- You know they don't tell you, "Don't lay on the bed."

You're supposed to lay on the bed.

- [Narrator] If you've ever visited an Ikea,

you've likely encountered

their store's endlessly winding floor plan.

This layout can be confusing, but that is by design.

Ikea may be the biggest furniture retailer on the planet

but it's certainly not conventional.

The Swedish furniture giant asks its customers

to build their own products

and it stores and distributes those products

in minimalist flat packed boxes.

So, how have these retail strategies,

as well as their famous Swedish meatballs

contributed to the company's runaway success?

This is the economics of Ikea,

a look at the innovative business practices

that have transformed modern life.

- [Sarah] When you step into an Ikea,

you immediately sort of are put into this maze like

path of different rooms.

- [Narrator] Ikea's store layout is a fixed path design

which means there's a designated road

that all customers must follow

that guides you through the store in one direction.

- [Sarah] It's not a grab a carton of milk

and get out kind of store, it's the opposite of that.

It's very much set up to spend a day,

think about rooms you know, dream about what you really want

your bedroom to look like.

- [Narrator] The floor plan of most Ikea stores

resembles a maze that curves about every 50 feet

to keep customers curious about what comes next.

Since an average Ikea store is around 300,000 square feet

or five American football fields,

that means a lot of walking.

- An Ikea is to some frustratingly winding

but really it's laid out as an experience

to get you to buy more.

(drill buzzing)

- [Narrator] Ikea is famous

for putting its customers to work.

Unlike most furniture retailers

that sell products preassembled, many of Ikea's pieces

have to be built by their customers.

But why?

As many couples and their therapists will know

building your own Ikea cabinet can be challenging.

- The big idea behind the Ikea effect is

consumers are more attached to have more positive feelings

towards objects or things that we've put effort into.

And that we actually think

that they're more valuable because of that.

- [Narrator] The term Ikea effect was first coined in 2011

by researchers who noticed a similar phenomena

in other products and businesses.

When instant cake mixes were first introduced in the 1950s

they didn't sell well.

- And then they said, "Let's add a fresh egg."

It was this idea that we wanna feel

like we're just participating enough to not feel guilty

about taking a shortcut.

- [Man] When you make a cake from a mix which do you want?

A fresh egg cake or a cake made with dried eggs?

A higher, lighter, tastier cake, why fresh eggs of course.

- The idea that we should love building products

isn't necessarily what Ikea intended.

- [Narrator] If you've ever shopped at one of Ikea's

massive warehouse stores

you're likely aware of the unconventional product names

but what you may not realize is that in creating these items

Ikea sometimes comes up with the price tag first.

- So we have a classic example that they could talk

about all the time is the $1 light bulb.

But they had this idea that a $1 LED light bulb,

you know this new type of light bulb

would be hard to achieve, but if they could achieve it,

lots of people would buy LED light bulbs.

So they just sort of designed backward

with the price point in mind.

- [Narrator] That obsession with low prices

is a large part of why Ikea is the world's

largest furniture retailer.

Today, Ikea has 445 stores operating in 52 countries.

- You know obviously if you go into a student dorm room,

you're gonna find a lot of Ikea,

but you'll also find some Ikea products

in a wealthy person's home.

And that's really what they're going for.

- [Narrator] Today, Ikea is the very definition

of mass market appeal, but when the company first began

as a Swedish mail order business in 1943,

well-designed furniture tended to be expensive.

And as a result out of reach for most,

or seen as a serious long-term investment.

Ingvar Kamprad, who founded the company as a teenager,

pushed forward the idea that furniture could be flat packed

to massively reduce the cost of shipping and transportation.

- So flat packing is really the largest arguably

Ikea invention that really led to the company's growth.

And the idea is that instead of buying, you know,

a piece of furniture I'll put together, it's deconstructed

into a flat pack, where you can fit more in a truck.

You can fit more in the Ikea warehouse

and you can also get it in your car.

And the trade-off is you know

you put it together at the end.

- [Narrator] Flat packing is a practical aspect

of the philosophy that has long guided Ikea's success

called democratic design.

- It's this idea that everything is imbalanced

both price, form, function, the aesthetic,

the sustainability.

- [Narrator] This vision

to create a better everyday life for the many people

was sent forth more than 30 years ago by Kamprad

in a manifesto now presented to every Ikea employee.

- And they talk about it almost religiously,

and fundamentally it's this idea

that when designing a product they think about

it can't just be really cool looking,

it can't just be functional,

it has to be all of those things.

- [Narrator] So despite the long shopping trips

and the DIY, customers can't seem to get enough of Ikea.

Perhaps it's as simple as labor leaves to love.

(lighthearted music)