by Elton Gomes
Swedish furniture company–IKEA–will finally open its first retail store in Hyderabad on the morning of August 9, 2018. The furniture company has been waiting to enter India for a while now, and plans to have 25 outlets across the country by 2025. The next IKEA store is slated to open in Mumbai in 2019. Bangalore and Gurgaon are subsequent cities where IKEA stores are likely to come up.
The Swedish company seems to be here for the long haul, as it plans to eventually spread its iconic blue and yellow stores across over 40 Indian cities. The company has said that it is prepared to spend about 10 billion rupees ($145 million) on each store it opens in the country.
The store in Hyderabad
IKEA has spent more than Rs 1,000 crores on its Hyderabad outlet (including acquiring land, construction, and capital goods). The outlet will have a direct staff strength of 950 employees, while 1500 more employees will be indirectly employed by services. Spread across 13 acres, the store is four lakh square feet in area and will display nearly 7,500 products. Out of these, roughly 1,000 products will be available for under Rs 200, IKEA said in an official statement, as reported by the Times of India. IKEA said that 20 percent of all products sold will be locally sourced.
The furniture company expects that as many as 6 million visitors could enter the outlet in a year. The world’s biggest furniture retailer is counting on new consumers in industrialising nations to bolster its sales growth in the face of increasing competition.
“The pace of opening stores in India will intensify,” said Harminder Sahni, founder and managing director of consulting firm Wazir Advisors, Bloomberg reported. Sahni added that IKEA has spent more than a decade in researching the Indian market in order to ensure its success. He said, “IKEA has never failed; it’s never closed a single store in its history.”
IKEA’s future plans for India
At a preview of the Hyderabad outlet in June 2018, IKEA’s India Chief Executive Officer Peter Betzel told the media that the company plans to launch online sales when it opens its second retail store in Mumbai in 2019. “As online buying in every product area is growing, it will be so in furniture segment too,” said Betzel, Business Today reported.
The company also plans to initiate several small format outlets across Indian cities. “We are also looking at opening multiple small format stores of 1,000-5,000 square meters each in bigger cities like Mumbai for having more touch points,” Betzel said, as per Business Today. The report further mentioned that after Mumbai, IKEA could look towards Bengaluru, Delhi, Ahmedabad, Pune, and Chennai for its outlets.
IKEA in India
The Swedish multinational began its journey in India with 535 staff members and a Rs 10,500 crore investment. “We are here for the long term,” Juvencio Maetzu, former CEO of IKEA India, said, as per the Economic Times. Maetzu added, “We think of 100 years when we think of our strategy. I have taken no short cuts. More importantly, I have had no pressure (from the headquarters) to take short cuts.”
Founded by the Swede Ingvar Kamprad in 1943, IKEA with 1,94,000 employees and operations in 49 countries, banks on its long-term vision. Its value for money quality furniture have been its USP for decades.
In June 2016, following a debate surrounding local sourcing conditions, IKEA was of the opinion to have “less detailed regulations” as any type of business would eventually find takers with the best preconditions. The company added that it was ready to do whatever it takes to meet the 30 percent sourcing requirements in India.
As per India’s FDI (foreign direct investment) in single-brand retail regulation, IKEA must source at least 30 percent of materials locally within five years of starting business. On Wednesday, chief executive Jesper Brodin told the media that India is all set to become IKEA’s biggest sourcing markets in the future. Brodin said that he wants IKEA’s products to be more affordable and accessible in India.
Elton Gomes is a staff writer at Qrius.