IKEA, the Swedish furniture giant, distributes 200 million copies of its catalogue around the world every year. It opened its first store in Israel in 2001, since when 23 million people have visited its stores here. "IKEA's entrance into Israelbrought down furniture prices by 30% and IKEA's prices have dropped 10% since the store opened here," said the CEO of Ikea Israel, Shlomi Gabai, on the occasion of the store's 10-year anniversary in the local market.
Yet it seems that the chain known for being cheap isn't all that cheap in Israel, compared to other countries.
Ikea responded that price gaps stem from several reasons: As opposed to countries where trade is unrestricted, Israel imposes import taxes that raise prices, as do local laws such as those mandating specific labeling. In addition, Israel's geographic distance means products must be shipped by sea and air, as opposed to in Europe, where shipping is land-based. Third, Israel has only two branches of Ikea (in Britain there are 18, in Sweden, 17, and in the United States, 38). The more stores there are, the more they will split shipping and logistics costs."
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