After price increases in 2022, the furniture retailer is reducing many prices again. Ikea boss Brodin talks about the reasons and says how German customers differ from those in other countries.
Ikea Germany has announced further price reductions for parts of its range. “After the cost increases in recent years, we are experiencing massive deflation. Raw material, energy and transport prices are falling. We want to pass this on to our customers,” said Ikea boss Jesper Brodin in an interview with the German Press Agency. The price reductions also served to “attract people to the shops”.
A total of 2,000 products are to be permanently reduced this year. According to the company, this corresponds to around 20 percent of the entire range, 80 percent are not affected. According to Ikea, individual items will in future be at or below the price level before the pandemic and the Ukraine war. According to the company’s own information, the plans for reductions cost a mid-three-digit million range.
Huge drop in demand
It was not until 2022 that Ikea significantly increased prices worldwide, by an average of nine percent. The pandemic, economic crisis and the war in Ukraine had made the furniture business more difficult. “We could see in all markets that people had less money in their wallets. Globally, we have never seen such a drop in demand,” Brodin said. Now the situation is normalizing. However, cheaper items are still particularly in demand.
The furniture trade has recently been particularly affected by the poor consumer mood. The industry is complaining about a significant drop in sales. The Association of the German Furniture Industry expects a decline in sales of five to seven percent for 2023. At Ikea Germany, business has been going significantly better recently. The furniture retailer reported record sales of 6.4 billion euros for the 2022/2023 financial year. The number of visitors rose by around 11 percent to 81.8 million.
Brodin: Every second person plans to move
According to the Ikea boss, the company has an advantage. “With all the changes we’re experiencing, people’s needs are the same as they were five or 10 years ago. You have your first child, move into your first apartment and need the essentials,” Brodin said. “We expect that more than half of the people in Germany will want to move and create a new home in the next two years.”
Germany is the group’s largest single market worldwide. Ikea operates 54 furniture stores here with almost 19,500 employees. According to Brodin, customers in Germany do not shop significantly differently than in other countries, but he does see some differences, for example when it comes to food. “In our German branches, 25 percent of customers buy plant-based products, compared to the global average of only 12 to 13,” said Brodin. He was surprised that people in Germany were making progress when it came to nutrition. Overall, awareness of the issue of sustainability is much more pronounced in this country than in other countries.
According to Brodin, practical things will be particularly in demand at Ikea worldwide in 2024, for example around storage. “That’s because life at home has become such a focus. We also own so many things, so the need for storage space is incredibly large.” The department with shelves, boxes and other storage items is now one of the most important at Ikea.
Source: Stern
