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Ikea is lowering its global average selling prices for furniture as inflationary pressures ease at the flat-pack retailer despite worsening economic conditions.
Sales at the world’s largest furniture retailer rose 6.6% to 47.6 billion euros in the year to the end of August, but only as lower sales led to higher prices.
Ikea has been forced to resist its practice of lowering prices over time during the Covid-19 pandemic, as rising raw material and shipping costs have led Ikea to pass on price increases to customers, an uncomfortable position for the retailer.
“Going into 2023, our prices are higher than we would like. We’ve already lowered our prices in late 2023 and 2024. Our supply costs are starting to come down,” said Inter Ikea CEO Jon Jon, who owns the brand and concept. Abrahamsson Ring said.
Jesper Brodin, CEO of major IKEA retailer Ingka, added: “Now is the time to buckle up. It’s not going to be easy in the next few years. What I’ve seen this year is that our customers are facing Interest rate challenges. So we’ve been lowering prices and every market is investing in lower prices.”
Ikea executives say the sharp rise in input prices in recent years is reversing, allowing them to start slashing their prices and restart offering all products after a period of short supply due to supply challenges.
But they acknowledged they were unsure whether it would help spur consumer spending as many countries face the prospect of a recession.
“In what ways does it stimulate consumption? Is it possible to stimulate growth through affordability? During the Lehman Brothers crisis (2008), it was possible to achieve this in northern Europe, but not in southern Europe,” Brodin said.
Ikea has also bucked the trend, which has seen many retailers reduce the number of stores they operate. Ingka operates 537 stores of various sizes and opened 60 new stores last year, including city center stores in Copenhagen, Madrid and San Francisco as well as smaller program and order points.
“It’s like the death of books,” Brodin said, referring to predictions about the end of stores. Visits to IKEA stores increased 7% last year to 697 million, while the company increasingly uses them as fulfillment and logistics centers for its online business.
IKEA has undergone a broad transformation over the past five years, moving away from offering larger stores purely outside towns to opening more stores in city centers and offering more services to customers, such as delivery, assembly and planning.
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