IKEA built its empire on the promise that stylish furniture can be cheap, but years into the cost-of-living crisis, its latest price cut suggests shoppers want it even cheaper.
The Swedish furniture giant said on Tuesday it will invest about $1.4 billion (€1.2 billion) to lower prices across Europe, including cuts averaging 15% to 25% on items such as home furnishings, kitchen products and storage bins. The company cited higher living costs squeezing consumers and said it’s willing to sacrifice some margin to help.
“It’s about making IKEA more affordable when people need it most, even if it means accepting a lower margin,” IKEA’s largest franchisee Ingka Group CEO Juvencio Maeztu said in the press release. He also said, “keeping prices low is our long-term commitment.”
The cuts follow years of steep price growth. Euro-area inflation hit a record 9.2% in 2022, and furniture climbed alongside it: Eurostat’s harmonized price index for furniture and furnishings across the EU now sits about 24% above its 2015 level, with far sharper run-ups in markets like Estonia (up roughly 58%) and the Baltics. IKEA felt the same squeeze on raw materials and logistics—it took the rare step of raising prices after COVID before reversing course, and has since invested between €2 billion and €3 billion to bring prices down by about 10% since 2023.
“People have thin wallets, but they still have needs, dreams, and frustrations,” Maeztu told Fortune at the time. “That’s why Ikea has become a destination for those who want to maximize the value of their money. Ikea is made for crisis, so to speak.”
An IKEA spokesperson declined to give Fortune the specific margin sacrifice the company is making.
The reductions land as demand across the continent stays weak. IKEA’s most recent full-year results showed retail sales slipping 1% to €44.6 billion, which the company blamed on its own price cuts and cautious consumers, even as customer visits and volumes rose 3%—and Tuesday’s move follows two consecutive years of declining revenue. IKEA has pointed to the broader backdrop: surging housing costs in many European countries have curbed people’s ability to move, dampening the “new home, new furniture” spending that drives the category. European consumer confidence remains near its lowest level in three years, taking a sharp hit after the Iran war began in February; in the Netherlands, the national statistics office recorded confidence falling from -30 to -44 between March and April alone.
Companies adjusting to affordability crisis
While IKEA’s price cuts are limited to Europe, it joins Walmart, Target, Kroger, and other consumer-facing companies in trying to ease pressure on customers’ wallets amid rising gas prices and inflation.
Walmart said it will direct its $3 billion in tariff refunds to lowering prices, and Target said it will use its nearly $1 billion in tariff refunds to do the same. Kroger announced price cuts to thousands of products in May, though Sen. Elizabeth Warren accused the grocery giant of price-gouging last month.
“Everyday Americans still struggle to put food on the table because giant corporations, facing little competition, can force customers to pay too much for essential grocery items while they further increase their profits,” the letter to Kroger’s CEO Rodney McMullen said.
Americans are struggling to afford necessities like food, healthcare, and housing, with nearly half unable to afford the cost of living as expenses outpace wages, according to Urban Institute research. The war in Iran is also straining budgets, with gas prices rising to $4 a gallon nationwide.
Recognizing the effects of high prices on customers, IKEA had previously pivoted into the secondhand market, testing an online marketplace where people can buy and sell secondhand IKEA furniture in 2024 and rolling it out officially earlier this year in five countries.