IKEA Israel prices nearly double IKEA Norway

IKEA Kiryat Ata

Globes compared prices on IKEA items in Israel and in Norway and found shocking discrepancies across the board.

Two months ago, in early March, Yoav Bar, an Israeli who has been living in Norway for the past 8 years, went to an IKEA store in Israel, to help his daughter buy furniture. A surprise awaited him there.

I looked at how much what I bought in Norway costs here. Like a sofa I had bought a month earlier, for example. I thought maybe I had misremembered the price, but then I went into the Norwegian website and I saw that my memory was just fine, Bar told Globes.

A FRIHETEN sofa costs NIS 3,295 in Israel, while in Norway, the exact same sofa costs just NIS 1,417. If thats not enough, the price in Norway includes 25% VAT, while in Israel the VAT rate is only 18%. Accounting for the difference in VAT, the price in Israel is nearly 2.5 times the price in Norway.

I opened a ticket with IKEA Israel customer service. I wrote to them what I paid in Norway, and what the price is here in Israel. It seemed to me like a very big difference. I wrote that this is piggishness - and I did not receive a response, he says. Bar was not satisfied. He decided to compare the entire purchase that he had made a month earlier in Norway, when he furnished a new apartment. Other than the sofa, the purchase included a double bed, nightstands, a table with four chairs, two coffee tables, and a small rug. Bar paid a total of NIS 5,124. In Israel, the same purchase would have cost NIS 9,014. Accounting for the difference in VAT rates, the price in Israel is 86% higher.

What happened to the promise to lower prices?

A Globes investigation reveals that Bars experience is not unusual - in all the randomly selected categories we examined, the prices in Israel were found to be significantly higher in at IKEA Norway.

For example, in the furniture category, a Norwegian consumer will pay just NIS 403 for a TRYSIL double bed (NIS 380 if the VAT rate is adjusted to 18%). The Israeli consumer will pay more than double - NIS 895 - 2.22 times more, or 2.35, factoring for the difference in VAT.

A double bed made of wood veneer with a storage box costs NIS 1,290 in Norway, but in Israel, consumers will pay 54% more - NIS 1,985.

Just 8 months ago, IKEA Israel announced that it is reducing prices across the board, in a PR campaign that received much media attention. IKEA Israel CEO Shuky Koblenz said that the price cut was made possible due to a price cut made by the supplier, and increased efficiency. At the same time, Koblenz announced that the prices of sofas and sofa beds would be reduced by 7%. The vast price differences that were discovered during this investigation, after the price cut that the Israeli chain announced, raise tough questions regarding these proclamations.

On the same occasion, speaking about the products on which prices had not been reduced, Koblenz said, There are many products for which we were unable to reduce prices. For us, this was a drastic step. But was it? Not really.

Here are a few more examples. New parents looking to buy a crib in Norway will pay NIS 342 (NIN 323 adjusting for VAT), and in Israel, they will pay double - NIS 645.

A favorite item among preschool-aged children is the play kitchen. In Norway, this item costs NIS 253 (NIS 238 with 18% VAT), and in Israel, it costs 56% more (66% with VAT adjusted), at NIS 395. Want to buy a baby gym? Think again, because while in Norway it would cost you NIS 146, in Israel it will cost NIS 195 - 41% more, accounting for VAT.

Want a LED DANSA disco ball? In Israel, you will pay more than double - NIS 195, compared with NIS 96 in Norway.

There are vast price differences on other light fixtures as well: A white SKOJIG ceiling fixture costs NIS 145 in Israel, and in Norway a mere NIS 95 (a 53% difference).

It appears that in categories for which IKEA has no significant competition, the Israeli consumer will pay double or more, and in categories in which competition is more significant, the prices are less than double. In all instances, however, the price differences are major.

Another category examined was home textiles. A single SISSELA sheet set costs NIS 95 in Israel, double the NIS 47 for which it sells in Norway.

The similar BRUNKRISSLA set costs 33% more in Israel than it does in Norway - NIS 95, compared with NIS 71.

Even the housewares category doesnt bear good news for the Israeli consumer: The price of a birch serving bowl is NIS 49 in Israel, and NIS 33 in Norway - a 49% difference. The same bamboo cutting board that costs NIS 95 in Israel, costs just NIS 66.5 in Norway, a 43% difference.

IKEA: There are a number of reasons

IKEA said in response, Beginning in 2003, IKEA made sure to reduce prices by a total of 17%, and continues to actively reduce prices. Moreover, IKEA is the only company in Israel that commits to fixed prices throughout an entire year, while offering products at attractive and worthwhile prices.

The price difference between Israel and other countries in the world may be caused by a number of reasons, including freight costs, logistics, inventory, taxation, local regulations, as well as other operational expenses.

VAT is lower in Israel

Because the VAT rate in Israel is lower than in Norway, it cannot be the explanation for the higher prices. It seems that also the freight costs are not a satisfactory explanation, because IKEA works with dozens of factories around the world, and also IKEA Israel orders inventory from 50 different countries.

And what about salaries? In Norway, wages are much higher than they are in Israel. Bar himself, who held a management position in Norway and employed students and temporary employees, had to pay his workers NIS 76 per hour - the lowest wage paid to workers in Norway, similar to the minimum wage. Bar says, Norway is an expensive country. There is also a serious employer tax, and workers get 25 vacations days - many more than in Israel.

So why is there such a difference? Bar thinks it because they can get away with it: They set a price, and it works, people pay. At the Norwegian company, there is still the issue of corporate shame. If it were publicized that someones prices were so inflated - people would react, and suppliers would feel uncomfortable. There, theres still a concept of shame. Norway is an expensive country, and you pay workers very high wages. So theres nothing in the world that can explain such price discrepancies.

Published by Globes [online], Israel business news - www.globes-online.com - on May 3, 2015

Copyright of Globes Publisher Itonut (1983) Ltd. 2015

IKEA Kiryat Ata
IKEA Kiryat Ata
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