IKEA Temporarily Closes Doors in Russia Amid Invasion of Ukraine

by TK Sanders
ikea-temporarily-closes-doors-russia-amid-invasion-ukraine
(Photo Sean Gallup/Getty Images)

The world’s largest furniture brand, IKEA, announced that it will close its doors in Russia pending the outcome of the Ukrainian invasion. It will also pause all sourcing in Belarus, a Russian ally. The move comes as part of a growing global refusal to do business with either country during wartime. IKEA is one of the first Western countries to “sanction” both countries at the same time.

“The devastating war in Ukraine is a human tragedy. We offer our deepest empathy and concerns to the millions of people impacted,” brand owner Inter IKEA and Ingka Group said in a joint statement.

“The war has a huge human impact [on the world economy]. It is resulting in serious disruptions to supply chain and trading conditions, which is why the company groups have decided to temporarily pause IKEA operations in Russia.”

The news from IKEA comes as inflation continues to soar across the globe. The budget furniture maker will likely raise prices by an average of 12 percent this fiscal year, according to reports. That number is up from the 9 percent originally forecast, thanks to soaring raw material costs and supply chain disruptions.

Ingka Group, which also owns some of the world’s biggest shopping centers, said its 14 malls in Russia remain open.

“We couldn’t offer safety and security of people working in our supply chain,” Inter IKEA Core Business Supply Manager Henrik Elm said regarding Belarus, specifically. “Passing the border et cetera was simply too risky. Then, on top of that, the consequences of different sanctions altogether made it simply not possible to operate any longer.”

IKEA closing its doors will immediately impact 15,000 Russians

The decision to pause operations in Russia affects roughly 15,000 employees, who will continue to receive pay for at least three months while the world waits for answers. As of the last audit, Russia was IKEA’s 10th-biggest market with retail sales of $1.8 billion; or 4 percent of total sales.

“The company groups will secure employment and income stability and provide support to [Russian employees] and their families in the region,” IKEA said.

IKEA produces chipboards and other wood products at three sites in Russia. The furniture company has around 50 direct suppliers in the country that produce a wide range of goods, too. The bulk of products made in Russia are also sold in Russia — goods produced in Russia and exported to other markets make up less than 0.5 percent of IKEA’s products. So a shutdown should primarily only affect local citizens in terms of supply chain.

IKEA sells most goods produced in Belarus, which acts as only a sourcing market, directly to Russians. The products made in Belarus consist primarily of wood-based products, mattresses, and sofas.

Whether IKEA will further raise wholesale prices for store owners due to the Russian-Ukrainian conflict, the company said it is “too early to say.”

Outsider.com