Ikea to ramp up U.S. production as tariffs bite

The Ikea logo is shown on the side of the warehouse-sized store during the grand opening of New York City's first Ikea, June 18, 2008. (Mark Lennihan / AP Photo)

LONDON/STOCKHOLM — Ikea plans to source more products from factories in the United States, the Swedish furniture group’s top supply chain executive told Reuters, as President Donald Trump’s tariffs drive up the cost of importing bookcases, mattresses and sofas.

This marks a big shift for IKEA after the share of the company’s U.S.-made products declined over the past decade. Inter IKEA, the brand franchiser, used to have a factory in Danville, Virginia, but shut it in 2019 and moved production back to Europe.

IKEA’s push to source products closer to where it sells them aims to support the retailer’s expansion in the U.S., its second-biggest market, and the wider region, where it has stores in Canada, Mexico, Chile and Colombia, with plans to open in Costa Rica and Panama.

“We are designing our supply chain network to be much more resilient, robust, and responsive,” Susanne Waidzunas, Global Supply Manager at Inter IKEA said in an interview with Reuters, adding that the company’s stores in North and South America are very dependent on furniture being shipped in, with long lead 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.”

The plan to produce closer to U.S. consumers predates this year’s tariff hikes and is part of a global initiative, Waidzunas said.

But the timing is now beneficial: IKEA prides itself on low prices but was forced to increase them on some products in the U.S. to offset the tariff impact. The retailer’s sales have declined for two years running as it lowered prices to attract inflation-weary shoppers.

HIGHER PRODUCTION COST, LOWER TRANSPORT COST

SBA Home, a Lithuanian supplier to IKEA, is ramping up its first U.S. factory in Mocksville, North Carolina, a $70 million investment supported in part by Inter IKEA. The factory will make products for IKEA like top-selling KALLAX shelves.

Jurgita Radzevice, CEO of SBA Home, said manufacturing capacity at the largely automated factory, which is expected to produce 2 million pieces of furniture a year, is steadily increasing.

IKEA depends more on imports in the U.S. than elsewhere.

Just 15 per cent of IKEA products sold in U.S. stores are made in-country, down from 19 per cent in 2014. In Europe, 70 per cent of the products IKEA sells are made in the region, while the equivalent figure for Asia is 80 per cent. Its top sourcing countries are China, Germany, Italy, Lithuania, and Poland.

Producing in the U.S. is more expensive, Waidzunas said, but shipping products across the world is also more costly and more unpredictable now than before the COVID-19 pandemic.

IKEA plans to buy more from existing U.S. suppliers, which include Ohio-based Sauder Woodworking, and look for new suppliers particularly of bulky items, aiming, for example, to source most of its mattresses in the U.S.

(Reporting by Helen Reid in London and Greta Rosen Fondahn in Stockholm. Editing by Jane Merriman)