Why is IKEA so cheap?

The short answer: IKEA is cheap because it designs each product around a low price first, buys materials in enormous volumes, ships everything flat-packed and leaves the assembly to you. Its founder’s habit of “making do” still runs through the company, and over its last two financial years it has cut prices by about 10% on average, accepting lower margins to do it. Those low prices come with an environmental cost that IKEA is reducing, but hasn’t solved.

A chair, a book, a fork, or even a tie-dye pillow case, whatever you want, they probably have it, although some assembly is required. IKEA, the blue and yellow furniture giant from Sweden, has quickly become a mainstay in many households. Through their alternative approach to interior design, which champions cheap prices and do-it-yourself attitudes, IKEA made €44.6 billion in total retail sales in its 2025 financial year (September 2024 to August 2025), from 915 million store visits and a growing online business.

When you walk through one of IKEA’s maze-like showrooms, however, it’s hard to fathom how they’re able to make that much money. But IKEA’s low price points and slick design are part of the reason why so many customers continue to flock to their big box stores.

So to put it simply, I want to understand why IKEA is so cheap. And alongside that, I want to figure out whether their low prices mean a weak commitment to mitigating their environmental impact.

Kamprad, the cost-conscious man

The story of IKEA’s low prices can be tied back to the mindset of its founder, Ingvar Kamprad, who died in January 2018 at the age of 91. Kamprad was an extremely cost-conscious man. According to an article in the New Yorker, he drove an old Volvo and recycled teabags, despite his massive amount of wealth. He championed the idea of lista or “making do” both in his own life and also in the core values of the IKEA empire.

In this regard, IKEA uses strategies from other corporations to circumvent accountability to the law. But does IKEA have the same disregard for their environmental initiatives? In some cases, IKEA’s low prices are thanks to the cost saving effects of the business’s new environmental initiatives.

Essentially, IKEA seeks to create low cost, minimalist and utilitarian solutions for everyday life, and it does that in several ways. Similar to stores like Costco, IKEA uses its huge buying power to drive prices down. Inter IKEA, the company that owns the IKEA brand, describes the whole franchise as a model built on “low costs and high volumes to create lower prices”.

All those materials are flat-packed so that the maximum amount of product can be shipped and stored in one place. On top of that, they shift the assembly component of furniture onto the consumer, which means that they avoid a large amount of costs on the manufacturing end. They push the time and effort needed to construct furniture onto people eager to buy their stuff. So the key to IKEA’s cheap products is a knowledge of where and how to cut corners, whether that’s in the manufacturing stage, shipping process, or up to the point of sale.

The company is still shaving costs in the same places. Its MITTZON desk uses thinner, high-strength steel to cut material and transport emissions, and the new PAX wardrobes launched in FY25 are designed to be easier to take apart and put back together.

Lately it has also been cutting prices directly: IKEA says it lowered prices by about 10% across its last two financial years, and Inter IKEA’s own FY25 figures show it earned less profit on the goods it sells to IKEA retailers as a result. On 1 September 2026, IKEA companies began a further €1.2 billion round of price cuts across Europe, with the BILLY bookcase down 28% in the UK.

But Kamprad also has a very dark history. He was involved in the Swedish fascist movement in the 1940s. While Kamprad would later go on to write that it was the greatest mistake of his life, the good and bad of his life also seems to parallel the dualistic nature of IKEA.

In search of more profits and better margins, for example, IKEA has been criticised heavily for avoiding potentially billions of euros in taxes by funnelling money through a web of subsidiaries and sub companies.

A 2016 report for the Greens/EFA group in the European Parliament put the figure at more than €1 billion over 6 years. In December 2017 the European Commission opened an in-depth investigation into two Dutch tax rulings for Inter IKEA, and on 13 October 2026 its tax rulings page still listed the case as open. Inter IKEA publishes its tax figures: in FY25 its tax charge was 21.3% of pre-tax income (17.5% in FY24).

Alongside these highly publicised sustainability efforts lie some questionable practices that leave much to be desired.

Let’s start with the good

IKEA has made tremendous headway on the renewable energy front.

Back in 2018, Ingka Group (the largest IKEA retailer) had 900,000 solar panels on the roofs of its stores and warehouses and owned and operated 441 wind turbines, all in the pursuit of becoming energy independent by 2020.

By 2023, Ingka said its investments meant the group generated more renewable energy than it consumed across its global operations. Today its investment arm has invested or committed €4.3 billion in renewable energy and has stakes in 49 wind farms and 26 solar parks, with a pledge to reach €7.5 billion by 2030. In FY25, Ingka matched 94.8% of the electricity its operations used with renewable sources. This is certainly admirable considering that there are now 504 IKEA stores in 63 markets that require a massive amount of fuel and energy to run.

