IKEA To Increase Its Prices As It Grapples To Keep Up With Supply Chain Crisis
Image via StockPhotosLV / Shutterstock.com
IKEA, which evidently has one of the farthest-reaching logistics strategies in the world, has conceded that ongoing struggles with the global supply chain would make it difficult for it to retain its prices in the coming year.
While demand for IKEA products rose sharply during the pandemic, with people around the world spending most of their days at home, the parent Inter IKEA Group suffered a pre-tax profit drop of 16% in the fiscal year ending September 2021 due to rising costs and the rush to stock shelves. Before the pandemic, there was only a 4% profit decline.
The BBC notes that IKEA Group makes most of its revenue from selling products to its outlets.
The company cited a “steep increase in transport and raw material prices in the second half of the financial year” as the main cause for the fall in income, according to an annual summary quoted by Reuters.
“The pandemic also disrupted global transport even as demand went up. As a result, many IKEA products sold out,” the furniture giant elaborated in a news release Wednesday. “At the same time, transport and labor shortages drove higher raw material prices.” It said it has yet to recover from these liabilities.
IKEA Group will pass some of its increasing supply-chain costs to stores in 2022, although it will leave it to the outlets to decide how best to manage these costs, Reuters reports.
Franchisees could, for instance, decide to raise their prices—which means fixed prices across stores won’t be guaranteed.
“Although our costs increased, we did our utmost by keeping the prices to our retailers stable in FY21,” said Inter IKEA Group’s CFO Martin van Dam. “Though we can’t continue to secure fixed prices to the retailers under these challenging conditions, we also plan to absorb part of the increased costs during FY22.”
[via BBC and Reuters, cover image via StockPhotosLV / Shutterstock.com]
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