IKEA is firmly etched into the minds of U.S. consumers with its mammoth, suburban big box stores, instantly recognizable along highways with their navy blue exteriors bearing the retailer’s name in gigantic yellow letters. Its relatively affordable self-assembled furniture, with its tough-to-pronounce names and countless umlauts, and its iconic meatballs have made the Swedish retailer an American fixture since it opened its first store here in 1985, outside Philadelphia.
“It’s curious. After 40 years, there are still pockets in the U.S., where, yes, everyone knows the name ‘IKEA,’ but to have been in contact with the brand is not that common,” IKEA U.S. CEO Javier Quiñones tells Fortune in an interview. “That’s why we need to be more present, and we will be.”
Adding to the challenge of doing this, however, is the arrival of new Trump administration tariffs of up to 50% on imported furniture beginning today, Oct. 1. Quiñones spoke to Fortune before the tariffs were announced, but in an e-mail since then said, “We are always striving to make our products more affordable for our customers, particularly those on a tight budget. At this time, we are still determining how the new tariff announcement on cabinets will impact IKEA.” On Tuesday, IKEA said that its cabinet frames and shelves sold in the U.S. are sourced stateside.
Quiñones’s plan to expand the brand’s reach involves opening smaller locations to complement those hulking big boxes, and a partnership with another major retailer that sports blue and yellow in its logo, Best Buy.
IKEA U.S. currently has 16 such locations, often in suburban strip mills like the one in Cherry Hill, N.J., with three more coming on line in the coming months in Dallas, Phoenix, and Syracuse, N.Y. On Tuesday, the company announced a second Manhattan store would be developed. At around 5,000 square feet each, they are a very different shopping experience from the big boxes, with their signature model rooms and self-service warehouse shelves. The new, smaller stores are essentially showrooms for design consultations, after which customers can order the items selected.
“We are adding these smaller formats closer to where people are,” Quiñones said. “We’ve tested everything and it’s confirmed: This is the way forward.”
Unlike some of its competitors, IKEA remains largely reliant on the physical retail experience. Rivals like West Elm and Crate and Barrel now get more than half their revenue from online sales. IKEA U.S. only does some 35% of its sales online—but that is triple the rate it boasted when Quiñones became CEO in 2019.
These smaller locations, along with the big box stores, are meant to support the growth of IKEA’s e-commerce business, serving as shipping and pickup nodes in IKEA’s order fulfillment network. Not long ago, the company had just one large facility to handle online orders for the country, but these smaller stores are creating a network that is speeding up delivery.
In August, the CEOs of both Home Depot and Lowe’s said some customers were pulling back on big home improvement projects like kitchen renovations in this uncertain environment, stoking worries of that trend trickling down and hurting demand for furniture. Indeed, IKEA last year cut prices on hundreds of items in the U.S.
At the same time, IKEA’s relatively modest prices are attracting people in search of more affordable alternatives for kitchen cabinets and storage systems. Quiñones is betting that IKEA’s focus on sustainability and waste reduction, not just in how it makes its products, but in the efficiencies they offer customers, will lure more customers focused on saving money amid inflation and an uncertain economy. “If you store food in the right way in your fridge, you can save a lot of food by the end of the year,” he adds. “If you change your light bulbs to LED, you will reduce your electricity bill.”
But to attract these frugal customers, IKEA has to introduce them to the brand, and offer them a nearby store. “We want to be closer to where people are,” he says.
