India

What’s The Hold Up For IKEA Stores In India?

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The Swedish retail giant IKEA entered India 28 years ago to source products for their stores around the world. But they still don’t have a storefront presence in the country – and don’t anticipate one until 2017. So what’s the hold up?

They tried first in 2007, setting up a retail office in India anticipating that store openings around the country would follow. However infrastructural and economic reforms didn’t pan out as hoped, and IKEA left with some haste.

In 2011, India changed its investment bylines to allow one hundred percent foreign ownership in single-brand retail ventures – earlier international companies were only able to enter under joint-venture contracts, holding no more than a 51 percent stake in Indian operations.

It wasn’t until June 2013 that IKEA returned to India with an approved plan to invest 105 billion rupees (today valued at about $1.6 billion) and open 25 stand-alone stores across India.

An IKEA store front. Photo courtesy of IKEA UK.
An IKEA store front. Photo courtesy of IKEA UK.

But things have still been moving slowly. Really slowly.

The company recently refurbished its Gurgaon headquarters in India to create the first IKEA activity-based space in the world. The open office with it’s working kitchen and chaise lounges for employees to hang out with their laptops has been a way of accommodating a rapidly growing workforce in a corporate office that could only hold 140 desks, says IKEA India’s Communications and Sustainability Manager Patrik Antoni, who led the project.

Yet one of the reasons the India office has seen so much hiring has been because of a challenge. “Buying land has proved to be more difficult than we initially predicted and we are recruiting more people to our real estate team to work on securing land parcels for our big expansion plans,” says Antoni.

Recent reports are that the first store may be opened in Hyderabad – although Antoni says Indian consumers shouldn’t expect to be able to get their hands on the iconic Swedish furniture until 2017 at the earliest.

Although they’ve been sourcing materials from India for the past 28 years, IKEA now has to comply with local rules, which have significantly held up the progress of India store operations. As a fully independently owned company, they must ensure that an average of 30 percent of the production value of sold goods should be sourced from within India, and within five years of the initial investment.

“Over time IKEA wants to source more than 30% to reach the affordability goals and to be profitable,” says Antoni. “But to set up new, big scale industrial suppliers following the IKEA IWAY conditions, our code of conduct when it comes to working conditions, social and environmental responsibility, takes time.”

They’ve even created a ‘Make More In India’ initiative to boost things, through which IKEA is currently searching for new suppliers in categories such as sofas and mattresses, which India has not previously been a source of – in addition to sustainable materials including bamboo, acacia, mango, jute, and coconut fibers.

IKEA KRYDDGLAD storage baskets and table runners, part of the company's jute and fibre collection hand-crafted by social entrepreneurs. Photo courtesy of IKEA UK.
IKEA KRYDDGLAD storage baskets and table runners, part of the company’s jute and fibre collection hand-crafted by social entrepreneurs. Photo courtesy of IKEA UK.

The products IKEA has traditionally sourced from India have predominantly included textiles, carpets and rugs as well as plastic and metal. “It is a very important sourcing market for us and we are looking to double that in the coming 5 years,” says Antoni, who also works with the IKEA Foundation, which supports women and children across India.

If the traditional IKEA offering of well-priced and affordable products is to be met, pricing for the average Indian consumer must also be kept in check, something that can only be done through sourcing locally.

And despite an estimated 190 million dollar investment into India since initial entry, IKEA is forbidden by the Indian government from selling their products online in the country, despite an ecommerce boom and a market of 213 million mobile internet users.

“This of course limits the reach, as well as the perception of the IKEA brand being modern and up to date,” says Antoni.

IKEA plans to open its trademark factory floor style stores in Delhi and its National Capital Region, Mumbai, Bangalore, and Hyderabad.

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Editorial Team

The SupplyChains Magazine editorial team takes great pride in bringing you the best information to help you succeed in your supply chain, logistics or procurement functions. Together, our editors and contributors have more than 50 years of supply chain industry knowledge to share with you.

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