(Bloomberg) -- Ikea, the flat-pack furniture giant, has started cutting prices after a year marked by soaring inflation and weak consumer sentiment in most of its markets.
“I think 2023 was the year where we turned the corner on prices and started lowering them again,” Chief Executive Officer Jon Abrahamsson Ring of Inter Ikea Group, the worldwide franchiser for the brand, said in an interview. The company is cutting prices across a range of products, including a 20% cut on the popular book shelf Billy, he added.
Ikea’s retail sales hit another record at €47.6 billion ($50.6 billion) for the 2023 fiscal year, an increase of 7.3% when adjusted for currency impact, thanks to price increases from the previous year and the first half that helped compensate for the “continued challenge of lower sales quantities,” Ring said.
Not only is competition over consumer’s wallets increasing, “the wallets are also getting thinner,” the executive said, pointing to how the ongoing cost-of-living crisis continued to affect demand at retailers worldwide.
The furniture company hiked prices to franchisees at the beginning of the year amid soaring costs in its supply chain. Since May, that pressure has eased as “raw material prices, transportation costs are going in the right direction,” he said. Product availability at Ikea stores also improved after the global shortages of previous years.
As Covid-restrictions were fully lifted and visitors returned to the physical stores, Ikea’s online sales remained roughly flat. The company continued to develop small store formats, adding more than 70 locations. It also entered a new market in South America with a store opening in Colombia.
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