Ikea is investing €1.2 billion in price cuts across Europe from 28 August as the Swedish furniture retailer seeks to revive demand after two consecutive years of declining revenue.

The retailer said the reductions are aimed at cost-conscious consumers as higher housing costs have reduced spending on furniture and homeware in several European markets. The move includes more than 1,500 price reductions in Germany, Ikea’s largest market by revenue, as well as lower prices on hundreds of products in Britain.

Juvencio Maeztu, CEO of Ingka, Ikea’s largest retailer, said: “The cost of living is increasing and it's getting tougher and tougher for many people.” He added that smaller living spaces were increasing demand for storage and organised home solutions.

In the UK, the Kallax shelving unit has been reduced from £60 to £49, while the Alex drawer unit has fallen from £70 to £55. Ikea said the reductions are permanent rather than promotional discounts, with the new prices available online and in stores.

Ikea said product redesigns, automation and renewable energy use have helped it reduce manufacturing costs and create room for the price reductions. Jakub Jankowski, CEO of Inter Ikea, said: “We try to constantly optimise the cost picture by redesigning the products from the beginning.”

Jankowski said a redesign of Ikea’s Pax wardrobe range had reduced packaging costs by 70 per cent. Europe remains a major manufacturing region for the retailer, with Poland, Italy, Lithuania and Germany among its leading sourcing markets.

The retailer is changing its store strategy as part of the effort to reach more consumers, opening seven smaller stores across Europe since January. The move represents a shift from Ikea’s traditional out-of-town large-format stores towards smaller locations closer to urban customers.

Ikea’s wider European franchise network is participating in the price reductions, with franchisees in the Balearic and Canary islands, Turkey, Greece, Cyprus, Bulgaria, Iceland, Estonia, Latvia and Lithuania agreeing to lower prices.

In Britain, Ikea is offering more than 1,000 additional in-store deals through the end of the year, with discounts of up to 25 per cent. The retailer will offer 20 per cent off selected home furnishings, including throws, bedspreads, candles, lamps, rugs and cookware, from 7 September to 1 November.

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