Jesper Brodin, the global CEO of Ingka Group, highlighted that India holds the top position on Ikea’s priority markets list for investment, remarking, “India is ranked ‘number one, two, and three’.” He underscored the difficulty in keeping pace with the country’s evolving digital and physical infrastructure. Ingka Group primarily operates Ikea stores as a franchisee.
“It has been incredibly interesting to see the speed of development the last five to 10 years,” he told in an interview. “Things were moving before but today, it’s even harder to keep up with all the changes in India. And India has moved from a country catching up to be a country that in many aspects are leaders in digital and more so the economic progression.”
He highlighted India’s leading position in terms of growth.
“We are deeply impressed by the economic development in India, which if you compare to any of the big countries out there, it’s the leader in economic growth and development right now,” he said. “And their outlook is quite optimistic.”
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The world’s largest furniture and home products retailer, renowned for its ready-to-assemble offerings, began sourcing from India in the 1980s. With over sixty suppliers in the country, predominantly in textiles, it obtained approval from the former Foreign Investment Promotion Board (FIPB) over a decade ago for its INR 10,500 crore investment proposal to establish 25 stores by 2025, each boasting an expansive size equivalent to about four football fields. Presently, it has inaugurated three large-format stores and two smaller city outlets, with plans underway to introduce larger stores in Gurgaon and Noida within the National Capital Region shortly. Additionally, it has extended its ecommerce services across Maharashtra, Karnataka, Telangana, Andhra Pradesh, and Gujarat, with ambitions to launch online operations in Delhi later this year.
According to IDBI Capital, the domestic furniture market is currently estimated at $32 billion, with expectations to reach $38 billion by 2026. This growth trajectory is fueled by increasing demand for both residential and commercial infrastructure development, primarily supported by a burgeoning middle-class segment within the country.
Brodin, who once worked as an assistant for Ikea founder Ingvar Kamprad, said India is the biggest “expansion adventure” in the group currently.
“When we think about India, we think about size,” he said. “In terms of investment priorities, India ranks one, two and three. We have consciously decided we cannot financially afford to be in the startup phase in too many places. But India is the top priority for us now.”
The Indian market aligns well with Ikea’s global vision of providing affordable solutions to a larger population with substantial needs.
“India is the ultimate market for us with all these people who have thin wallets, so many needs, big family situations,” he said. “So, for us to succeed in India I think is the most exciting expansion project that we have.”
Continue Exploring: Ikea expands reach with online doorstep deliveries to 62 new districts in India; plans e-commerce launch in Delhi-NCR within a year
The Swedish retailer announced that it has reduced costs due to a softening in raw material prices, enabling Ikea to decrease prices on numerous products by approximately 20% both in India and worldwide. This reduction is expected to drive an increase in sales volumes.
India ranks as the world’s fifth-largest producer and the fourth-largest consumer of furniture. However, per-capita furniture consumption stands at $5, notably lower than countries like China with $237 and Vietnam with $330, indicating substantial room for growth. While approximately three-fourths of India’s furniture industry is dominated by standalone stores and local carpenters, the recent emergence of about half a dozen ecommerce players, such as Flipkart and Amazon, has entered the market, signaling a shift in the landscape.
The company stated that it is engaged in discussions with the Indian government to establish quality standards aimed at ensuring the production of safer and standardized products, particularly concerning the ingredients and materials utilized. This initiative is intended to foster a fair and equitable market environment.
“We have been invited to be part of the dialogue–how do we find a pathway which is right for consumers, right for India to claim its space on the market, but also helping the government to reach the $2 trillion export target by actually making sure that the standards are exportable?” said Brodin, who started at Ikea in 1995 as a purchase manager and became Ingka Group CEO in 2017.
Ingka, the primary global franchisee of Ikea, commands almost 90% of the company’s sales. Owned by a distinct entity, Inter IKEA, the brand produces all its merchandise.
Ikea, which opened its first India store in Hyderabad in 2018, has swiftly become a formidable presence in the market, surpassing local competitors Urban Ladder and Pepperfry within its inaugural year of operation at that single outlet. By 2023, it recorded sales of INR 1,768 crore, marking a remarkable 61% increase from the previous year. However, despite this notable growth, the company faced a widened net loss of over INR 1,134 crore, attributed to investments in new infrastructure such as land acquisition and distribution centers for forthcoming stores.
The flat-pack furniture giant expressed its ongoing efforts to establish a strong presence in the Indian market, emphasizing that it would require at least 8-10 stores to fully leverage economies of scale.
“The sooner we can get to that, the better,” Brodin said. “Chapter one was the sourcing and foundation and then getting the first door up and running. And then the intention is to get the company in top big cities. We are measuring out and laying out plans to see how we can do it for 1.4 billion people. And if I am certain about anything, it is that the economic outlook for India is looking good.”
Continue Exploring: Ikea India streamlines operations, set to close R-City Mumbai store by mid-2024
