November 29, 2021

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IKEA owner warns of high prices - E24

IKEA owner warns of high prices – E24

Increased shipping costs and higher raw material prices mean that IKEA centrally announces higher purchase prices for supermarkets in the future. What this means for Norwegian customers is currently unclear.

Even if prices will rise from a central point of view, Ikea Norway does not know if it will affect the prices of Ikea Slependen and other stores in Norway.

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The 2022 fiscal year will be more difficult with more challenges, says Intra Ikea Group Chief Financial Officer Martin Van Damme, to Reuters.

The global shipping crisis in the wake of the Corona pandemic and the shortage of raw materials are the reasons that the IKEA Summit refers to when it announces price hikes.

The Intra Ikea Group together with the owner Inter Ikea Holding BV is the center of Ikea. Among other things, they own the Ikea concept and mainly make money by selling merchandise to Ikea franchises.

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The parent company kept purchase prices for retailers unchanged during fiscal year 2021, but it will not continue.

“Although we cannot continue to secure fixed prices for merchants in these challenging circumstances, we plan to share in the bill for increased costs in fiscal 2022,” Van Damme says. In the company summary for the year.

The result for fiscal year 2021, which runs from September 1, 2020 to August 31, 2021, was presented on Wednesday. The Intra Ikea Group posted a pre-tax profit of 1.71 billion euros. It’s a little lower than fiscal 2019, the last full year before the pandemic.

Supermarket owners will have some freedom in deciding whether higher purchase prices will affect prices for the consumer, or to what extent, Van Damme told Reuters.

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It is unclear how it affects Norwegian prices

Whether prices will rise in Norwegian stores, IKEA Norway can’t say anything about it yet, according to commercial director Eja Tuominen.

– It is very difficult now to determine what the prices will be in the future. After the end of the year, we will consider whether any changes are necessary. So nothing will happen until the end of the year, she says.

Tuominen says they are happy that they have been able to keep prices even into 2021, and that they are primarily interested in keeping prices low.

Eja Tuominen, Commercial Director at Ikea Norway

Tuominen says it’s also hard to say with certainty which products might be at risk of price increases. The reasons are that ongoing crises do not affect all commodities equally.

– Transportation costs increase more for small goods produced in Asia, while raw material prices affect wood products produced in Europe. If there is a price increase due to raw material prices, it is the furniture that is affected, while if transportation fails, it will affect smaller products, says Tuominen.

She also points out that the krone exchange rate does influence, and that together this makes the picture complicated.

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I think the shortage of goods will continue

Transportation challenges not only contribute to higher prices. It also presents challenges in the availability of all products. Container shipping capacity has exploded in the world, especially between Asia and the West. Capacity challenges affect many industries, and as E24 wrote previously, Ikea is also affected by commodity shortages.

– Problems in the supply chain have led to a significant decrease in the availability of products, which we have not yet overcome. We expect this to continue well into fiscal year 2022, Inter Ikea Group wrote in its annual summary.

The challenges affect customers who want to buy wardrobes or kitchens, says Ija Tominen at IKEA in Norway.

Kitchens contain many ingredients, so there is a higher risk that the delivery time will be longer than usual. A small table is either available or not, but it is not easy with the kitchen.

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