Furniture giant Ikea UK & Ireland is to focus on growing turnover and market share at the expense of profits as it navigates its way through a challenging big-ticket market.
The retailer, which grew turnover 1% to £1.2bn in the year to August 31, is the home furnishings market leader with a 6% share at the end of 2009.
IKEA UK & Ireland’s country manager Martin Hansson said the retailer had grown share this year too, and added that this would be the priority for the chain, as it revealed a 5% price drop designed to lure more hard-pressed customers through its doors.
Hansson said it would lower prices next year as well after a review of the market next spring.
He said the retailer, which declined to give profit figures, could afford to take a hit to profit if it meant growing its share.
Hansson said: “The 5% price drop has made us more affordable. We’re making a statement around price points. The ambition is to be more relevant and for more people to shop with us and the outcome of that is hopefully growth.”
He added: “We can live with fluctuating margins and profitability. The most important thing is to be relevant to many people.”
The retailer has invested in pricing in most categories, and in particular kitchens and storage.
Hansson said Ikea had been able to cut prices by taking advantage of economies of scale, and cost cutting initiatives such as reducing its number of delivery trucks.
“We are lowering prices by more than what you have seen previously,” said Hansson. “The entry point is much more accessible.”
He added: “This year will be a challenging year, there will be no free ride in terms of growth. But I still believe we’ll have a positive [turnover] development this year.”
Next year Ikea plans to launch an improved home delivery service while adding more than 500 products to its online offer.