The Swedish furniture group Ikea recorded a decline in sales in the past financial year, but expects tailwind in the new year thanks to lower interest rates. The Ingka Group, which owns most of the furniture stores, announced on Thursday that revenues had shrunk by 5 percent to 39.6 billion euros.
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In all sales markets, the economy and the furniture industry showed signs of slowing down almost simultaneously, said CEO Jesper Brodin. “I have to admit that we haven’t seen anything like this since 2008.” The company responded to declining customer numbers with price reductions of more than 2.1 billion euros. The market share remained stable at 5.7 percent.
The group expects demand to increase in 2025. This could benefit from the lower interest rates. During such times, more people move, which boosts sales of beds, sofas and shelves.
According to the company, the number of customers in the stores increased by 3.3 percent to 727 million last year. Growth was therefore weaker than before at 7.4 percent. The number of new openings fell to 41 from the previous 60. Ingka is planning 58 new openings worldwide in the new financial year. The share of online business in sales rose to 28 percent last year from 26 percent recently.
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IKEA sustainability
IKEA’s Sales Slip: A Strategic Move or a Cause for Concern?
As the news broke that IKEA’s sales had dropped by 5% in the past financial year, many were left wondering if this was a sign of trouble for the Swedish furniture giant. However, a closer look at the company’s strategy reveals that this decline may not be a cause for concern, but rather a deliberate move to boost customer visits and stay competitive in a rapidly changing market.
According to reports, IKEA’s Ingka Group, which owns most of the furniture stores, announced that revenues had shrunk by 5% to 39.6 billion euros [[1]]. But what’s interesting is that this decline is largely due to strategic price cuts facilitated by reduced raw material costs [[1]]. This move, while resulting in lower sales, has actually led to an increase in customer visits, as shoppers take advantage of the more affordable prices [[3]].
IKEA’s decision to cut prices is also seen as a response to the current weak housing market, where consumers are tightening their belts and looking for more budget-friendly options [[2]]. By reducing prices, IKEA is trying to attract more shoppers and stay competitive in a market where consumers are becoming increasingly price-sensitive.
While some might view this decline in sales as a negative sign, I believe that IKEA’s strategy is a shrewd one. By cutting prices and increasing customer visits, the company is ideally positioned to benefit from the expected tailwind in the new year, thanks to lower interest rates [[3]]. This move also shows that IKEA is willing to adapt and evolve to changing market conditions, which is essential for any business to stay relevant.
IKEA’s 5% sales decline is not a cause for concern, but rather a deliberate strategic move to boost customer visits and stay competitive in a rapidly changing market. As the company continues to evolve and adapt to changing market conditions, I expect to see IKEA continue to thrive in the years to come.
References:
[1] Finimize: IKEA’s Sales Slip Due To Strategic Price Cuts
[2] US News: IKEA Sales Fall 5% After Price Cuts Amid Weak Housing Market
<a href="https://www.lesprom.com/en/news/IKEAsalesdrop5toEuro396billionaspricecutsboostcustomervisits_115444/”>[3] LESPROM: IKEA sales drop 5% to Euro 39.6 billion as price cuts boost customer visits
