IKEA’s Next Investment Phase in India

IKEA, the Swedish furniture retailer, is looking at the next round of investment in India after fulfilling its commitment of Rs 10,500 crore when it entered the country 10 years back, 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.

IKEA’s growth strategy in India

“This first investment that we committed is booked with the projects in NCR. So with that, we have exhausted the Rs 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 told PTI.

In 2013, the government approved a Rs 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 per cent foreign direct investment is permitted in single-brand retail trading through automatic route.

Currently, IKEA is operating stores in Hyderabad, Mumbai and Bengaluru and is investing around Rs 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, 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,” Pulverer 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.

IKEA’s sourcing plans from India

Besides expanding its retail presence, IKEA is also working to increase sourcing from the Indian markets for its global retail operations.

The company has around 60 suppliers in India with over 45,000 direct employees and 400,000 people in the extended supply chain.

It sources products worth €318 million from India annually for its global operations.

“We have a very strong ambition to grow our sourcing from India because we see a lot of potential here both for our global needs and for our local needs…We want to source more sustainable materials from India such as cotton, wood and bamboo,” Pulverer said.

She also said that IKEA is exploring opportunities to source more from women entrepreneurs and social enterprises in India.

“We have some very inspiring examples of how we work with social entrepreneurs who employ women artisans and create beautiful products for us…We want to do more of that because we believe that it creates a positive impact on society and also brings unique products to our customers,” she said.