Latest news with #Öncü
CNBC
11 hours ago
- Business
- CNBC
How IKEA is doubling down on price cuts to attract cost-conscious customers
Ikea shoppers will see price cuts of up to 50% at many of the company's restaurants globally, as the Swedish retail giant aims to attract cost-conscious consumers. The steep price cuts will be a temporary measure to help consumers "stretch their budgets" at a time of heightened economic uncertainty and high cost-of-living pressure, the company said, without specifying when the cuts will come into effect. The home and furniture retailer said it would also offer free meals for children. "Consumer confidence has decreased. People are holding on to the money that they have in their pockets or in savings," Tolga Öncü, COO at Ikea Retail, told CNBC's Emily Tan Wednesday. The flat-pack furniture seller slashed wholesale prices by an average 15% last year, allowing retailers to cut prices for consumers. Efforts to enhance affordability cost 2.1 billion euros to the company last year, according to Öncü, even as lower prices saw revenue drop about 9% and retail sales decline 5.3%. Ikea also plans to open 58 new stores globally during fiscal year 2025 ending in August, with its first outlet in Seoul — fifth in South Korea — up and running since April. By cutting prices so deeply, Ikea is bucking the trend as a slew of Western retail brands have warned of price hikes, passing onto consumers part of the higher duty costs importing into the U.S. Retail giants such as Walmart, Target, Costco and Nike said in their latest quarterly earnings reports that they have already raised prices or plan to do so in the coming weeks. Although global firms took a sigh of relief after the Trump administration had suspended sweeping "reciprocal" tariffs for three months and struck a preliminary deal with China, Walmart CEO Doug McMillon said in May that "we aren't able to absorb all the pressure given the reality of narrow retail margins." Ikea is not "immune" to the higher tariffs, which are expected to fuel inflation and weigh on consumer confidence, said Öncü, although it has been able to "somewhat absorb the impact and not pass on the total impact to customers in the U.S." The price reductions are, however, an urgent need in China — a key market for IKEA — where local businesses are cutting prices aggressively to stay competitive and attract customers amid sluggish consumer demand. IKEA has 39 stores in China, although the share of its global sales in the country has been sliding in recent years and was at 3.5% in 2023-24 financial year. "Big-ticket demand in China will be held back by decreased consumer confidence," said John Mercer, head of global research for Coresight Research. Mercer pointed out that "economic optimism" among China-based consumers fell to its lowest level in well over two years in May. "There will be limits to how much a big-ticket retailer can stimulate demand in an uncertain context, but an aggressive price stance is likely to support market-share gains as cautious consumers trade down," Mercer added. Retailers in China are betting big on food and beverage as one of the few offline segments where consumers continue to spend, though with less emphasis on value and cost, said a marketing agency advising European brands operating in China. Ikea is looking to expand its home furnishing product range to tap into China's growing elder population. Öncü emphasized the need to tap into China's "silver economy" — a sector that provides goods and services for people over 50. "Multi-generational homes are increasing. That's why we have introduced the new bedding and range. We are now testing to answer to those needs that has come from the silver economy in China," Öncü said. "If anyone knows how to cater to global consumers with a highly price-competitive offer in furniture and furnishings, it's IKEA," Coresight's Mercer said, but "whether planned price cuts will be sustainable is for IKEA to determine." The Swedish company said it also planned to introduce new items catering to Asian cuisine and flavors, which it hoped would bring in around 8 million new customers. "We will soon launch our very first falafel, adding this popular food to our restaurants, and later, to our Swedish food markets," Lorena Lourido Gomez, global food manager at Ingka Group, the worldwide franchiser for the brand, said in a statement.
Yahoo
01-05-2025
- Business
- Yahoo
Ikea's new central London store has learned from ‘a lot of mistakes' over 7 years—but it's confident its inner-city debut will click with shoppers
When you enter Ikea's freshly opened Oxford Street store, two things instantly meet your eye: a display of the company's newest furniture line and some very bright colors. The long-awaited store, which looked like a mega blue Frakta bag when in the works and was initially slated to open in 2023, finally welcomed shoppers on Thursday. It's not a common sight for an Ikea store to be smack in the middle of the city, and in a location that's Europe's most popular shopping destination, receiving a whopping 30 million yearly visitors. But Ikea knows what it's up against and has tweaked its city store format to account for its location. The store features new concepts, like a 25 sq. m. live studio and colorful curated collections by Londoners. It also boasts a souvenir section by the entrance to attract fast-footed tourists. The marketplace section, keeping affordability front and center, offers a range of kitchen items for £3 and under. 'We have been on to this for the last seven years, and we have [made] a lot of mistakes when designing city location stores,' Tolga Öncü, Ingka Group's Retail Manager (COO) at IKEA Retail, told Fortune in an interview following the store opening. He gave the example of IKEA's Paris store, where they did away with its serpentine store format, thinking people would want to pop in and out without necessarily exploring all sections. But Parisians preferred the original format. Formerly the Topshop flagship store, the new Ikea boasts a range of 3,500 products on display, with another 2,500 available for pick-up. Given the busy neighborhood and tricky parking availability compared to some suburban locations, Ikea will limit the size and type of furniture people can collect or buy in Oxford Street. 'We have also learned over the last seven years which category of products people are more eager to bring home from the city location,' Öncü said, adding that small accessories were popular, while people were willing to wait a few days for sofas to ship to their homes. Ikea may have had to make different choices for furniture at its Oxford Street store, but its 130-seater Swedish deli, featuring meatballs and hot dogs, will be present in all its glory. Öncü pointed out one design tweak key to this location—food will only be served in takeaway boxes to account for people working in the area who might want to grab a quick, low-cost meal. The company has other city-center stores in Stockholm and Mumbai. It's also no stranger to London, having opened its Hammersmith store in west London in 2022 and a standalone restaurant next to it last year. This foray offered hints into what Londoners are looking for as the cost of living continues to stretch their wallets. One of British retailers' biggest concerns in recent years is the uptick in shoplifting, which costs them £2 billion a year according to the British Retail Consortium. Ikea said that while it has stationed a security team across the store and made the checkouts clear to mitigate the risk of theft, it also wants to make sure it appears welcoming to shoppers. The mostly underground Ikea store might struggle with queues as it has only a handful of tills two floors below the street level. However, Ikea said it plans to introduce a scan-and-pay system whereby customers can skip the checkout counters by simply scanning to purchase an item. In a bid to make the area more suitable for shopping, Ikea's U.K. chief Peter Jekelby has backed Mayor Sadiq Khan's bid to pedestrianize Oxford Street. Khan has advocated for this to boost the strip following the crop of shops selling U.S. candy and the pandemic's impact on general business in the area. The Westminster Council has opposed Khan's plan due to disability access and public transport disruption. Khan said Ikea's big debut is 'a huge vote of confidence in London, in our economy and in our plans to rejuvenate Oxford Street and unlock its true potential.' Öncü said the upside of a pedestrianized Oxford Street is that shoppers will be more at ease, especially if they accompany children. 'As a retail concept, the more relaxed our visitors are, the more time they will spend, the more time they spend, the more time we have to do business,' he said. The Ikea store, which was led by Ingka Group's investment arm, will mark a new spurt of U.K. stores to follow in Brighton and Norwich. This story was originally featured on
