IKEA Shifts Production to US to Combat Rising Import Costs and Boost Expansion

IKEA is set to significantly increase its sourcing of products from factories within the United States, a strategic shift confirmed by the Swedish furniture giant's top supply chain executive. This move is largely influenced by rising import costs driven by recent tariffs, which have impacted everything from bookcases to mattresses and sofas. This marks a notable reversal for IKEA, as the share of its US-made products had seen a decline over the past decade, including the closure of its Danville, Virginia factory in 2019, which saw production shift back to Europe.

This initiative to produce goods closer to their point of sale is designed to bolster IKEA's expansion plans in the US, its second-largest market, and across the wider North and South American region, which includes stores in Canada, Mexico, Chile, and Colombia, with upcoming plans for Costa Rica and Panama. Susanne Waidzunas, Global Supply Manager at Inter IKEA, emphasized the goal: "We are designing our supply chain network to be much more resilient, robust, and responsive." She noted that stores in the Americas have been heavily reliant on furniture shipped from afar, leading to 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," Waidzunas added, highlighting the benefits of localized production.

While the plan to manufacture closer to US consumers is part of a broader global strategy that predates the recent tariff hikes, the timing now proves particularly advantageous. IKEA, which prides itself on offering low prices, was compelled to raise prices on some products in the US to counteract the impact of tariffs. This had already affected the retailer's sales, which had declined for two consecutive years as it lowered prices to attract inflation-weary shoppers, making cost-efficient local sourcing even more critical.

Currently, IKEA's reliance on imports is more pronounced in the US than in other regions. Only 15% of products sold in US stores are manufactured domestically, a decrease from 19% in 2014. This contrasts sharply with Europe, where 70% of IKEA products are made within the region, and Asia, which sees an equivalent figure of 80%. Globally, IKEA's primary sourcing countries include China, Germany, Italy, Lithuania, and Poland.

Concrete steps are already underway, exemplified by SBA Home, a Lithuanian supplier to IKEA, which is actively ramping up operations at its first US factory in Mocksville, North Carolina. This significant $70 million investment, partly supported by Inter IKEA, is set to produce popular IKEA items such as the KALLAX shelves. Jurgita Radzevice, CEO of SBA Home, confirmed that the largely automated factory, projected to produce 2 million pieces of furniture annually, is steadily increasing its manufacturing capacity.

Beyond new ventures, IKEA intends to strengthen its relationships with existing US suppliers, such as Ohio-based Sauder Woodworking, and actively seek out new partnerships. A particular focus will be on sourcing bulky items domestically, with a specific aim to produce most of its mattresses within the US. While acknowledging that manufacturing in the US can be more expensive, Waidzunas pointed out that global shipping has also become significantly more costly and unpredictable since the COVID-19 pandemic, making localized production an increasingly viable and strategically sound option.