IKEA intends to obtain a greater number of products in the United States, the head of the supply chain of the Swedish furniture group reported to Reuters that President Donald Trump’s tariffs increase the cost of importing bookcases, mattresses, and sofas.
This is a significant change to IKEA, considering that the proportion of products produced by the firm in the U.S. has been on a decrease in the past decade.
The brand franchiser, Inter IKEA, utilized to have a factory in Danville, Virginia, but closed it in 2019 and took production back to Europe.
The objective of IKEA sourcing products nearer to the market it sells in is to facilitate expansion of the retailer in the U.S., its second-largest market, and the region in general, which has stores in Canada, Mexico, Chile, and Colombia, with more set to open in Costa Rica and Panama.
In an interview with Reuters, Global Supply Manager at Inter IKEA, Susanne Waidzunas, said that “We are designing our supply chain network to be much more resilient, robust, and responsive,” citing that the company’s stores in North and South America are dependent on furniture being shipped in, with long lead times.
She stated that “The closer we can build, the faster we can react from a supply perspective, both when it goes up in demand but also when it goes down.”
She adds that the strategy to produce closer to U.S. consumers predates this year’s tariff hikes and is part of a global initiative.
However, it is now beneficial that IKEA boasts about low prices, but it had to raise prices of some of its items in the U.S. to compensate for the effect of the tariff. The sales of the retailer have decreased in the last two consecutive years due to its reduction in prices to seek inflation-weary shoppers.
SBA Home, a Lithuanian supplier to IKEA, is preparing to increase its first factory in the U.S. in Mocksville, North Carolina, to a $70 million investment with Inter IKEA. Products such as KALLAX shelves, which are the best sellers, will be made in the factory by IKEA.
CEO of SBA Home, Jurgita Radzevice, said that manufacturing capacity within the heavily automated factory, which will produce 2 million furniture pieces annually, is continuously growing. Therefore, in the U.S, IKEA relies more on imports than in other countries.
Almost 15 percent of IKEA products sold in U.S. stores are made in-country, which fell from 19 percent in 2014.
IKEA sells 70 percent of its products in Europe, which are made in the region; therefore, the exact figure for Asia is 80 percent. Its leading sourcing nations are China, Germany, Italy, Lithuania, and Poland.
Waidzunas added that its costs produce more in the U.S., as shipping products across the world is also more expensive and more unpredictable now as compared to the COVID-19 pandemic.
IKEA to purchase additional products already obtained by current U.S. suppliers, who also involve Ohio-based Sauder Woodworking, and seek new suppliers, especially of large products, to source a majority of its mattresses in the U.S.
