her so aggressively to head its flagship Toronto store? She, after all, came from the leisurely paced world of high fashion, having managed stores for Holt Renfrew & Co. and Birks. Even the interviewer, Mikael Ohlsson, had his doubts. "I was worried that she was a little too fine for hard work," says Ohlsson, who was then president of Ikea's Canadian arm, and is now CEO of the entire company.

Both parties' skepticism was dispelled by the time the interview was over. Molinaro was intrigued by the company's informal, no-nonsense ways; Ohlsson detected the sort of hands-on attitude that Ikea needed. In Molinaro, he'd found someone he could later promote to run Ikea's Swedish operations, of all things, before she was named to oversee Canada in 2005.

"It was a very big risk to hire me," says Molinaro, 48, looking un-corporate in cropped jeans over shiny beige boots and a lime- and aqua-striped cardigan. "But we are selling fashion. It requires merchandising, instead of just throwing things on pallets. …The stores have to sing."

And the song they sing is about the harmonious spot where cheap meets chic. There's a science to this: The company is a relentless cost-cutter-except when it makes better strategic sense to spend. It painstakingly hand-picks factories in Poland and China that can produce its Sultan mattresses or Klippan sofas at the lowest possible cost. But it pours money into research on consumer habits and product design. And it hires fashion mavens such as Molinaro to keep its hip edge.

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The chain also offers unusual perks like a supervised kids' play area and impossibly cheap specials (Swedish meatballs: $2.99!) in its cafeteria. Ikea customers understand the deal: Those treats are just a way of keeping them in the store longer. They save money at Ikea, but they have to go to work themselves to get the savings. Shoppers invest hours driving to the store, finding a parking spot, wandering the showroom, searching for staff, waiting at the cashier, hauling the flat-packs to the car and then, once home, mastering the art of the Allen key to assemble the stuff-only to discover that a part is missing.

And consumers keep motoring back for more. Even during the recession, privately held Ikea made gains globally, with sales rising 1.4% to $29.4 billion in 2009 at more than 300 stores in 35-plus countries. In Canada, its revenue fell 2% to $1.4 billion at 11 stores-a retreat, true, but one that beat by a long shot the overall home-furnishing sector's decline of 9.2%. And fiscal 2010 is already looking promising. In the first six months, domestic business shot up by about 6%, Molinaro says, double her 3% forecast-and four times the sector's growth.

But she's not the only savvy retailer in the sector. American home specialists Crate & Barrel, Bed Bath & Beyond and Lowe's are among new players crowding the Canadian market. Molinaro's mission is clear: Broaden her customer base by branching out into more upscale areas of kitchens, storage units, and do-it-for-me delivery and product-assembly services. She's wooing professional designers as her ambassadors by setting up shop at trade shows.

As well, she's tightening the purse strings-the global company has set a goal of slashing costs by 5% over the next five years, she reveals. That's more aggressive than past targets, with savings to be poured into price cuts. In Canada, Molinaro shaved $23 million off prices in the six months to the end of February-on the way to exceeding the $30 million of price cuts in the previous 12 months.

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