Ikea CEO says prices are coming down. But pre-pandemic levels are still a long way off

If you’ve shopped on Ikea.com lately, you may have noticed the phrase “New Lower Price” in red letters above certain products. You may have also noticed that underneath the current price is the “previous price,” in case you didn’t get the message that after two years of hiking prices up to 80%, the Swedish furniture company is now on a “journey toward more affordability, accessibility, and convenience for the many,” according to a press release.

Joining other price-cutting retailers such as JCPenney and Walmart, the company in November announced its “New Lower Price” initiative, which promised to lower the cost of around 600 items up 20% with a focus on popular low-cost items (or key value indicators in industry parlance) such as the Kallax shelf and Billy bookcase.

“We are decreasing prices on the most famous IKEA products first, so many more people can afford them,” CEO and chief sustainability officer Javier Quiñones told Retail Brew in an exclusive interview, adding that consumers are “more conscious today because of the economic situation.”

He also stressed that it was always Ikea’s intent to reduce its prices after raising them in recent years due to skyrocketing supply-chain costs following the pandemic. “For Ikea, it is painful to increase prices and it always will be, and we will never be in that space if it is not absolutely necessary,” he said. “We saw the cost of raw material, we saw [the] cost of transport going down, and we didn’t wait a single minute to pass it to the customers.”

But Ikea still has a long way to go before it’s able to bring prices down to pre-pandemic levels, and Quiñones isn’t making any promises as to when that will happen.

“I wish I could say we’re going to be at the same level as pre-pandemic soon,” he said. “That would be a good goal, which I’m not committing [to] right now.”

The Poäng armchair, for example, is now selling for $119. The previous price listed online is $129, which is a reduction of ~8%. Prior to the pandemic, however, that same chair sold for around $87 in 2019, according to the Ikea catalog from that year, meaning the price is still up 27%.

Closer to customers: Quiñones explained that historically Ikea’s prices have trended downward, making the last few years an anomaly. So in many ways, Ikea is sticking to tried-and-true methods to bring down prices, including working closely with manufacturers to design and develop their furniture toward a particular price point.

One way that Ikea’s strategy is evolving is in its approach to omnichannel distribution, which Quiñones said will also help bring down prices longer term. The company unveiled a plan in April to invest more than $2.2 billion to grow its US footprint with eight new stores and nine “planning studios,” a new concept store that allows customers to see items and work directly with experts to plan their layouts.

Quiñones said this expanded market will help increase sales volume and allow Ikea to enter into better, longer-term agreements with suppliers to lower prices.

He added that Ikea’s recent investments in expanding its fulfillment capabilities in the US will also bring down prices: “When we do that, we are closer to where the customer lives, and by doing that, we also decrease the cost of transportation.”