Ingvar Kamprad: Leader of the flatpack

Love it or hate it, Ikea has entered the nation's psyche to the degree there was a riot at the opening of a new store in London last week. The man who controls the empire is an unlikely style setter, with a history of Nazi sympathies and a reputation for tight-fistedness. But he is revered by his staff - and the world clearly cannot get enough of his products

Much has been written about where blame lies for the disturbances in the north London suburb of Edmonton last week, when 5,000 people clamoured to get into a new Ikea store. But there is no doubt who is in charge. Ikea's king of the Allen key is Ingvar Kamprad, its 78-year-old founder. He has crafted a company thought to be worth $74bn and his personality is stamped right through it.

Much has been written about where blame lies for the disturbances in the north London suburb of Edmonton last week, when 5,000 people clamoured to get into a new Ikea store. But there is no doubt who is in charge. Ikea's king of the Allen key is Ingvar Kamprad, its 78-year-old founder. He has crafted a company thought to be worth $74bn and his personality is stamped right through it.

Ikea has made Kamprad one of the world's wealthiest people with a fortune estimated at $18.5bn. But instead of a chauffeur-driven limo, he drives a 10-year-old Volvo and whenever he flies, even long haul, it's in economy. Rather than travelling by taxi, he's even been known to use Stockholm's subway and public buses to take advantage of his pensioner's discount.

And forget St Tropez. Kamprad's idea of a break is fishing or rowing in his native Sweden. He once said that his idea of luxury is buying the occasional nice shirt. Kamprad's sole extravagance is having a small vineyard in Provence which he describes, with characteristic dourness, as a "very expensive hobby". He admits to a fondness for hard drink, which in the past some called alcoholism, originally developed on business trips to Poland in the Sixties. "I love to drink, but I know that if I don't have these [three times a year, month-long] pauses it will become a habit," he says. "I have to clean out my kidneys and liver."

Kamprad's frugality is not born of a desire simply to build up his billions, but also to offer a guiding example to Ikea's 76,000 staff. He reasons that if Ikea is to provide customers with low prices, its brutal control of costs has to extend to every level in the company. And keeping in touch with his customers, as well as giving them a good deal, is in Kamprad's blood.

Born in southern Sweden, Kamprad grew up on a village farm. In his teens, he discovered an aptitude for business and began importing and selling anything he thought he could make a profit on. Starting to trade in cigarette lighters, Christmas cards and pens, at the age of 17 Kamprad formed a small company, which took its name from his initials and the first letters of his family farm Elmtaryd and nearby village Agunnaryd. Ikea was born.

Having a company enabled Kamprad to bid for a contract to supply pencils and he was soon sending goods out with the daily milk round. He discovered that by buying goods in bulk he could sell them to his customers at low prices and still make a profit. Kamprad then acquired a disused factory and began turning out furniture. His low prices undercut Swedish cartels and in 1952 he set up a showroom in the town of Almhult to reassure people who felt his prices were simply too good to be true. Kamprad tinkered with furniture designs to keep costs low, but his biggest breakthrough came in 1955 with the birth of a product which would become the bane of DIY enthusiasts.

While trying to pack and ship a bulky table, Gillis Lundgren, an early employee and later the chief designer, hit upon the idea of taking the legs off and mailing them packed flat under the tabletop. Enter the flatpack. The secret of Ikea's products is functionality. The flatpack eliminated the cost of shipping vast quantities of air whenever a product was sent from factory to shopfloor. It also offloaded on to customers an expensive part of selling furniture - actually putting the stuff together. Flatpacks allowed furniture to be made so cheap that, instead of accumulating emotional weight as it was passed down the generations, it would come to seem transient and disposable. This started a revolution in interior furnishing.

Ikea quickly swept past Habitat in popularity before it bought the business in 1992. Now Ikea is the UK's fourth biggest furniture retailer. Last year 33 million people in the UK alone visited one of the stores, and more than 300 million people worldwide frequent Ikea each year even though it has only about 200 branches.

Although 70 per cent of its store managers worldwide are local, Kamprad once wanted Swedish-trained bookkeepers at every store because of differing bookkeeping practices around the world. And it's easy to see why employees have described Ikea as a "cult". The company structure is less hierarchical than similar businesses: titles and privileges are taboo. Every year he personally hands out Christmas presents to each of Ikea's 2,500 staff members at its Almhult headquarters. When he confessed to being a Nazi sympathiser in his youth, he wrote to every employee describing this flirtation as "the greatest mistake of my life". Several hundred staff signed a letter of support.

His penny-pinching permeates Ikea. Even senior executives travel around Europe on budget airlines and always stay, they insist, in cut-price hotels. And they recall with approval the rumour that Kamprad himself never takes fizzy drinks from a hotel minibar without replacing them as cheaply as possible.

The company never releases profit figures but sources suggest they are massive - around 18 per cent - while rival firms operate on single-figure margins. Last year Ikea heavily invested in logistics, putting paid to the problem of reaching the self-service warehouse only to be told that an item is out of stock. Consequently, the company's sales in 2004 soared 15 per cent to $15.7bn, and UK sales broke the £1bn mark for the first time.

Kamprad is a creature of habit. Only about 20 per cent of Ikea's product line changes every year. But retail analysts confirm that since Ikea's customer base is not getting any younger, it must cater for a more mature market or strive to win younger customers.

Worryingly, Ikea has refused to embrace the e-commerce revolution. It offers online shopping in Sweden and Germany, but not in the UK. Disputes with planning authorities have also meant that Edmonton was the first new Ikea opened in the UK since 1999.

Kamprad long gave up day-to-day running of Ikea and lives with his second wife Margaretha in Switzerland - apparently for tax purposes, of course. Kamprad has sheltered Ikea from Sweden's confiscatory taxes and death duties by shrouding the business in trusts and holding companies, ensuring that Ikea will continueafter he is gone. He has not to look far for a successor. Kamprad has declared that whichever of his three sons is most successful in running his arm of Habitat will inherit Ikea. Flatpacks are here to stay.