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Ikea Reacts to Pandemic Pressures By Raising Prices

As the COVID-19 pandemic enters its second year, many of the issues it has brought to the home industry still persist. Shipping delays coupled with exorbitant transit fees have made sourcing product costlier than ever. And while many companies have absorbed those increases to avoid raising prices for customers, some have begun announcing price hikes.

Ashley Furniture has implemented several price increases over the past year, and furniture manufacturers such as Jackson Catnapper, Woodard, Mallin, LeatherItalia and others have added surcharges. Now, Ikea joins their ranks, announcing price increases set to take effect this year.

A statement released earlier this month by Ikea’s parent company, Inkga Group, announced an average 9 percent price increase globally, “reflecting localized inflationary pressures, including commodity and supply chain issues.”

According to Tolga Öncü, retail operations manager at Ikea Retail (Ingka Group), the company held off as long as possible before implementing a price increase.

“During the pandemic, despite rising costs all around us, Ingka Group kept prices stable with the aim to keep prices as low as possible for customers,” he said. “It was the right thing to do.

“Unfortunately, now, for the first time since higher costs have begun to affect the global economy, we have to pass parts of those increased costs onto our customers,” Öncü added.

One exception to this increase is Ikea franchiser, Inter Ikea Group, which absorbed additional supply chain-related costs amounting to EUR 250 million in fiscal year 2021 to soften impact on retail prices. They say they plan to absorb additional costs in fiscal year 2022.

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While prices are raising globally for Ikea, the company noted shipping and purchase price hikes have been felt most acutely in North America and Europe. When we reached out to Ingka for comment, the company declined to elaborate on the amount of shipping increases they’ve seen, but they confirmed United States outlets would likely see the full nine percent increase.

“The situation looks very different between different markets and between different stores within the same country,” the company said via an email interview. “We are doing everything we can to make our products available to our customers.”

While price increases may be more palatable for the customers of mid- to upper-range furnishings manufacturers and retailers, for shoppers of outlets like Ikea—which has positioned itself as a more affordable option for home goods—those hikes can be an issue. Ikea said it plans to continue re-investing in the company to help ease the blow of increases.

“We invest a large part of our net income back into the business to keep prices as low as possible, particularly for the lowest priced range, ensuring that as many people as possible continue to afford IKEA,” it said.

One option that may keep Ikea’s prices accessible for some is the company’s Buy Back & Resell program, which has helped Ikea increase circularity while offering reduced prices on products bought back from customers and resold in special resale sections in stores.

“The price increases for Buy Back & Resell products will be lower than for the firsthand range,” the company said. “The buy back value is based on historic sales price and condition of product. The sales price for second-hand is set based on original/historic price compared to value and shape of the product, always lower than firsthand, and in line with the value set for our customer when buying back.”

While Ikea didn’t rule out permanent price increases or additional hikes to come, the company did say it will do what it can to avoid additional changes, within the parameters of navigating business in a post-pandemic world.

“At Ikea, we always strive to keep prices as low as we possibly can, yet it’s hard to predict how the global disturbances might impact in the coming months,” it said.