Ikea thinks it can lower its prices further, now that costs are stabilising and the supply chain is untangled. Lower prices will help people buy more again, the home furnishing chain expects.
Costs tempering down
Although profits at Ikea took a big hit this year, the furniture retailer still wants to cut prices. Input costs are starting to stabilise, and supply chain disruptions should finally be over as well. For instance, sea transport is becoming cheaper again and metal prices are stabilising too.
The Swedish group is therefore optimistic that it can continue to focus on price cuts in the future, retail chief Tolga Oncu told Reuters. Ikea thinks it can benefit from the cost-of-living crisis, as price-conscious consumers today are turning to more budget-friendly retailers and brands.
After peaking during the coronavirus pandemic, sales in the home category fell sharply. People are postponing large purchases and keeping a tight hold on their purse strings. By cutting prices, Ikea thinks it can still increase volumes. “In times like these, our business model bears fruit“, Oncu says.
Belgian country manager André Schmidtgall previously confirmed that basic products are becoming cheaper. “At the beginning of the year we lowered prices, then had to raise them, now we are lowering them again. The market is volatile. To boost volumes, we are betting on what we call ‘breathtaking items’: attractive products at the lowest possible price.” Premium products, such as leather sofas, then become more expensive to offset margins.