Why Do the Same Ikea Products Cost More in Israel Than Abroad?

You find the same products at Ikea outlets all over the world. Why does a face towel cost one shekel in Sweden and NIS 15 over here?

One of the reasons people go to Ikea is to get a good price. But it turns out that the prices at the furnishing store's Israeli outlets are about 30% above the prices in Britain and the Netherlands. The same items bought here cost about 24% more than in France and Sweden, TheMarker has found.

The Marker looked at 21 products costing a total of NIS 17,000 at the Israel outlet. A consumer buying exactly the same products in France or Sweden would have paid the equivalent of NIS 13,000. In Britain and the Netherlands, the same items would have cost NIS 12,000.

The comparison is based on the IKEA catalog for 2009, and exchange rates on August 20.

The differences exist for items large and small. Take for example the television cabinet that Ikea Israel offers for NIS 3,595. You can get the same thing in France for NIS 2,363.

A desktop lamp sells locally for NIS 25, but in Sweden, Britain and the Netherlands it costs only NIS 13.

The same fold-up desk that Ikea Israel offers for NIS 345 costs only NIS 180 outside the country. A face towel that Ikea Israel charges NIS 15 for costs only one shekel in Sweden and up to NIS 2.60 elsewhere.

A three-seat sofa that costs NIS 3,395 in Israel can be had for NIS 2,626 in France and the Netherlands, and NIS 2,450 in Britain.

Of the 21 items we checked, only two cost less in Israel than elsewhere. The other 19 cost more.

In its 2009 catalog, Ikea Israel warned that prices would be about 5% higher than in previous years. In four years it had lowered its prices by about 10%, Ikea explained. Breaking down the math, Ikea Israel said a quarter of is products would cost more, 70% would stay the same and 4% would cost less.

Shlomi Gabai, manager of Ikea Israel, said at the time the price hike was driven by the rising cost of raw materials and shipping. Even after the increases, he said, "Ikea offers the most attractive range of prices in the furniture and home design market in Israel."

Ikea Israel is currently distributing its glossy 2009 catalog among 1.25 households in Israel, at a cost of NIS 8.5 million. That's half the local outlet's marketing budget for the year. This year the global chain is printing more than 200 million copies of its catalog worldwide, in 27 languages, for distribution in 36 countries. Around the world there are 283 Ikea outlets with 2007 sales of 19.8 billion euros.

In Israel, the chain has been operating since April 2001 through a single, large store, 23,000 square meters in size. The outlet is located at the Poleg intersection in Netanya, just off the main highway. More than 16 million visitors have arrived since the store opened, and during a special summer sale in July and August, more than 200,000 customers passed through its doors, Ikea Israel says. Sales increased 5% compared with a special sale the year before.

But what about those price differences?

"There are two main reasons why prices in Israel are higher: Transportation costs and logistics costs in a distant country like Israel are tens of percentage points higher," Gabai says. "The time it takes to transport the item is two and a half months, on average, while to nearby countries it's a week." He also notes that exchange rates aren't favorable at present and prices were set about six months ago, when exchange rates were different.