Much of IKEA's success lies in that it offers well-designed furniture at affordable prices. But have you noticed how those prices often change over time, mostly getting lower but sometimes higher? FiveThirtyEight gives us a peek into the weird world of IKEA's economics.
The price roller coaster is especially noticeable when looking at the ubiquitous POÄNG chair, which celebrated its 40th birthday this year. Back in the early '90s, the chair retailed for about $150, or $300 in 2016 dollars when you adjust for inflation. How much is a POÄNG today? As low as $79. Even considering that furniture has gotten cheaper relative to other things due to globalization as FiveThirtyEight points out, this trend is extreme:
Even recently, we've seen the RÅSKOG, which debuted in 2013 for $50 drop 40% to $30 in the US. To the frustration of non-US shoppers, prices here don't always correspond to their local store; the company operates "its own unique competition profile" in each separate country to determine pricing, according to Marty Marston, a product public relations manager at IKEA.
Marston also echoed that prices are, for the most part, going down:
On average, the prices would go down, from year to year, 1 percent overall. Some prices could go down with a huge jump. Other prices may increase slightly. But overall, year on year on year on year, we're trying to reduce prices.
While the economies of scale—the proportionate saving in cost gained by increased production—plays a part in many of the price drops of popular pieces like POÄNG, there are more nuanced factors at work, too. Researchers are actually looking into IKEA's pricing habits, and while a definitive answer isn't yet available, it looks like the main trend is "survival of the fittest furniture."
Economist Marianne Baxter from Boston University says, "If [IKEA] can't figure out how to make [a product] more cheaply, or retool them or slightly redesign them, it seems like the things disappear," she said. This explains how the LACK—which used to be solid wood—cost $56 in 2016 dollars back in 1985, and is now made with honeycomb "board on frame" construction and costs just $10.
Check out more insights over on FiveThirtyEight.