Swedish furniture retailer IKEA is looking at the next round of investment in India after exhausting its commitment of ₹10,500 crore when it entered the country 10 years ago, according to the company’s India CEO Susanne Pulverer.
The company, which kicked off its retail operations in India with the opening of its first store in Hyderabad in August 2018, is currently setting up projects in Delhi-NCR that are expected to open in 2025 and will complete its committed investment for 10 years.
“This first investment that we committed is booked with the projects in NCR. So with that, we have exhausted the ₹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,” Ms. Pulverer told PTI.
In 2013, the government approved a ₹10,500 crore FDI proposal by IKEA to set up 10 stores with allied infrastructure in 10 years. Subsequently, it had plans to open 15 more stores. At present, 100% foreign direct investment is permitted in single-brand retail trading through automatic route.
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Upcoming “big and bold” investments
Currently, IKEA is operating stores in Hyderabad, Mumbai and Bengaluru and is investing around ₹7,000 crore to enter the National Capital Region with two stores in Gurugram and Noida. When asked as to whether the next tranche of investment would be on a similar scale or potentially higher, Ms. Pulverer said a decision regarding this would be taken by its parent company Ingka Group. However, she also added would the next round to be “big and bold” looking at 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,” she added.
As part of the strategy, IKEA is focusing on markets of the South and West region with its omnichannel approach. However, with its upcoming stores in Delhi-NCR, it is mulling expanding to other cities such as Lucknow and Chandigarh in North India, which also offer good opportunities.
Though she added 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.
Besides, IKEA is also working to increase sourcing from the Indian markets for its global retail operations. It offers the potential to diversify 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.
Sourcing locally
While, for its domestic operation in India, IKEA is sourcing around 33% of retailed products from India as per the regulations and has even plans to increase it further. “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.
It is essential for sustainability and affordability for Indian consumers, she said adding that there is a need to focus on specific 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,” Ms. Pulverer added.
Foreign retailers with more than 51% per FDI in this sector have to source a minimum of 30% 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% to ₹1,768 crore for the financial year which ended on March 31, 2023. However, its loss was at ₹1,134 crore, on account of expansion in new markets and investments in infrastructure.
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