IKEA's Answer to a Splitting Economy Is a Brand Built on Being Everywhere, Not Premium

The prevailing corporate response to a squeezed middle class has been to chase the money that is left, tailoring products, pricing, and marketing toward the wealthier households still spending freely. Economist Katica Roy argues that IKEA has taken the opposite bet, building its brand around a single measure most retailers do not track closely, how many homes it can reach, rather than how much margin it can extract from the customers it already has.

The math behind a splitting economy

The numbers behind Roy's argument are stark. The top 20 percent of households now account for roughly 60 percent of consumer spending, while wages for everyone else have not kept pace with the cost of living. Wages grew 3.2 percent over the past year while consumer prices rose 3.4 percent, a negative 0.20 point wage to price spread. Measured against a pre pandemic baseline gap of 1.34 percentage points, that amounts to a 115 percent collapse in the margin households have to work with. One quieter signal shows up in how people are paying for basics, buy now pay later usage at grocery stores has doubled over the past two years, a sign that a meaningful number of households are now financing everyday groceries rather than discretionary purchases.

A KPI most retailers don't track

Against that backdrop, IKEA CEO Juvencio Maeztu has been explicit about what the company optimizes for. The big KPI, he has said, is in how many homes IKEA is present in, not top line revenue. He illustrates the philosophy with a simple example, the company sells umbrellas, and when times get harder, it normally reduces the price rather than raising it, the reverse of the instinct that guides most retailers trying to protect margin during a downturn.

Cutting prices while competitors raise them

That philosophy shows up directly in IKEA's numbers. The company leaned into deflationary pricing rather than passing costs on to shoppers, and even as revenue dipped 0.9 percent in fiscal 2025, store visits climbed to 736 million and operating income rose 16.8 percent to 1.46 billion euros. The result suggests that lower prices, paired with enough volume, can outperform a strategy built around defending margin on a shrinking base of high spending customers.

Building a supply chain that isn't hostage to the world

IKEA has also been investing to protect that pricing promise from forces outside its control, committing 70 million dollars to manufacturing in North Carolina specifically to reduce its exposure to global shipping disruptions. The logic follows directly from the brand's core commitment, a supply chain shock that forces prices up would break the exact promise the company has built its identity around.

Owning the energy under the stores

The company has taken a similar approach to energy, committing 7.5 billion euros to utility scale renewable energy and already owning 49 wind farms and 26 solar parks. That is not simply a sustainability initiative, it is a hedge against the kind of energy cost volatility that could otherwise force IKEA to raise prices and undercut the low cost positioning its entire brand depends on.

Retraining instead of laying off

On the workforce side, IKEA retrained 8,500 employees rather than cutting them, pairing that investment with a customer service AI system called Billie. Remote sales centers built around that shift generated 1.25 billion euros in revenue, while customer satisfaction rose from 60 percent to 89 percent over the same period. The choice reads as an extension of the same brand logic, protecting service quality and trust rather than treating headcount as the first place to find margin.

What most companies are doing instead

Roy contrasts IKEA's approach with the more common corporate playbook, tailoring offerings toward affluent shoppers, AI driven hiring freezes concentrated in middle and entry level roles, and tax relief structured so that households in the 95th to 99th income percentile receive roughly 1.9 times the benefit that middle income households see. She points to demographic data that shows how unevenly the current economy is distributing pressure, Native American women earn 53 cents for every dollar earned by white, non-Hispanic men, and 510,000 Black women left the labor force within a five month span. Closing existing pay gaps, she notes, could add 3.1 trillion dollars to the economy.

Why this is a stability argument, not a charity one

Roy's broader warning is that engineering the middle class out of the economy weakens the demand base every business ultimately depends on, and that closing wage gaps could cover roughly a third of the funding shortfall facing Social Security on its own. Read next to that argument, IKEA's strategy looks less like a feel good exception and more like a calculated bet, that a brand built to stay present in as many homes as possible, rather than a shrinking number of wealthier ones, holds up better once a large share of the customer base has quietly run out of room to spend.