The world's largest furniture retailer Ikea plans to scale up its investments in India over time as it sees a huge growth potential in the market. The company had planned to invest Rs 10,500 crore in the country as per the investment proposal that was cleared by the Foreign Investment Promotion Board in 2013. Senior executives of the company, without giving a particular number, said they would look to invest more than that.
“Rs 10,500 crore was the initial approval. This was when we were starting to look at India. Today, we have much better understanding of the potential India has. We believe we will invest more than the Rs 10,500 crore,” said Patrik Antoni, deputy country manager of Ikea India.
India's furniture market consists of few retail chains like Godrej Interio, Shoppers Stop-owned Home Stop and Future Group's Home Town. However, the biggest competition for Ikea will be the largely unorganised market dominated by standalone stores and carpenters. In recent times, e-commerce players like Amazon, Flipkart have also entered the fray.
Globally, the Swedish furniture retailer is well-known for its products, which are ready to assemble and officials say they have visited several homes in cities like Mumbai to understand local requirements. Its first store in the country is set to open by the middle of this year in Hyderabad, where work is in advanced stages.
After Hyderabad, the second store will come up in Navi Mumbai next year, where construction is also on in full swing. This will be followed by an outlet in Bengaluru, which also the company hopes to open in 2019, after which it will open in Delhi-NCR. Later the company will look at expanding its retail footprint to other cities like Chennai and Ahmedabad among many others.
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“It is really about reaching the many people in India. We believe in bigger investments to reach more people,” added Antoni.
In Maharashtra alone, the company is investing close to Rs 3,000 crore, which will include multi-format stores as well as experience centres in Mumbai. A similar investment is also likely to be made in Delhi-NCR.
Earlier this month, Ikea opened its distribution centre in Pune, from where it will service and supply its stores in the country. The company is investing Rs 750 crore in the distribution centre, which will be further expanded as the business grows. There may be smaller logistics centres that may be opened near Bengaluru and other large markets like Delhi. These smaller logistics units will be used to distribute products to customers, said Per Hornell, Maharashtra Market Manager for Ikea.
Each Ikea retail store will directly employ around 800 people and around 1,200 people will get indirect jobs, added Hornell.
Apart from physical stores, customers will also be able to shop Ikea products online starting 2019. The roll-out of its own e-commerce platform will be in phases and only in areas closer to where it will be physically present.
The company is also looking to rapidly scale up local sourcing in a big way.
“Each market is quite local. For instance, in Europe around 60 per cent of source comes from Europe, in China its about 70 per cent. In India today, we are still quite limited. If we were to open a store today, maybe 5-6 per cent would be sourced locally. This we are now escalating,” said Antoni.
At a global retail level, around 3 per cent of the total sourcing of products is from India.