IKEA is planning to increase procurement from US factories as tariffs introduced during US President Donald Trump’s presidency have raised the expense of importing items such as mattresses, sofas and bookcases, the company’s supply chain executive told Reuters.

This move marks a notable change in strategy for the Swedish furniture retailer, which has seen a decline in the proportion of its products made in the US over the past ten years.

Inter IKEA, which manages the brand’s franchising, previously operated a manufacturing site in Virginia but closed it in 2019, shifting production back to Europe.

The initiative to manufacture more goods closer to its US customer base is intended to support IKEA’s expansion in the US, the company’s second-largest market, and the wider region where it operates, including Mexico, Canada, Chile and Colombia, with future openings planned in Panama and Costa Rica.

In 2023, IKEA announced a $2.2bn (Skr20.68bn) investment over three years to expand in the US.

In an interview with Reuters, Inter IKEA global supply manager Susanne Waidzunas said: “We are designing our supply chain network to be much more resilient, robust and responsive”, noting that stores across North and South America currently rely heavily on imported furniture, resulting in extended delivery times.

“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.”

According to Waidzunas, the decision to move production closer to consumers in the US was made before the latest tariff hikes and is part of a global strategy.

However, the current environment has made the shift more timely, as increased tariffs have forced IKEA to raise prices on some US products, despite its reputation for affordability.

The company’s sales have fallen for two consecutive years as it has cut prices to attract customers facing economic pressures.

According to the news agency, IKEA Lithuanian supplier SBA Home is increasing output at its inaugural US factory in North Carolina.

As part of a $70m investment, partly backed by Inter IKEA, the supplier will manufacture products such as KALLAX shelves for IKEA.

SBA Home CEO Jurgita Radzevice noted that the mostly automated facility is gradually ramping up its manufacturing capacity and is projected to produce two million pieces of furniture annually.

According to Reuters, IKEA relies more on imports in the US than in other markets.

Only 15% of IKEA products sold in US stores are produced domestically, a decrease from 19% in 2014.

In contrast, 70% of IKEA’s European sales and 80% of its Asian sales come from products made within those regions.

Key sourcing countries include Germany, China, Poland, Italy and Lithuania.

Waidzunas noted that production in the US is more expensive, but global shipping expenses and unpredictability have increased since the Covid-19 pandemic.

IKEA intends to expand its partnerships with current US suppliers such as Sauder Woodworking, and to seek new suppliers, especially for bulky products, with the goal of sourcing most mattresses within the US.
  
Source: investmentmonitor.ai