How Ikea is doubling down on price cuts to attract cost-conscious customers

Ikea shoppers volition spot terms cuts of up to 50% astatine galore of the company's restaurants globally, arsenic the Swedish retail elephantine aims to pull cost-conscious consumers.

The steep terms cuts volition beryllium a impermanent measurement to assistance consumers "stretch their budgets" astatine a clip of heightened economical uncertainty and precocious cost-of-living pressure, the institution said, without specifying erstwhile the cuts volition travel into effect. The location and furnishings retailer said it would besides connection escaped meals for children.

"Consumer assurance has decreased. People are holding connected to the wealth that they person successful their pockets oregon successful savings," Tolga Öncü, COO astatine Ikea Retail, told CNBC's Emily Tan Wednesday.

The flat-pack furnishings seller slashed wholesale prices by an mean of 15% past year, allowing retailers to chopped prices for consumers.

Efforts to heighten affordability outgo 2.1 cardinal euros to the institution past year, according to Öncü, adjacent arsenic little prices saw gross driblet about 9% and retail sales diminution 5.3%.

Ikea besides plans to unfastened 58 caller stores globally during fiscal twelvemonth 2025 ending successful August, with its archetypal outlet successful Seoul — 5th successful South Korea — up and moving since April.

By cutting prices truthful deeply, Ikea is bucking the inclination arsenic a slew of Western retail brands person warned of terms hikes, passing onto consumers portion of the higher work costs importing into the U.S.

Retail giants specified arsenic Walmart, Target, Costco and Nike said successful their latest quarterly net reports that they person already raised prices oregon program to bash truthful successful the coming weeks.

Although planetary firms took a suspiration of alleviation aft the Trump medication had suspended sweeping "reciprocal" tariffs for 3 months and struck a preliminary woody with China, Walmart CEO Doug McMillon said successful May that "we aren't capable to sorb each the unit fixed the world of constrictive retail margins."

Ikea is not "immune" to the higher tariffs, which are expected to substance ostentation and measurement connected user confidence, said Öncü, though it has been capable to "somewhat sorb the interaction and not walk connected the full interaction to customers successful the U.S."

The terms reductions are, however, an urgent request successful China — a cardinal marketplace for Ikea — wherever section businesses are cutting prices aggressively to enactment competitory and pull customers amid sluggish user demand.

Ikea has 39 stores successful China, though the stock of its planetary income successful the state has been sliding successful caller years and was astatine 3.5% successful 2023-24 fiscal year.

"Big-ticket request successful China volition beryllium held backmost by decreased user confidence," said John Mercer, caput of planetary probe for Coresight Research. Mercer pointed retired that "economic optimism" among China-based consumers fell to its lowest level successful good implicit 2 years successful May.

"There volition beryllium limits to however overmuch a big-ticket retailer tin stimulate request successful an uncertain context, but an assertive terms stance is apt to enactment market-share gains arsenic cautious consumers commercialized down," Mercer added.

Retailers successful China are betting large connected nutrient and beverage arsenic 1 of the fewer offline segments wherever consumers proceed to spend, though with little accent connected worth and cost, said a selling bureau advising European brands operating successful China.

Outside the nutrient business, Ikea is besides looking to grow its location furnishing merchandise scope to pat into China's increasing elder population.

Öncü emphasized the request to pat into China's "silver economy" — a sector that provides goods and services for radical implicit 50.

Economists estimation that by 2040, around 30% of China's colonisation volition beryllium implicit 60 years old, compared to astir 15% successful 2024. The aged colonisation volition besides contiguous a promising marketplace accidental arsenic they thin to beryllium much financially sound, having accumulated wealthiness on with China's economical rise.

"Multi-generational homes are increasing. That's wherefore we person introduced the caller bedding and range. We are present investigating to reply to those needs that has travel from the metallic system successful China," Öncü said.

"If anyone knows however to cater to planetary consumers with a highly price-competitive connection successful furnishings and furnishings, it's IKEA," Coresight's Mercer said, but "whether planned terms cuts volition beryllium sustainable is for IKEA to determine."

The Swedish institution said it besides planned to present caller items catering to Asian cuisine and flavors, which it hoped would bring successful astir 8 cardinal caller customers.

"We volition soon motorboat our precise archetypal falafel, adding this fashionable nutrient to our restaurants, and later, to our Swedish nutrient markets," Lorena Lourido Gomez, planetary nutrient manager astatine Ingka Group, the worldwide franchiser for the brand, said successful a statement.