New York: Ikea is planning to expand its production in the United States as rising import tariffs make it more expensive to bring furniture from overseas. The company said the decision is part of a long term strategy to make its supply chain more stable and better prepared for future trade challenges.
At the moment only around 15 percent of Ikea products sold in the United States are made locally. That number was closer to 19 percent more than a decade ago. Higher tariffs on furniture and related materials have now prompted the company to reverse that trend.
One of Ikea’s key suppliers SBA Home is increasing work at a new factory in Mocksville North Carolina. The plant is a 70 million dollar investment and is expected to produce about two million items per year. This includes popular products such as Kallax shelving units. The factory currently has around 150 employees and is set to grow in the coming years.
Ikea said the goal is to make production closer to customers and reduce reliance on imports that are exposed to rising costs and shipping delays. The company believes this will also help keep prices steadier for American shoppers even though local production may cost more at first.
The expansion comes during a challenging period for Ikea’s business. The owner group Inter Ikea Group reported a drop in annual operating profit earlier this year with a fall of about 26 percent. Higher shipping fees tariffs and raw material costs have put pressure on earnings even though global sales volumes have increased.
Despite the difficulties Ikea said that customers remain price conscious and the company has tried to raise prices more slowly than other furniture retailers. By shifting more production to the United States the company hopes to avoid further large price increases.
Industry analysts say more companies could follow similar steps if tariffs continue. Making goods closer to buyers could become a common model especially for bulky products like furniture.
Ikea said the United States remains one of its most important markets and the new investment is a sign of long term commitment to serving American customers.