IKEA Turns You Into A Real Estate Investing Genius?!

ikea-store

You Can Learn Everywhere, Even Shopping at IKEA!

Studying how successful people and companies work is a key to your success. We usually refer to this as finding a mentor, getting a coach, or shadowing success in real estate circles. Podcasts and reading blogs here on BP is a great start for that, but there are obvious lessons in daily life you may be missing.

IKEA has taken the U.S. by storm, and I’m sure you’ve been there a dozen times if there’s one in your market, and if you haven’t you need to go! Some real estate lessons I was reminded about on my last trip are:

LOCATION….LOCATION…LOCATION!

ikea-nice-area

The Atlanta IKEA is located right in the center of one of Atlanta’s hottest growth markets….Atlantic Station. New lofts, condos, multi-use developments, row houses, and small cluster home developments are all around the warehouse superstore. There are all kinds of skyrise apartment/condos and the arms of towering cranes announce the arrival of many others in the upcoming years. Building amidst this explosion of growth was genius for the discount furniture retailer!

ikea-development

According the the National Association of Home Builders:

​The NAHB analysis of the Consumer Expenditure Survey (CES) data from the Bureau of Labor Statistics shows that the biggest outlay in the budget of new home buyers is furnishings. They spend $5,288 on furnishings during the first year after buying home, outspending buyers of existing homes 2.2 times and non-moving owners 5.3 times. Average spending is estimated for all households in the group regardless whether they purchased a certain item or not. Thus, higher averages may point to larger and/or more frequent spending by the group.

Know Where the Growth Is

Knowing that the new growth due to major revitalization projects in an area once dominated by Atlantic Steel’s wasteland, and that the surrounding area contained Georgia Tech and high dollar areas that approach Buckhead this sector was primed for new home/condo buyers. When those buyers spend $5,288 on furnishings in the first year (2.2 times existing home buyers and 5.3 times non moving home owners) this was huge in their location strategy!

Know Your Product, Know Your Audience

Additionally, knowing that intown buyers, loft buyers and Millennials are very attracted to the modern style of their furnishings, this location made perfect sense.  THEY WERE RIGHT IN THE MIDDLE OF THEIR TARGET AUDIENCE! THEY KNEW THE DEMOGRAPHICS AND THE GROWTH PATTERNS!

Learn from IKEA: as an investor you have to know who your target audience is, and what products they like. It’s highly unlikely that if IKEA specialized in Victorian furnishings and antiques that they would do nearly as well in that location…they would want to be in Savannah, Georgia, not Atlantic Station in Atlanta!

  • ​Who is your audience, baby boomers, generation X, Millenials, student housing, first time home buyers, section 8 renters, executive rentals?
  • What product is in demand in your market, condo’s, apartments, duplexes, tear down and rebuild?
  • Is there a market or submarket in your area that you should really focus on? Where is the in-migration? Even if your market isn’t experiencing strong growth, are there areas that have new roads, new shopping centers, and new developments?
  • Is your market a flip market or a cash flow, buy and hold market – Don’t Try To Flip In A Cash Flow Market or Cash Flow In A Hot Seller’s Market.

Serve The Masses Live With The Classes…​

You’ll notice that the huge IKEA store is full of chic designs that are highly functional, have great style and are very affordable. Many of the urban crowds like the modern designs and the functionality of products often catering to those who live in small spaces and need to maximize. This is important for high end condos that are small and pricey, and also to people just starting out that are on a budget. IKEA epitomizes the term “champagne taste, beer budget.” They have attractive products that are cheap. THIS IS NOT ETHAN ALLEN.

  • Learn from IKEA:   Focus on hitting the largest section of the market. Do flips or cash flow properties either at or below the median home cost for your area. There is more demand, and there is more stability and less risk where there is more demand. Serve the classes and you can live with the classes. That’s a key to wealth building.
  • Make sure that your product has some nice touches that your competitors don’t. Be a cut above and offer better value than your competition. If you are a landlord, put tile backsplash and stainless appliances, or vinyl plank floors instead of linoleum. Even if you charge the same rents, you will get better quality tenants who stay longer and you’ll fill your units before your competitors.

Keep Your People Engaged and Keep Them There!​

IKEA realizes that a great deal of expense goes into building their stores, and advertising to get you in their doors. They make great efforts to make sure that you stay in there stores as long as you can so that you’ll continue the shopping experience and buy before leaving.

  • As soon as you arrive, if you have children and it’s hard to carry them in your arms, no worries they have family parking right by the door. Families with kids need more furniture, especially cheap furniture if they are going to outgrow or break it!  Learn from IKEA: Pick houses that are easy to get too, not in the middle of nowhere, close to major roads and jobs. Bullet proof the house with things tenants can’t destroy or that are cheap to fix but look great. Think linoleum plank instead of linoleum, refinish hardwood floors instead of carpet.
  • ​An entry display shows all kinds of ideas that will improve your home on the cheap before you head up the first escalator. You immediately find free childcare in a cool recreational environment that kids want to be in! It’s a lot easier to stay and shop when you aren’t hearing, “Mom….Mom….Mom…Mom…Mom…Can We Go…When Are We Leaving…I’m Hungry…She Hit Me…”

ikea-take-care-of-mom ikea-babysitting

 

 

 

 

 

 

 

 

  • Learn From IKEA: Your homes must be easily accessible, appointments must be easy to get, you must work around their schedule, and absolutely must answer your phone. Buy homes where people want to live, not where they are the cheapest because of bad crime.
  • Then you see the restaurant, so even if you are hungry, you’re not leaving! It is filled with fresh Swedish cooking that is healthy, looks and tastes great, and is priced low enough that you think the Swedish government has subsidized it!

ikea-food2 ikea-food

  • Learn form IKEA:  Your advertisements and the tours of your property must convince people why they want to deal with you, buy, rent or sell to you. You must keep them on your website, in your house! There must be something intriguing that keeps them interested. There better be something great in the first room that they enter, and as they move through the house the kitchen and baths better pop! A painted accented wall in the living room? Granite look countertops and stainless in the kitchen?

ikea-kitchen

Have a Mission That’s Unique and Share It Always!​

Swedish values are everywhere in this store, they also want you to embrace their culture:

As soon as you pull in there are electrical charging stations for all electric cars (even though nobody in America drives them yet). You can buy Swedish Fish at the cash register, or Swedish Meatballs in their restaurant, or Swedish cookies, Swedish baked goods, Swedish Chocolate in their grocer section. I almost thought I was in the Swedish Consulate the first time I came. The food waste from the restaurant is proudly advertised as being used for compost.

ikea-car

You can’t be everything to everybody, and while these stores are in America, they are very un-American, and that’s ok, it’s what makes the store fun and unique.

Learn from IKEA: What will your product stand for, what will you be known for, what values do you have, can people see them in the product you put out? What are you doing to be responsible in improving neighborhoods, providing jobs, making an impact? Why can people feel that you are mission driven and making a difference. Do you stand out, or are you pretty much like dealing with everyone else?

 

Comments

  1. Here is a link to more history about the development of Atlantic Station if you are interested:

    https://en.wikipedia.org/wiki/Atlantic_Station

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