In light of cost decreases and slowing inflation, IKEA intends to continue lowering prices to stimulate sales.
Recent reports reveal that Swedish home furnishing retail giant IKEA is reducing prices in multiple countries. It is reported that against the backdrop of reduced transportation costs, falling raw material prices, and easing inflation, the purpose of this significant global price reduction is to retract the price increases from 2022. Tolga Öncü, head of the retail division of IKEA's parent company Ingka Group, stated that for IKEA, the focus now should be on investing in pricing rather than profit margins.
In fact, the trend of price reduction did not emerge only recently. At the end of August 2023, IKEA China disclosed plans for the 2024 fiscal year, mentioning "price investments" for over 300 products. A few months later, the scope of price reductions expanded to nearly 500 items, covering various settings such as bedrooms, living rooms, and kitchens. Besides the Chinese market, IKEA is also implementing low-price strategies in other global markets. In January of this year, IKEA Germany announced further price reductions, with some products expected to return to pre-pandemic and pre-Ukraine war prices or even lower. On February 1st, IKEA Belgium also announced price reductions on a quarter of its products, mostly comprising the currently most popular items, demonstrating swift and precise pricing adjustments. Additionally, IKEA is adjusting prices in multiple markets including Canada, the United States, and India.
Some analysts point out that during periods of low consumer demand, strategies such as price reductions, akin to those employed by IKEA, are more practical from a business perspective. Such strategies help stabilize the consumer base before seeking benefits from aspects like raw materials and channel reforms. However, some industry insiders believe that the so-called price investments have always been in line with IKEA's survival strategy, rather than being a necessity to adapt to the overall environment. Catering to the target customer base, IKEA focuses on minimalist, comfortable, and durable products that are not only aesthetically pleasing but also affordable, thus enjoying widespread popularity among the general public, especially young families. Understanding what customers need and how to encourage their spending can be considered a significant factor contributing to IKEA's strong competitiveness.
Öncü stated that, despite facing challenges such as geopolitical risks in certain regions, IKEA will continue lowering prices in all countries, and uphold its commitment to customers.