IKEA's expansion in India takes an ambitious route; New outlets in store for 30 cities in 7 years

Swedish furniture giant, IKEA has set a pace for rapid expansion and growth in India to catch up with the delays marked by the COVID-19 pandemic and the consequent nationwide lockdown. With two prominent stores in Hyderabad and Navi Mumbai, and two in the pipeline for Noida and Bangalore, IKEA hopefully aims to have a presence in 30 Indian cities by the next 7 years. Besides them, the international brand is also viewing to start work on another store near Delhi and two smaller units in Mumbai in 2021.

Challenges before IKEA for expansion in India

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While the Indian landscape is fairly cultivable for new businesses, there are multiple challenges that have hurdled the growth of IKEA here. For starters, the COVID-19 pandemic and the suspension of construction work. Though the company is now progressing things at full speed, it has effectively slowed down the overall expansion plan.

Additionally, the pack and parcel furniture brand has to draft a feasible plan of action to meet the local sourcing requirements for independent growth in India. The company has a two-year deadline to raise the ratio of goods and materials sourced from India -- currently at 22%, to at least 30%, to meet local regulations. This, along with the stiff competition from Reliance Retail Ventures Ltd, is also standing as another obstacle for the company.

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IKEA's Chief Executive Officer for India have shown confidence and stated that fulfilling the local regulation target is fully achievable. Commenting about the local competition, the veteran official stated that India's large market gives an opportunity to not just one, but several businesses to bloom, simultaneously. The need in the country is high and IKEA is one part of it.

Moreover their consulting agency, Technopak Advisors Pvt. does not size Reliance as an immediate competitor as IKEA is far ahead in terms of branding and positioning. They too have pointed out the possibility of more than just one local competition to enter the mainstream, in due course of time considering it is a fast-growing segment in India.

Assent of IKEA in India

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Despite the hurdles, IKEA's business in India has accelerated fairly well. Where the nationwide lockdown slowed down the construction of new stores, it beefed up the online (e-commerce) business of the furniture brand. Online sales now account for 40% of total sales compared to about 10-15% a year ago, highlighted the CEO.

This growth however is not dominating the store sales. IKEA stores are humongous and offer a lot more than just furniture. With food stores that serve classic Indian dishes, customers spend more time here than any other retail outlet and this is directly proportional to what they are spending, stated the CEO.

Post the COVID-19 lockdown, people are also rushing to the malls with force and this is also helping to boost retail sales. The furniture company aims to be accessible to more than 100 million people in India in the next two years.