IKEA CEO Hopes $2.1 Billion Price Cuts Will Draw Shoppers From Costly Competitors After Shaky Year

Things are tight for shoppers right now. Prices are high. Wallets are stretched. And people are looking for deals wherever they can. IKEA's CEO, Jesper Brodin, gets it. “This has not been the most prosperous year,” he said in a recent interview with Business Insider. No kidding.

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To help, IKEA's cutting prices – big time. The company's spending $2.1 billion on slashing costs on its most popular items. Why? to attract shoppers who are skipping pricier stores. And guess what? It's working. 

"We're seeing more customers who might've gone to more expensive competitors," Brodin told BI at his company's new Oxford Street store in London. "So we saw more people." Makes sense. When money's tight, people want the best bang for their buck.

But it hasn't been smooth sailing. IKEA's sales dropped for the first time since 2020. They're down 5.3%, falling to $47.5 billion for the year ending August 31. Tough times, even for the king of budget furniture.

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Brodin says it feels like 2008 all over again. Back then, shoppers pulled back hard after the recession hit. Even with inflation cooling, people are still holding on to their cash. They're shopping for the basics, like beds or kitchen tables, not splurging on extras.

"People have the same needs, but they have much less money in their wallet," Brodin said. It's all about needs-based shopping now. Think college essentials or setting up a nursery – stuff you can't skip.

DIY projects? Those are taking a hit, too. High interest rates mean fewer people are borrowing for home improvements. That's not great news for IKEA, but Brodin's staying optimistic.

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The pandemic didn't make things easier. Back then, everyone wanted new furniture for their home offices. However, IKEA struggled with supply chain issues and store closures. They shifted to online shopping, which helped, but the pressure hasn't let up.

"Home furnishing is still down globally," Brodin said. High rates and inflation are the culprits. And even with rates easing, he doesn't expect a quick bounce-back. "It takes time for people to open their wallets again."

China's not bouncing back fast, either. Retailers like IKEA, Starbucks and luxury brands are feeling the pinch. Brodin's hoping government stimulus there will help. But for now, shoppers everywhere are still cautious. 

It's a waiting game. IKEA is betting that lower prices and smart moves like opening a new store on London's Oxford Street will keep them ahead. But for now, everyone's feeling the squeeze.

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