On the Money

IKEA's strategy: Stick to the basics, and expand in the US

Assembling Ikea
Assembling Ikea

In the world of "big box" retail, there arguably are few bigger "boxes" than home goods behemoth IKEA.

For consumers who live in an apartment, or just graduated from school, chances are they've probably assembled something from a large flat box that came from a massive IKEA store.

While some major retailers are shuttering physical stores and shifting to a digital strategy, the Swedish-based global giant explained to CNBC's "On the Money" recently it is still growing in both areas.

"We're expanding our e-commerce business, but we are also building more brick-and-mortar," IKEA's U.S. President Lars Petersson told CNBC in an interview.

"It's very important to be accessible," Petersson said. Getting customers in the store enables them to experience furniture and other items "in a three-dimensional way," the executive added.

Being a global company, we are very much for a liberal trade policy, because that helps also the customers to better prices and better quality
Lars Petersson
US president, IKEA
A new IKEA store under construction in Florida. The furniture giant said Monday that after the three deaths of three children it is no longer selling its "Malm" series products.
Christina Mendenhall | Bloomberg | Getty Images

The furniture retailer saw nearly $38 billion in total sales—a 7 percent year over year jump—in fiscal year 2016.

Worldwide, IKEA has 380 stores in 48 countries, and 43 of those are in the U.S.—and remain wildly popular with Americans in spite of high profile furniture recalls last year.

Yet Petersson told CNBC there's more work for IKEA to do.

"We are still small on the American market," Petersson said, adding that there are "still, many people we are not reaching here in the U.S."

IKEA's touchstone is easy to assemble furniture, which helps them maintain what Petersson called "a very broad customer base. We are really obsessed by people's life at home regardless of the size or the income of the people living there."

He added: "We see everything from people living in extreme small spaces in inner cities to the suburbs coming to IKEA."

IKEA began in Sweden in 1943, but the first U.S. store opened in 1985, in Plymouth Meeting, Pennsylvania. The retailer is expanding at a rapid clip to other key areas.

"We are already close to the coasts, and we are moving into the center," Petersson said, citing stores that have broken ground in the heartland, such as Kansas City and St. Louis. New locations are on tap for Columbus, Indianapolis and Jacksonville.

The Lone Star state is also on IKEA's radar, Petersson said, adding that Texas is where the retailer is "underrepresented…[and] we are working really hard to get more opportunities there."

Today, the global company is the world's largest furniture retailer. That may change if the incoming White House administration realizes President-elect Donald Trump's pledge to tighten U.S. free trade.

"Being a global company, we are very much for a liberal trade policy, because that helps also the customers to better prices and better quality," Petersson said.

Still, IKEA produces a large slice of its goods here in the U.S. It has about 9,500 products, a fourth of which and Petersson said is made domestically. "And we would like continue to expand that production" in ways that shorten transportation needs and help the environment, he added.

IKEA employs about 13,000 workers in the U.S. and this year implemented a more generous parental leave policy. The retailer will give workers with one-to-three years' experience up to three months paid leave. Those with three or more years are eligible for four months leave to care for a new child.

Those benefits have more in common with Silicon Valley or tech companies, not retailers.

"We are trying to create a better everyday life for the many people, and that includes our employees," Petersson said, calling the new policy "a good investment for us in the future."

The company expects "lower staff turnover [and] we will have coworkers who feel better who won't need to switch jobs just because they're welcoming a new member to their family," he added.

On the Money airs on CNBC Saturday at 5:30 am ET, or check listings for air times in local markets.