IKEA, the world renown budget furniture retailer, appears to be sticking to its plans to reduce prices on its products. This is being done despite the disruptions to Red Sea shipping that are likely to push up costs.
According to reporting by Reuters, the furniture giant said that it likely had sufficient stocks to absorb any supply chain shocks.
Jesper Brodin, CEO of Ingka Group which owns most IKEA stores worldwide, had said that they are committed to making sure that their customers can continue to enjoy lower prices in spite of the disruptions.
Over 1 billion euros invested to reduce prices across all markets
From September to November 2023, Ingka Group has invested over 1 billion euros (US$1.1 billion) to facilitate price reductions across all its markets and intends to continue lowering prices in 2024.
For those not in the know, global commerce has been greatly disrupted due to the actions of Houthi militants, who have begun attacking commercial shipping in Yemen. As a result of these attacks, most shopping companies have decided to avoid the busy route through the Red Sea, with many ships being rerouted around the southern tip of Africa. The result is a longer and costlier trip.
IKEA to continue to observe deflations in its supply chain
The increase in transportation costs have also brought about the potential risk of inflation. However, Brodin noted that IKEA still observes “quite significant deflations” in its supply chain.
While the lowering of profits may hurt profits, Brodin states that IKEA tends to take market share when consumers are faced with financial pressures.
“This is not a year for us to optimise profits. This is a year to try to navigate on a thinner profit, but to make sure that we support people,” he said.
