Reasonably priced yet chic furniture is fundamentally how Ikea attracts customers. Merchandise is priced up to 50% less than their competitors and the distinctive flat packaging helps it save on storage and transportation costs.
This allows the popular home goods store to continue offering low-priced goods but by next year in 2022, that won’t be the case anymore…
Recently, Ikea announced that it will be raising prices to offset rising transport and raw material costs. According to BBC, Martin van Dam, CFO of the Swedish furniture giant, said that the price increases would come into force next year.
Ikea is among a growing group of retailers and manufacturers that are lifting prices to offset rising inflation caused by higher transportation, packaging, and labour costs. The global supply chain crisis also means that businesses across all industries are struggling to make and ship their products to meet consumer demand.
So what does this mean for us Malaysians? Since Ikea operates under a franchise model, it will be up to franchisees to decide whether to pass the higher costs on to their customers, Martin said.
He spoke after Ikea’s latest annual results revealed that margins had been squeezed as a result of leaving wholesale prices untouched as input costs rose.
“Keeping Ikea stores and warehouses stocked has been a challenge. Supply chain disruptions led to a substantial drop in the availability of products that we have yet to recover from… Raw material prices increased dramatically in the second half of FY21 following an unfavourable combination of scarcity and high demand,” the company wrote in its annual summary.
It added that transport costs rose due to the “limited availability of containers and carriers as a result of the pandemic”.