Ikea Announces €1.2 Billion Investment in Europe-Wide Price Cuts to Boost Demand
By Helen Reid
Ikea's Strategy to Revive Demand Amid Economic Challenges
LONDON, Sept 1 (Reuters) - Swedish budget furniture retailer Ikea announced a new wave of price cuts on Tuesday as it tries to boost demand in Europe, at a time when the surging cost of housing in many countries has dented people's ability to move and curbed spending on furniture and homeware.
Investment Details and Revenue Goals
Ikea said it was investing €1.2 billion ($1.39 billion) in price cuts in total, with the aim of attracting cash-strapped shoppers and driving sales after two consecutive years of declining revenue.
CEO Insights on Cost of Living and Consumer Needs
"The cost of living is increasing and it's getting tougher and tougher for many people," said Juvencio Maeztu, CEO of Ingka, the biggest Ikea retailer worldwide, which operates Ikea stores in most European countries under the franchise model run by Inter Ikea, the brand owner and furniture supplier.
"For many people, home is a bedroom in a shared house, and it's even more important to offer storage and organised solutions," he added.
Specific Price Reductions Across Key Markets
In Germany, Ikea's biggest market by revenue, the retailer said it cut prices on more than 1,500 products, like the Poang chair reduced to €119 from €179. In Britain, the Kallax shelving unit was reduced to £49 ($66.37) from £60 ($81.26) and the Alex drawer unit to £55 from £70.
Product Redesign and Cost Optimization
"We try to constantly optimise the cost picture by redesigning the products from the beginning," said Jakub Jankowski, CEO of Inter Ikea, which sources from its own factories as well as third-party suppliers. A redesign of the Pax wardrobe line cut packaging costs by 70%, he said.
Manufacturing Efficiency and Sustainability Initiatives
Greater automation and using renewable energy have also helped bring costs down, Jankowski said. Europe is a key manufacturing region for Ikea, with Poland, Italy, Lithuania and Germany among its top sourcing countries.
Expansion and Franchisee Participation
As it tries to attract new customers, Ikea has also opened seven smaller stores across Europe since January, shifting away from its traditional out-of-town big-box model.
Franchisee Agreements on Price Cuts
Inter Ikea said its other franchisees had also agreed to price cuts: Sarton Group in the Balearic and Canary islands, Mapa in Turkey, Housemarket in Greece, Cyprus and Bulgaria, Miklatorg Group in Iceland and Inter Ikea Retail in Estonia, Latvia and Lithuania.
Currency Exchange Rates
($1 = 0.8610 euros)
($1 = 0.7382 pound)
Reporting Credits
(Reporting by Helen Reid in London; Editing by Matthew Lewis)
