Ikea cutting prices as inflation eases and more could be on the way

Swedish home and furniture company Ikea has been cutting prices across a number of countries as global inflation eased, as it boosts its investments in price reductions.

The company is further expanding its price cuts in 2024 across all of its markets globally, aiming to dial back price increases that were introduced in 2022. This move comes as the cost for transportation and raw materials decreases.

“We are doing it in all the markets where we operate,” Tolga Öncü, head of retail at Inkga Group, the biggest owner of Ikea stores, told CNBC on Monday.

“This is the moment for companies like Ikea to invest in pricing rather than profitability,” he said, adding that a lot of people now have “thinner wallets.” The price cuts, which started in Europe in September, have led to an increase in customers, as well as an increase in items sold by the retailer, according to Öncü.

Between September and November, Ingka has invested more than 1 billion euros ($1.1 billion) in price cuts across markets it operates in, according to Reuters.

In Canada, the price of its popular Billy bookcase has fallen by 20% since the company invested 55 million euros to trim prices for over 1,500 products, Ingka said in January.

The commitment to continue cutting prices comes several months after the Swedish retailer warned of delays, following a major commercial shipping disruption in the Red Sea.

Cargo worth billions of dollars have been diverted due to safety concerns surrounding a wave of Houthi attacks since December 2023.

Despite facing geopolitical risks in the Red Sea, “we are more and better equipped than we have ever been, so we will stick to our promise to continue decreasing the prices in all the countries where we operate,” Öncü told CNBC’s Squawk Box Asia.

“In Ikea, it’s all about serving the many,” he said. “The dreams and desires of many people to have a better home hasn’t changed due to economical touch challenges, so I’m happy that we can contribute to provide more affordable and more sustainable products to the many people.”

Ingka Group also has plans to grow it’s mall portfolio by anchoring its shopping centers with Ikea stores. The holding company looks to turn Ikea stores into destinations by incorporating co-working spaces, eateries and more, according to The Wall Street Journal.