[SHANGHAI] Ikea pledged to keep prices lower at its China stores, as the world’s largest furniture retailer courts thriftier buyers and seeks to fend off competition from local rivals.
The Swedish company will commit 20 million euros (S$30 million) in the fiscal year starting Sep 1 to efforts to slash prices further in the market, according to Tolga Oncu, chief operations officer of Ingka Group, Ikea’s largest franchisee.
“We are continuing to invest in lowering the prices in China compared with other countries,” Oncu said in an interview with Bloomberg News in Shanghai on Tuesday (Sep 2). “It’s too early to say if we are lowering prices more in China or less, but I know that China is one of those countries we are investing the most.”
Ikea faces challenges in China as weak consumer spending, a cooling property market, and slowing economic growth sap demand for big-ticket home goods. Consumers are also spoilt for choice, with e-commerce sites flooded by low-cost sofas, cabinets, and storage units that mimic Ikea’s designs but sell for less – undercutting its edge in affordable furniture.
While Ikea has trimmed prices globally, weak spending and intense competition have made cuts especially vital in China. The flat-pack furniture seller has already earmarked more than 80 million euros over the past two fiscal years to lower prices on more than 1,000 products there.
In the new fiscal year, Ikea plans to roll out more than 1,600 new home products, 23 product lines, and over 50 food items in China, according to the retailer. It will also cut prices on 150-plus products.
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Ikea China currently accounts for 3.5 per cent of the company’s total global sales, according to Ingka. Its contribution to total sales have slipped over the years, but the retailer still counts China as one of its top 10 markets.
China is also a key manufacturing site for Ikea, a presence that has helped hone local makers’ ability to produce furniture of similar quality and design, in turn threatening to lure away its customers.
In addition to opening more brick and mortar stores, Ikea has also deepened its online presence in the country. Last month, it opened a flagship store on JD.com, one of China’s biggest e-commerce platforms, expanding its online presence from Alibaba Group Holding’s Tmall and its own app.
At a time when both foreign and domestic firms are looking to shift production out of China amid the US trade war, Oncu said that the Asian country has been and will remain an important strategic market for all components of Ikea, including manufacturing and the retail business.
In the US, where Ikea has a major presence, the company faces a potential blow from possible new tariffs. US President Donald Trump last month announced a tariff investigation into furniture imports, while threatening “very substantial tariff” on the industry soon. While Ikea has some manufacturing in America, it still purchases products from countries such as China for the US market, where its sales came in at US$5.5 billion in fiscal year 2024.
Ikea is closely monitoring the situation, Oncu said, adding that it will try to mitigate the impact once it’s clear what the consequences will be exactly. BLOOMBERG
