IKEA, the Swedish furniture retailer, is exploring further investment opportunities in India as it approaches the next phase of funding. The company initially committed INR 10,500 crore when it entered the Indian market a decade ago, as stated by Susanne Pulverer, the CEO of IKEA India.
Having initiated its retail operations in India by opening its first store in Hyderabad in August 2018, the company is presently in the process of establishing projects in Delhi-NCR. These projects are anticipated to be operational by 2025, marking the completion of the company’s committed 10-year investment in the country.
“This first investment that we committed is booked with the projects in NCR. So with that, we have exhausted the INR 10,500 crore and we are looking at the next level of investment to further build IKEA presence in India, to expand volumes and increase sourcing. So that is in the plan making and we will announce more when we are ready. The plans are being formulated, and we will make announcements when ready,” Pulverer conveyed.
In 2013, the government granted approval for Ikea’s INR 10,500 crore FDI proposal, aimed at establishing 10 stores with associated infrastructure within a decade. Following this, the company expressed intentions to further expand by opening an additional 15 stores.
Currently, single-brand retail trading allows for 100 percent foreign direct investment through the automatic route.
Presently, Ikea has operational stores in Hyderabad, Mumbai, and Bengaluru, with an investment of approximately INR 7,000 crore as it ventures into the National Capital Region, planning to establish two stores in Gurugram and Noida.
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When inquired about the scale of the next investment tranche, whether it would be similar or potentially higher, Pulverer mentioned that the decision on this matter would be made by its parent company, Ingka Group.
Nevertheless, she also emphasized that the upcoming round of investment would be characterized by being “big and bold,” considering the growth potential of India.
There is “a lot of belief in India as it is coming into its growth decade. As a market, it is very dynamic. Many young people are upgrading their lives and are investing in their homes. So it is a huge opportunity market for Ikea,” Pulverer added.
As a strategic move, Ikea is directing its attention to the markets in the South and West regions, employing an omnichannel approach.
Nevertheless, as it prepares to open stores in Delhi-NCR, Ikea is contemplating the possibility of extending its presence to other cities like Lucknow and Chandigarh in North India, recognizing the promising opportunities they present. However, she mentioned that it is premature to disclose any plans beyond the Delhi-NCR at this point.
“Beyond the NCR (National Capital Region), Pune and Chennai are of interest. Kolkata is also on our radar, but it will be a stepwise approach,” she added.
Furthermore, Ikea is actively engaged in enhancing its sourcing from Indian markets to support its global retail operations. This presents opportunities for diversification, particularly in sectors such as furniture.
“While India has the potential to further develop its production capacities, the current export of furniture from India remains relatively small. Exploring opportunities for regionalised and global sourcing from India is part of IKEA’s ongoing strategy,” she added.
For its operations within India, Ikea is currently sourcing approximately 33 percent of retailed products in accordance with regulations and has intentions to further increase this percentage.
“Our intention is to continue increasing this percentage, as it makes sense to produce more locally and explore India’s potential to supply other IKEA markets. Growing volumes in the country, with more stores and online markets, will facilitate the next level of local sourcing,” she added.
She emphasized the importance of sustainability and affordability for Indian consumers, highlighting the necessity to concentrate on specific product categories.
“Textiles, plastics, metals, stainless steel, mixed materials, handicrafts, bulky furniture like mattresses and sofas, and local production of wood-based furniture are areas where we see the potential for growth,” Pulverer added.
Foreign retailers with more than 51 per cent FDI in this sector have to source a minimum of 30 per cent of the value of purchased goods domestically, preferably from MSME, village and cottage industries, artisans and craftsmen, in all sectors.
Presently Ikea is getting one-fourth of its sales in India from online platforms from its own channels such as its app, and e-commerce portal. It also introduced Shop By Phone assistance service and increased doorstep delivery facility in 62 new markets in India.
According to RoC filings, Ikea India sales were up 61 per cent to INR 1,768 crore for the financial year which ended on March 31, 2023. However, its loss was at INR 1,134 crore, on account of expansion in new markets and investments in infrastructure.
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