Ikea is among the most recognized retail stores in the world—thanks to its much-loved serpentine stores and wide range of home furnishings.
Last year, as people struggled with sky-high inflation and interest rates, the Swedish giant undertook to cut prices so Ikea’s products stayed within their reach even if their pockets felt tighter.
Now, Ikea is planning to roll out another round of price cuts to ease its customers’ pain, starting May 1.
The reason the home furnishings company is doubling down on its strategy, contrary to the rising prices in every other industry, is simple—to cater to the budget-constrained consumer.
“Our founder, he was obsessed [with] supporting people with all kinds of wallets,” Tolga Öncü, Ikea’s head of retail, told Fortune in an exclusive interview on Tuesday. With accumulated inflation at close to 30% now, he said this was a chance to help shoppers, “not as a promotion, but as a promise,” he added.
The price cuts will kick in gradually, with Canada, France and South Korea among those that’ll see lower price tags on hundreds of products starting Wednesday.
For instance, in France, where Ikea has turbo-charged its expansion, 150 more products have been added to the 1,550 items that already had lower price tags. Overall, the cost of the price cuts in France will amount to €200 million ($215 million) for the current fiscal year. Meanwhile, in Canada, Ikea has invested €80 million ($86 million) in price reductions on 1,500 products this year.
The group doesn’t have an overall estimate on the cost of price cuts to its business yet, although Ingka Group, Ikea’s parent company which owns 90% of its stores globally, earmarked $1.1 billion to absorb the cost of these price cuts at the start of its fiscal year in Sep. 2023.
The reason Ikea can drive price cuts amid the inflation hoo-ha is because it’s privately run. Since Ikea isn’t answerable to scores of investors, it has more flexibility when initiating multiple price cuts at the expense of lower profitability.
That allows Ikea to operate “against the flow” and consider further rounds of price reductions, Öncü said.
“Historically, we’ve always been lowering prices. I look forward to next year and the years to come to continue finding ways to lower our cost of operation … and not necessarily focus on our own profit to be higher every year,” Öncü said.
It helps that consumers have received it well, as Ikea is gaining in volume what it might lose in price margins. Ikea’s head of retail has seen a sharp increase in store visitations and the sale of products with lower price tags.
“It’s above our expectations,” Öncü said.
Ikea hopes riding against the tide will ultimately make it the market leader in furniture and home decor—not just in Europe, but the world.
Clarification, April 30, 2024: This story was updated to clarify that Ikea is carrying out its third price cut.
