Following today’s release of IKEA’s figures for the 52 weeks ending 31st August 2024; Matt Walton, senior retail analyst, at GlobalData, a leading data and analytics company, offers his view: “Even IKEA could not outrun the tough big-ticket sector in 2024, as weaker consumer confidence and supressed disposable income discouraged spend on furniture, with IKEA’s UK sales falling by 6.8% to £2.3bn for the financial year. The retailer invested £117m in lowering prices which contributed to this topline decline; a third of its range dropped in price by an average of 20% in an attempt to stimulate demand in areas such as bedroom, kitchens and storage. However, the lack of demand in general for big-ticket purchases meant that these lower prices were not counterbalanced enough by higher volumes.
“Online has remained relatively buoyant for IKEA, growing by 0.9% on last year and witnessing penetration increase by 3.2ppts to 41.7%. Online penetration is deeper still in London, reaching 51.4%, aided by its new distribution centre in Dartford which has processed just under 500,000 orders since opening in May 2023. GlobalData figures indicate that IKEA’s online sales growth was faster than the combined UK furniture, floorcoverings and homewares online market for the year to August 2024 with improvements to its delivery offer in late 2023 supporting this uplift.
“The improvements to online include lowering delivery charges, as well as thresholds to obtain free deliveries, introducing a new delivery option for smaller furniture and the rolling out of IKEA collection points at Tesco car parks following a successful trial. There are now over 100 pick-up points at Tesco, with plans to open a further 100 collection points as it aims to have 90% of UK customers being within five miles of a collection point within the next year. These moves are prudent as shoppers become more comfortable buying home products online and the points overcome the relative inconvenience of getting to an IKEA store. The initiative will also boost sales for homewares products, where the previously higher delivery cost was a barrier for smaller ticket items.
“The prospects for IKEA in FY2024/25 are more positive, however. Current consumer confidence remains brittle largely due to the uncertainty surrounding the upcoming October budget. Should customers receive this budget positively, there is likely to be a release of pent-up demand in furniture. This release would be especially beneficial for IKEA as the deadline for Christmas delivery for many prominent retailers would have passed before the budget was announced, whereas shoppers could go to an IKEA store and collect the item themselves in the run-up to Christmas. Its online delivery is also quicker than some of its competitors. The recent momentum in terms of housing transactions and continued real-wage growth in 2025 will boost demand for furniture as well. The opening of its store on Oxford Street and central Brighton in 2025 will also provide a boost to sales and offer greater convenience to shoppers in the South East.”
