IKEA Suspends Operations in Russia, Affecting 17 Stores

IKEA Suspends Operations in Russia, Affecting 17 Stores
The company’s logo is seen outside of an IKEA Group store in Saint-Herblain near Nantes, France, on March 22, 2021. (Stephane Mahe/Reuters)
Bryan Jung

The parent company of IKEA announced on March 3 that it will close all of its stores in Russia, stopping production in the country and halting all exports and imports to and from Russia and Belarus, as Western companies begin to curb business with Russia since its invasion of Ukraine.

Ingka operates seventeen stores and one distribution center in Russia.

The two companies said in a joint statement that the war in Ukraine has already had a huge human impact and is also resulting in serious disruptions to supply-chain and trading conditions.

"The devastating war in Ukraine is a human tragedy, and our deepest empathy and concerns are with the millions of people impacted," they said.

“For all of these reasons, the company groups have decided to temporarily pause IKEA operations in Russia.”

Ingka, one of the world's biggest shopping center owners, said its other 14 locations across Russia operating under its Mega brand will remain open to ensure that the many people in Russia have access to their daily needs and essentials such as food, groceries, and pharmacies.

The world's biggest furniture brand, Inter IKEA Group and Ingka Holding BV, the largest owner of IKEA stores worldwide, will also likely raise its prices by an average of 12 percent this fiscal year, up from the 9 percent flagged in December, amid rising prices for raw material costs and supply chain disruptions.

Inter IKEA is in charge of supply and the manufacturing of products, while Ingka is the main global retailer, owning 392 of its stores around the world.

Inter IKEA Core Business Supply Manager Henrik Elm said in a joint interview with Ingka Group Retail Operations Manager Tolga Oncu, that the decision was made before the European Union approved new sanctions against Belarus on March 3 for supporting Russia’s invasion of Ukraine.

Inter IKEA has not yet decided whether to raise prices at its stores as a result of the Ukraine crisis, according to Elm.

IKEA is one of the first major Western firms to halt business with Belarus.

"We couldn't offer safety and security of people working in our supply chain—passing the border et cetera was simply too risky. Then, on top of that, the consequences of different sanctions altogether made it simply not possible to operate any longer," said Elm regarding Belarus.

IKEA produces chipboards and wood-based products at three sites in Russia, with around 50 direct suppliers in the country that produce a wide range of goods, the bulk of which are sold in Russia.

Russian-produced products that are exported to other markets make up less than 0.5 percent of IKEA's inventory.

Belarus is primarily a sourcing market for IKEA and most of the goods manufactured there, primarily of wood-based products, mattresses, and sofas, are sold in Russia.

Top brands from M&S to Apple, Jaguar Land Rover, Expedia, and Coca-Cola have already suspended operations in Russia, as a wave of international companies are leaving due to the war and the consequent sanctions against the country.

The decision to mothball operations will affect 15,000 workers in Russia, after a similar situation with 416 workers in Ukraine, where its one store and online operations have been suspended since the start of the invasion on Feb. 24.

Through last August last year, Russia was IKEA's 10th-biggest market with retail sales of 1.6 billion euros ($1.8 billion), or 4 percent of total retail sales.

Oncu, in a joint interview with Elm, promised that all staff in Russia would get paid, in rubles, for at least three months.

"The company groups will secure employment and income stability and provide support to them and their families in the region," said IKEA.

Bryan S. Jung is a native and resident of New York City with a background in politics and the legal industry. He graduated from Binghamton University.