Just how does IKEA manage to offer such consistently low prices?  Many people think that it's because the furniture is made cheaply, which isn't exactly true.  Read on to find out about some of IKEA's less obvious cost-saving strategies. 

1 Recycling

The Recovery Department (of which, the AS-IS room is part) is responsible for sorting and recycling all recyclable materials, including packaging broken down in-store as well as materials collected from customers at recycling donation bins where available.

2 AS-IS

Products not suitable for sale at the full retail price (floor samples, returns, items damaged in shipment, etc.) are placed for sale in AS-IS, generating revenues that might otherwise be lost to waste. The Recovery department also recoups parts from damaged items, making spares available to customers who need them.

3 Waste Reduction

IKEA's designers and engineers strive to reduce the amount of material used and wasted in production.  Additionally, many waste products are then used to make new products, further reducing overall costs both to the pocketbook as well as to the environment.

4 Automatic selling

Despite the showrooms showcasing IKEA furniture in real living arrangements (typically located upstairs), IKEA is a warehouse store designed to maximize customer self-sufficiency with minimal reliance on staff assistance. Cost savings stem from reduced wages, training costs and lower design, maintenance and outfitting costs associated with the marketplace and warehouse areas of the stores.

5 Thriftiness

Frugality is a value highly prized by IKEA's founder, Ingvar Kamprad. Though listed as one of the world's richest men, he continues to fly economy as do IKEA's top-level managers when on business travel. Stores encourage employees to turn out lights in offices, turn off computers and reduce overall energy consumption by using compact fluorescent lightbulbs.

6 In-house design

Virtually all of IKEA's products are designed by IKEA's staff of in-house designers who are well versed in creating trend-setting designs while working from a set pricepoint.  In-house design also means there are no large design commissions to be paid.

7 Economies of Scale

IKEA utilizes it's massive economies of scale to secure long-term contracts with manufacturers and to reduce costs of raw materials through bulk-buying. Because of their sheer size, they can demand lower prices for materials which suppliers can afford to give if they have a steady income.

8 Transportation

All transportation of IKEA products is by cargo container - either via cargo carrier for overseas transportation or via tractor-trailer for ground transport rather than by more expensive air transport. Transportation costs are also minimized by carefully locating distribution centers and stores for optimum travel efficiency (see below).

9 Strategic Placement

IKEA Stores are strategically placed in high-density areas to guarantee store traffic and along highway/interstate routes to maximize visibility.  Expansion plans take into account not only the proximity to a highway, but also the distance from a distribution warehouse - this minimizes the expenses associated with stocking the warehouses. 

10 Minimal packaging

The ubiquitous plain brown corrugated cardboard is the packaging material of choice for a reason - it's cheap, easy to recycle and can be made to fit around almost any product.  Small labels on the boxes identify the products within.  Printing wordless instruction materials also saves money by eliminating the need to translate the written word to the native languages of the many nations in which IKEA retails. 

IKEA is constantly seeking ways to reduce costs as it is in integral part of the corporate culture.  With IKEA, you're not getting reduced prices on previously overpriced products, you're getting real honest to goodness value.  And that's something worthwhile.