SWEDEN - In response to a year characterized by surging inflation and waning consumer confidence across most of its markets, Ikea has taken the initiative to reduce prices.

Jon Abrahamsson Ring, CEO of Inter Ikea Group, the global franchiser for the brand, emphasized that 2023 represents a pivotal moment in Ikea's pricing strategy. The company is actively lowering prices on a variety of products, including a substantial 20% reduction in the price of popular items such as the Billy bookshelf as reported by Bloomberg

Despite the challenges posed by decreased consumer purchasing power and increased competition, Ikea achieved a record-breaking EUR 47.6 billion in retail sales for the fiscal year 2023. This figure reflects a 6.6% increase, thanks in part to price adjustments made in the preceding year and the first half of the current year. These price increases helped offset the ongoing issue of declining sales volumes.

Ring highlighted the intensified competitive landscape for consumer spending as well as the reduced financial resources available to consumers. He stressed that the ongoing cost-of-living crisis continues to impact demand for retailers worldwide.

At the start of the year, Ikea initially raised prices for its franchisees due to the skyrocketing costs within its supply chain. However, since May, price pressure has begun to ease. Ring pointed out that raw material prices and transportation costs are moving in a favorable direction. Additionally, product availability at Ikea stores has substantially improved, marking a positive shift from the global shortages experienced in previous years.

Even as Covid-related restrictions were fully lifted and in-person shopping resumed, Ikea's online sales remained relatively stable. The company has also proactively pursued the development of smaller store formats, introducing over 70 new locations. Furthermore, Ikea expanded its presence in a new market in South America with the opening of a store in Colombia.