Photo: Toronto Sta

IKEA is taking a bold step to appeal to financially strained consumers by cutting meal prices by up to 50% across many of its global in-store restaurants, while also offering free weekday meals for children. The move is part of a broader affordability push aimed at attracting budget-conscious customers at a time when economic uncertainty and inflation are reshaping global retail dynamics.

“Consumer confidence has fallen. People are more cautious with spending,” said Tolga Öncü, Chief Operating Officer at IKEA Retail. “We want to help families stretch their budgets.”

A Strategic Bet on Affordability

The food discounts follow a 15% average wholesale price cut across IKEA’s retail operations last year. That decision cost the company around €2.1 billion, according to Öncü, and resulted in a 5.3% decline in retail sales and an overall 9% drop in revenue. But the brand remains firm in its belief that affordability builds long-term customer loyalty.

In contrast to many global retailers raising prices to offset tariff and import costs—Walmart, Target, Costco, and Nike among them—IKEA is pushing in the opposite direction.

“Even though IKEA isn’t immune to tariff impacts, we’ve tried to absorb most of it instead of passing the full cost to U.S. customers,” Öncü said.

Expansion Despite Global Headwinds

IKEA’s affordability strategy comes as it undertakes a major global expansion plan, with 58 new stores set to open during the 2025 fiscal year. The company recently launched its fifth store in South Korea, located in Seoul, and is heavily investing in Asian markets, particularly China, despite increasing challenges.

China accounts for 39 IKEA stores, but its share of global sales has slipped to just 3.5% in the 2023–24 fiscal year. That drop is attributed to sluggish consumer demand and growing competition from local brands aggressively slashing prices to stay afloat.

“Big-ticket demand is being held back by declining consumer confidence,” said John Mercer, head of global research at Coresight Research. He noted that Chinese consumer optimism in May hit its lowest point in more than two years.

Targeting the Silver Economy

Beyond short-term pricing tactics, IKEA is preparing for long-term demographic shifts by designing new home furnishing lines targeted at China’s aging population. By 2040, nearly 30% of China’s population is expected to be over 60, compared to 15% in 2024. These older consumers, often financially stable, are seen as a promising market segment.

“Multi-generational living is rising, and we’re introducing bedding and furniture to support that lifestyle,” Öncü said. “We're testing products designed specifically for the silver economy.”

The company believes this demographic will increasingly drive spending on furniture designed for comfort, accessibility, and convenience.

Reinventing IKEA’s Food Business

Food continues to be a powerful customer draw, especially in China where offline food and beverage segments remain resilient. IKEA plans to expand its food offerings by introducing Asian-inspired menu items, aiming to attract 8 million new customers.

“We’re soon launching our very first falafel, with plans to add more regional flavors,” said Lorena Lourido Gomez, Global Food Manager at Ingka Group, the main franchisee of IKEA stores worldwide.

This effort is designed not only to drive foot traffic but also to compete with local restaurants in urban markets where IKEA stores are located.

Navigating Tariffs and Inflation

While IKEA is absorbing some of the financial strain from U.S. tariffs, it’s walking a fine line. The Swedish giant is aware that continued pricing pressure and margin cuts are not indefinitely sustainable. Still, its bold pricing stance stands in stark contrast to the industry norm.

“If anyone can deliver high-value, low-cost furniture and food on a global scale, it’s IKEA,” said Mercer. “But how long these deep discounts can last remains to be seen.”

Final Thoughts

In an environment where inflation, tariffs, and uncertain consumer sentiment dominate the retail landscape, IKEA’s choice to cut prices rather than raise them could set a new standard. With strategic bets in China, an eye on demographic shifts, and an aggressive global rollout plan, the company is banking on accessibility and value to maintain relevance and capture new market share—especially when most competitors are heading in the opposite direction.

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