Barry Smyth

(I haven’t posted for ages … too much conference travel … but in my post-conference jet-lag I thought the following might be of interest…)

This week Dublin’s new Ikea store opened and apparently life as we know it was due to end as most of the island converged on Ballymun to worship at this alter of flatpacks and meatballs. As it turns out that didn’t happen! Recession, anyone?

Instead I found myself on the receiving end of  emails from various family and friends all engaging in the popular online sport of “spot the price difference”, this time between Ikea’s Dublin (euro) prices and Ikea’s Belfast (sterling) prices. You see, south of the broder, we all feel strongly that we are being ripped off, as sterling prices are hiked-up in a sterling-to-euro conversion that bears no apparent relationship to the prevailing exchange rate. The argument given is one of a more expensive economy south of the border. I’m not sure if this is true really, but if it is, it is not surprising given that we have to pay more for goods and services, such as Ikea’s, which is a rather unfortunate circular argument if you live in the Republic of Ireland.

So friends and family were emailing around these price comparisons, “Markus Office Chair @ €126 in Belfast but €149 in Dublin!” etc. And it looked like there was no shortage of examples to support the theory that Dublin shoppers were paying significantly above the odds relative to what a short journey to Belfast might offer.

The worry is, of course, that people are being selective in the prices that they compare, as they adopt a confirmation bias to justify their rip-off assumption. After all it is only natural to pay more attention to the evidence that supports our favourite theory.

I decided to take a closer look, and so yesterday I wrote some Ruby scripts to scrape the Ikea product catalog to lookup prices for common product codes across 12 stores (Ireland, UK, Italy, Netherlands, Finland, Sweden, Germany, Spain, France, Austria, USA, and Canada). For the purpose of price comparison I converted local prices to their euro-equivalent at the exchange rate valid for yesterday (July 28th, 2009) evening. I based my master product-list on the products available on Ikea’s UK web-site and I only included a product in the survey if it was on sale in all 12 of the comparison stores; there are plenty of products that are only available in a subset of the stores, but including these would likely skew the overall statistics.

So, on to the results; which for now will remain preliminary as I have not had a chance to check everything fully. In total I managed to compare 1093 products, which were common across the 12 stores. (Incidentally, other surveys I looked at examined as few as 17 products to make their price comparisons. 17 products! Get real people. Who pays for these surveys?)

Anyway, here are some key statistics:

• The average product price for the Dublin store is €42.60.
• This is 9% more expensive than the cheapest average product price for an Ikea store, which happens to be for USA stores, at €39.13 (sales tax adjusted).
• Furthermore, this average Dublin price is only 3.58% less than the most expensive Ikea store, which happens to be for Finland, at €44.18.

It certainly seems as though Dublin prices are tilting in the direction of the more expensive stores in the survey. But are they really significantly higher than UK prices? Well with an average product price for the Dublin store of €42.60, we come in at just over 8% more expensive than the pricing for the UK, which is €39.42 on average.

I also looked at the spread of prices on a product by product basis, to check which countries tend to come out the cheapest (or most expensive) on individual product comparisons. The results are somewhat revealing, at least for Ireland:

• For the 1093 products surveyed, the USA is the cheapest more often than any other country. It offers the best available price for 295 products. In otherwords, just under 30% of its (common) product inventory is the cheapest there is, at least across the 12 regions I have looked at to date.
• Interestingly, the new Dublin store is the worst performer by this measure. It offers the cheapest price for only a measly 20 of its 1093 products; fewer ‘cheapest products’ than any other country. The UK is cheapest on 194 products; that’s nearly 10 times more ‘cheapest products’ than the Dublin store.
• Moreover, across the 1093 products, the Dublin store is the most expensive more often than any other country. It commands the highest price (across the 12 regions surveyed) for 195 of its 1093 products. And the UK is the most expensive on only 28 products.

So are we being ripped off by the good people at Ikea? I’ll mainly leave that for others to decide as I have more data analysis to do, but I must admit that an 8% premium above UK prices is somehow less than I was expecting, especially considering the VAT differences up north. In fact if we normalise for VAT then the average Dublin price is just marginally higher (by about 60c) than the average Belfast price and so it seems that Ikea are playing a fair pricing game.

As a parting thought for now though, consider the following…If you are currently living in Dublin then you are about 150km from the Belfast Ikea store. I think that a Ford Modeo will do well to deliver fuel efficiency of about 15km per litre, and so the round-trip to Belfast will cost you about €25 given as average price of €1.25 per litre (300km total using 20 litres of petrol). Given that, on average, the Dublin store is 8% more expensive than the Belfast store, then, all other things being equal, you will begin turn a profit (absent your time) if you are expecting to spend at least €312. Below that your in-store savings will probably not compensate you for your fuel.

Food for thought?

- Barry

ERRATA: In the original version of this post I did not account for US sales tax since Ikea prices in their US database are quoted pre-tax. I’ve fixed this now, using an average sale tax figure of 8%, and made the appropriate edits above. This has resulted in some minor changes to the results but the overall picture remains the same. Thanks to James below for spotting this one!