Swedish home furniture giant IKEA has announced that it is raising prices by an average of 9 percent across its global markets.
The company insists it has been forced into the price hike after being hit with supply chain issues that are currently wreaking havoc across the world, prompting businesses to increase costs for customers.
In a Thursday statement, Ingka Group, which owns most IKEA stores, noted that “our homes have become more important to us than ever” amid constant COVID-19 pandemic-related lockdowns over the past 18 months.
In turn, IKEA has seen an increase in demand for its products from consumers, such as workplace and outdoor furniture and storage solutions.
“Like many other retailers, Ingka Group has faced an unprecedented demand for products,” the statement read.
“And while IKEA has shipped more than ever before, it was still not possible to meet the needs of all customers.”
In an effort to meet soaring demand and customer needs, Ingka Group made “significant investments in physical and online retail operations”, totaling 3.2 billion euros, which it said allowed IKEA to “continue to deliver on its promise to offer a large variety of products for all parts of the home to customers all at once.”
“During the pandemic, despite rising costs all around us, Ingka Group kept prices stable with the aim to keep prices as low as possible for customers,” Tolga Öncü, retail operations manager at IKEA Retail (Ingka Group), said.
“It was the right thing to do.”
IKEA franchisor Inter IKEA Group has been absorbing supply chain-related costs this year, which totaled 250 million euros, in an effort to keep costs low for customers and they plan to do so in 2022, too.
However, like hundreds of other industries across the United States and indeed the globe, IKEA is battling significant supply chain issues which are driving up costs, and the company said it expects to face further disruptions in 2022.
The biggest cost increase is currently being felt in North America and Europe, the company said.
As a result, the Swedish furniture giant will raise its prices by an average of 9 percent across its global markets to reflect the changing economic conditions and localized inflation.
“We are taking this difficult step right now to ensure we can live up to our purpose to create a better everyday life for the many people, and to safeguard our competitiveness and the resilience of our company,” Öncü said. “However, affordability will always be a cornerstone for us.”
IKEA warned earlier this year that prices would increase, citing the global transport crisis and a rise in raw material prices, among other factors.
“The global pandemic affected our operating income in FY21,” the company said in November.
“The biggest cause was the steep increase in transport and raw material prices in the second half of the financial year.
“The full impact of this can be seen in the increased costs of goods sold which reflects the cost of sourcing, handling, and distribution of IKEA products.”
Throughout the globe, industries are facing acute bottlenecks in supply chains, such as material and worker shortages as well as the skyrocketing prices of materials, driven by pandemic lockdown measures.
Meanwhile, inflation levels have risen in a number of countries.
In the United States, the rate of inflation hit a multi-decade high of 6.8 percent in the 12 months through November.
Some economists have warned that they expect a shortage in goods and price increases to persist into the middle of 2022 amid the ongoing supply chain crisis.
Despite consumers facing higher costs, demand remained positive in the run-up to Christmas in the United States with retail sales rising 8.5 percent between November 1 and Christmas Eve compared with the same period last year, according to Mastercard’s SpendingPulse.