Ikea to ramp up US production as tariffs bite 

[LONDON/STOCKHOLM] Ikea plans to source more products from factories in the United States, the Swedish furniture group’s top supply chain executive told Reuters, as US President Donald Trump’s tariffs drive up the cost of importing bookcases, mattresses and sofas.

This marks a big shift for Ikea after the share of the company’s US-made products declined over the past decade. Inter Ikea, the brand franchiser, used to have a factory in Danville, Virginia, but shut it in 2019 and moved production back to Europe.

Ikea’s push to source products closer to where it sells them aims to support the retailer’s expansion in the US, its second-biggest market, and the wider region, where it has stores in Canada, Mexico, Chile and Colombia, with plans to open in Costa Rica and Panama.

“We are designing our supply chain network to be much more resilient, robust, and responsive,” said Susanne Waidzunas, global supply manager at Inter Ikea.

She added that the company’s stores in North and South America are very dependent on furniture being shipped in, with long lead times.

“The closer we can build, the faster we can react from a supply perspective, both when it goes up in demand but also when it goes down,” she said.

The plan to produce closer to US consumers predates this year’s tariff hikes and is part of a global initiative, Waidzunas said. But the timing is now beneficial – Ikea prides itself on low prices but was forced to increase them on some products in the US to offset the tariff’s impact.

The retailer’s sales have declined for two years running as it lowered prices to attract inflation-weary shoppers.

Higher production cost, lower transport cost

SBA Home, a Lithuanian supplier to Ikea, is ramping up its first US factory in Mocksville, North Carolina, a US$70 million investment supported in part by Inter Ikea. The factory will make products for Ikea such as top-selling Kallax shelves.

Jurgita Radzevice, chief executive officer of SBA Home, said that the manufacturing capacity at the largely automated factory, which is expected to produce two million pieces of furniture a year, is steadily increasing.

Ikea depends more on imports in the US than elsewhere. Just 15 per cent of Ikea products sold in the US stores are made in-country, down from 19 per cent in 2014.

In Europe, 70 per cent of the products that Ikea sells are made in the region, while the equivalent figure for Asia is 80 per cent. Its top sourcing countries are China, Germany, Italy, Lithuania and Poland.

Producing in the US is more expensive, Waidzunas said, but shipping products across the world is also more costly and more unpredictable now than before the Covid-19 pandemic.

Ikea plans to buy more from existing US suppliers, which includes Ohio-based Sauder Woodworking, and look for new suppliers particularly of bulky items, aiming, for example, to source most of its mattresses in the US. REUTERS