Alongside this rapid transition to renewable energy, IKEA committed in 2018 to zero-emission home deliveries in all of its markets by 2025, which meant a fully electric home delivery fleet within six years. It missed that deadline: in FY25, 60.1% of Ingka’s home deliveries were zero-emission, up from 41.1% the year before.

To top it all off, IKEA wants to become a circular business by 2030 (its current strategy, updated in September 2025, words it as a “transition towards a circular business”). IKEA phased out single-use plastic products from its global range in January 2020, and it has used recycled materials in products like its KUNGSBACKA line, which used recycled wood and plastic bottles to create kitchen cabinets (KUNGSBACKA no longer appears on IKEA’s UK, Swedish, German or French websites).

Second-hand is growing too. Ingka’s Buyback service took back almost 686,500 used IKEA products in FY25, 424 of its stores have an “As-is” area for second-hand and discontinued items, and its second-hand marketplace, where people buy and sell used IKEA furniture with each other, reached 8 European markets in October 2026, including the UK and Ireland. IKEA has set out to redefine their relationship with waste.

Climate change goals and ambitions

IKEA is doing better than most of the other big name brands in the field. But there’s always a flip side to the coin. You shouldn’t just applaud IKEA for doing something everyone else should already be doing. It’s our job as consumers and as people to consider the consequences of a brand that decides on a shockingly low price for furniture and then challenges the design team and suppliers to meet that price at whatever the cost.

In fact, according to IKEA’s figures at the time, the carbon footprint of the company grew from 23.3 million tonnes of CO2 in 2016 to 24.6 million tonnes of CO2 in 2018, which is roughly 1.3 million tonnes more CO2 in just two years.

IKEA has since recalculated its baseline, and its newer numbers point the other way. Its latest figure for the whole value chain, in the FY24 Climate Report, is 21.3 million tonnes of CO2 equivalent, 28% below the restated FY16 baseline of 29.7 million tonnes, and the goal is to halve emissions by FY30.

IKEA credits more renewable energy, better efficiency and electric transport, but also says lower production volumes played a part. It hasn’t published a whole-value-chain figure for FY25; that’s due in November 2026.

Even though they installed hundreds of thousands of solar panels on their showroom roofs, they’re still a growing company. Their suppliers, storage and shipment are still making and moving vast amounts of furniture and are not all plugged into that clean grid: in FY24, 491 factories and suppliers ran on 100% renewable electricity, which was 44% of IKEA’s direct suppliers. Materials alone make up almost half of the IKEA climate footprint.

Materials

IKEA is often said to use about 1% of the world’s commercial wood for their furniture, a figure that’s been quoted since at least 2013. IKEA’s own FY24 Sustainability Report puts its wood use at 14.9 million cubic metres (in roundwood equivalent), and says 97% of it was either FSC-certified or recycled. For just one company, that is a truly massive amount.

In the forests it owns, Ingka says it aims to plant more than it harvests, and it estimates those forests, now 323,863 hectares in 7 countries, grow by a net 0.5 million cubic metres a year. In FY25, Ingka reforested 5,585 hectares and planted another 6,186 hectares of new forest plantation in New Zealand and the Baltic states (in New Zealand, mainly non-native pine).

But IKEA’s track record on which trees its forestry subsidiary Swedwood cut down hasn’t been perfect. In 2014 the Forest Stewardship Council suspended Swedwood’s forestry certificate after finding it was cutting down trees up to 600 years old in Karelia, Russia.

It wasn’t the last time. In June 2020, the UK non-profit Earthsight published Flatpacked Forests, which linked beech used in IKEA chairs, including the Terje and Ingolf, to illegal logging in Ukraine’s Carpathian forests, much of it FSC-certified.

IKEA denied wrongdoing, and in October 2020 it said a third-party investigation had found no evidence of illegal Ukrainian wood in its supply chain. Earthsight called that response “a sham” after IKEA declined to publish the full findings.

In July 2021, Earthsight linked IKEA children’s furniture to illegal logging in Siberia; IKEA said the wood was legally harvested, but dropped the supplier and temporarily banned sanitary-felled wood from the region. And in 2024, three separate investigations, including one by Greenpeace, raised concerns about wood from old-growth and protected forests in Romania reaching IKEA suppliers.

Labour and working conditions

In November 2022, the French investigative newsroom Disclose reported that at least six of IKEA’s Belarusian suppliers had worked with a prison colony that used forced labour between 2014 and 2019 (Disclose). IKEA said it took the reports seriously and was concerned (IKEA, 21 November 2022). It had already paused all imports and exports with Russia and Belarus in March 2022 (IKEA, 3 March 2022).

In October 2024, IKEA Germany pledged €6 million to a German government fund for people forced to work in East German prisons, where some IKEA furniture was made. “We deeply regret that this took place,” the company said (DW).

