Bad news for Ikea devotees: The Swedish furniture giant announced it’s raising its famously low prices.
Ikea, like many other retailers, has been hit hard by disruptions in the global supply chain, including high transportation costs and labor shortages. These costs will ultimately get passed on to consumers, but some sustainability experts argue that higher Ikea prices could actually be a win for the planet.
Even though demand for furniture is at an all-time high, Martin van Dam, the CFO of Ikea’s parent company, told Bloomberg the company is simply unable to get products onto shelves to meet this demand. Ikea’s profits fell by 16%, to $1.6 billion during the last fiscal year, as costs went up for raw materials. He says Ikea has already spent 250 million euros to manage labor and transport shortages, and expects to spend even more next year, which will cut into its bottom line. Ultimately, he said the company would raise its prices in 2022 and beyond–although he did not specify by how much. (Ikea did not respond to our request for comment by the time of publication.)
But while consumers may be disappointed that their Billy bookcases and Malm bedframes will be more expensive, it might not ultimately be a bad thing. It’s now clear that cheap, disposable furniture–the kind Ikea specializes in–is an environmental disaster. More sustainable alternatives, like durable, locally made furniture, haven’t been able to compete with Ikea’s low prices. But if the company begins raising prices, it might prompt consumers to explore other, more eco-friendly alternatives.
How We Got Hooked On Ikea
For most of human history, furniture was an expensive product, designed to last decades or longer, passed from one generation to the next. But in the 1990s, IKEA and other furniture brands found ways to manufacture products at low costs thanks to cheap labor in developing countries and inexpensive materials like plastic and particleboard. This helped democratize furniture, allowing middle class people to redecorate their homes in the latest styles, mimicking the interior decorating habits of the rich and famous. “Brands like IKEA allowed people with fewer means to live a comfortable, fashionable life at home, even though those pieces were not meant to last forever,” says Dio Kurazawa, co-founder of The Bear Scouts, a consulting firm that helps brands shift to more sustainable supply chains.
Transforming furniture into a short term, disposable purchase is terrible for the planet. In the U.S., Americans throw out 12 million tons of furniture annually, up from 2 million in 1960. This is an enormous waste of the natural resources and greenhouse gas emissions required to manufacture these pieces in the first place. It requires an estimated 90 kilograms of carbon to make and ship a single piece of furniture, the equivalent of flying a Boeing 747 for an hour.
But people around the world–particularly young people–are now increasingly concerned about climate change. And today, 87% of consumers say they’re willing to pay more for furniture they believe is more eco-friendly (up from 33% in 2008), according to a report by the Sustainable Furnishings Council, a nonprofit devoted to making furniture manufacturing more sustainable. “More and more people are aware of the cost of the poor decision to shift toward low-quality, disposable furniture,” says Susan Inglis, founder and executive director of the Council.
The problem, however, is that the fast furniture business model now dominates the market. As Ikea, and retailers like Wayfair, Overstock, Amazon, and Target flooded the market with cheap furniture, Inglis said American furniture manufacturers–that were known for their well-made, durable goods–started to go out of business. “The growth of Ikea and its ilk resulted in the end of a generation of American manufacturing, as these factories and workshops were unable to compete with their prices,” she says.
Accelerating the Rise in Sustainable Furniture
If fast furniture brands start raising their prices, this could potentially recalibrate supply and demand in the furniture industry. Fast furniture retailers are particularly reliant on the global supply chain to create inexpensive products and, as a result, these brands are now getting hit much harder by the global logistics crisis. Inglis says local manufacturers are dealing with worker shortages and transportation delays, but they’re in much better shape than brands that manufacture overseas.
As Ikea’s prices inch up, consumers may be willing to spend a bit more to buy higher-quality, locally-made furniture, particularly if they’re already concerned about fast furniture’s impact. For instance, brands like Sabai and Maiden Home sell American-made furniture using a direct-to-consumer model that lets them sell products more affordably than through a retailer. A Sabai loveseat costs $995, which is on par with some of Ikea’s mid-range loveseats and about double the cost of Ikea’s cheapest models. Brands like this may entice Ikea shoppers.
However, this can’t be the only solution to the environmental catastrophe of fast furniture, Inglis says, partly because these companies don’t make enough furniture to meet the national demand. That’s why she says it’s important for the industry to shift toward selling refurbished or recycled furniture. As I wrote in a recent story, used furniture is a growing industry, and analysts say it could become a $16.6 billion business by 2025, a 70% increase from 2018. “Garbage–the furniture we’re throwing away–is about to become our most abundant natural resource,” Inglis says. “Our old furniture is going to be the feedstock for the next generation of furniture. This means refurbishing old pieces to make them new again, and turning old wooden furniture into particleboard for new furniture. ”
Even Ikea understands the value of secondhand furniture and recently announced that it will buy back used pieces and resell them in stores. However, Kurazawa points out that most Ikea pieces, as they currently exist, weren’t designed to last for years and multiple users. For furniture resale to really take off, he believes we need more companies that make it easy for consumers to access high quality secondhand pieces at a wide range of price points, much like TheRealReal and ThredUp have done for fashion.
Kurazawa is optimistic that the furniture industry is slowly shifting toward more sustainable practices. At the same time, he’s realistic about how much Ikea’s price hikes will impact the sector. He believes that eventually, the supply chain problems will be resolved, and Ikea will once again flood the market with its cheap furniture and potentially even return to its cheaper prices. Ultimately, he says’ the better way to bring about positive change quickly is for governments to create legislation that forces fast furniture brands to become more sustainable. “It’s unrealistic to expect companies like Ikea to shift toward eco-friendly practices on their own,” he says. “They need incentives. And if governments start taxing them for their carbon footprint or how much waste they create, they will be highly motivated to change their designs and manufacturing process.”