(Bloomberg) -- Ikea’s sales took a hit in 2024 as the flat-pack furniture seller lowered prices in a bid to remain affordable for its customers.
The Swedish company’s currency-adjusted sales fell 4% to €45.1 billion ($49.3 billion) for fiscal 2024, after hitting a record the year before when it pushed prices up as inflation soared.
While revenue declined in the year through August, Ikea said the move to shave the prices of its most popular products resulted in higher market share, more store visits and a rise in web traffic.
“When we lower the prices, the business model works,” said Jon Abrahamsson Ring, chief executive officer of Inter Ikea Group, worldwide franchiser for the brand. “It’s when we increase prices that there’s a risk for the business model.” Speaking in an interview at an Ikea store in Brooklyn, New York, he added that volumes have also climbed.
The company, not traditionally associated with e-commerce, has been investing to improve its online capabilities. Web sales represented 26% of Ikea’s sales in 2024, up from 5% in 2019, which Abrahamsson Ring attributed to an increase in pick-up locations.
Ikea opened three full-size stores, 8 smaller stores and 44 new specialized pick-up locations during the year.
Ikea, which operates in 63 countries and employs more than 200,000 workers, boosted prices in 2022 after reporting a billion euros of inflationary costs. Abrahamsson Ring said at the time that the increases “hurt my soul.”
The company has cut prices about 10% this past fiscal year, Abrahamsson Ring said, adding the company hopes to be able to continue to cut costs going forward.
“IKEA always has to lower the prices every year with a few percentage points,” he said. “That has been the model for us to grow.”
Low prices are a central part of the big-box retailer’s appeal, and it’s able to undercut competitors in part due to its practice of selling its furniture disassembled, with the pieces coming stacked in flat boxes, which saves costs on shipping.
Heading into 2025, Ikea is betting consumers will spend on improving their bedrooms and upgrade their apparel storage. With inflationary pressure expected to ease in 2026 and residential construction seen increasing, the company is preparing to push its kitchen business, Abrahamsson Ring said.
©2024 Bloomberg L.P.