In June 2021, a court in Versailles fined IKEA France €1 million for spying on staff, union representatives and job applicants between 2009 and 2012 (BBC). Its former head, Jean-Louis Baillot, was given a two-year suspended prison sentence (DW), which an appeal court reduced in January 2023 (AFP via Digital Journal).

In short

IKEA is doing good, but there are also negative ramifications to the growth mindset of this massive fast furniture company.

So as we look towards IKEA’s cheap cost, we can understand a couple of things. Its quote-unquote “cheapness” is the product of:

• streamlined marketing and sales
• strong control of their supply chain
• some unique approaches like flat packing and DIY assembling
• a willingness to accept lower margins to keep cutting prices
• as well as a little help from cheap renewable energy.

That being said, there’s also a tension between the “cheap first, everything else second” mentality that seems to ooze from all things IKEA and their environmental practices. They’ve made strides in crafting more durable furniture, but IKEA is a business. Mass consumption of their furniture is their reason to exist. The more you buy, the better they do. But at the same time, the better they do, the higher the environmental cost.

IKEA is ultimately interested in sustainability because that’s what customers want and it’s good for business. So the next time you’re chowing down on those classic IKEA Swedish meatballs, look around. Appreciate the fact that IKEA has made itself into a strong leader in sustainability for big companies, but also understand that buying IKEA will never save the planet or help mitigate climate change.

Buying that TARVA bed frame is certainly less bad than other options, but searching for a different bed frame in a local antique or secondhand furniture store is the better option for the environment. (If you have your heart set on IKEA, its As-is areas and second-hand marketplace count too.)

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Watch the video essay here ⤵️

Resources (links checked 13 October 2026):

1. Ingka Group Annual and Sustainability Summary Report FY18 (Ingka Group, 2019)
2. IKEA Sustainability Strategy 2025 to 2030 (Inter IKEA, updated September 2025)
3. IKEA Ltd Ethical Consumer Score (Ethical Consumer)
4. How IKEA gets you to impulsively buy more (Vox via YouTube)
5. Can Ikea turn its blonde world green? (Fortune, 2015)
6. Renewable energy investments (Ingka Group)
7. Ikea Has Been Accused of Avoiding 1 Billion Euros in Taxes (Fortune, 2016)
8. House Perfect: Is the IKEA ethos comfy or creepy? (The New Yorker, 2011)
9. IKEA is in trouble for cutting down 600-year-old trees (Grist, 2014)
10. IKEA retail sales figures for FY25 (Inter IKEA, 16 October 2025)
11. Inter IKEA Group Financial Summary FY25 (Inter IKEA, November 2025)
12. IKEA Climate Report FY24 (Inter IKEA, January 2025)
13. IKEA Sustainability Report FY24 (Inter IKEA, January 2025)
14. Sustainability reporting FY25 (Inter IKEA)
15. Ingka Group Annual Summary and Sustainability Report FY25 (Ingka Group, January 2026)
16. Ingka Group scales Buyback by 39%, achieves 60% zero emission home deliveries (Ingka Group, January 2026)
17. IKEA makes a major investment in affordability (Ingka Group, 1 September 2026)
18. IKEA second-hand marketplace expands to the UK and Ireland (Ingka Group, 7 October 2026)
19. Commission opens in-depth investigation into the Netherlands’ tax treatment of Inter IKEA (European Commission, 18 December 2017)
20. Earthsight report exposes Ikea’s illegal logging links (Earthsight, 23 June 2020)
21. The illegal Russian wood hidden inside Ikea children’s furniture (Earthsight, 15 July 2021)
22. IKEA’s Romanian wood sourcing woes (Environmental Investigation Agency, June 2024)
23. Ikea founder Ingvar Kamprad dies aged 91 (The Guardian, 28 January 2018)

What changed

• 13 October 2026: added a short answer at the top.
• 13 October 2026: added a section on labour and working conditions (Belarus suppliers, East German prison labour, IKEA France spying case).
• 13 October 2026: removed emoji markers from the text and headings.
• 13 October 2026: updated revenue (€44.6 billion, FY25), store count (504 stores in 63 markets), Kamprad’s death (January 2018), renewable energy (Ingka’s €4.3 billion in wind and solar, 94.8% renewable electricity in FY25), zero-emission deliveries (60.1% in FY25, short of the 2025 goal), circular and second-hand schemes, the climate footprint (FY24 Climate Report) and wood sourcing (FY24 Sustainability Report, Ingka FY25 forests).
• 13 October 2026: added IKEA’s recent price cuts, the EU tax investigation, and the Earthsight (2020, 2021) and Romanian (2024) logging investigations with IKEA’s responses.
• 13 October 2026: corrected the 2014 FSC entry (Swedwood’s certificate was suspended), fixed the 2016 to 2018 footprint sum (1.3 million tonnes), removed a 2018 tree-planting figure we couldn’t find in IKEA’s report, replaced 3 dead links and removed 1, and added image descriptions.