While India’s retail market holds immense potential, success here has never been quick. IKEA India, now in its eleventh year, knows this well. The Swedish furniture giant isn’t on an expansion spree. Instead, it is taking a measured approach by meticulously planning each step, investing heavily, and focusing on long-term gains rather than quick wins.
With its latest foray into North India, IKEA is doubling down on a strategy that prioritises sustainability over speed.
IKEA India entered the crucial North India market through its online ordering and delivery system but a physical store in the region is still a year away. The local subsidiary of the Swedish retail giant IKEA Group started its physical retail journey in 2018 with the first India store in Hyderabad. Since then, it launched IKEA stores in three other cities —Navi Mumbai (2020), Mumbai (2021) and Bengaluru (2022). However, the vast market in the national capital region of Delhi remained untapped, despite its business potential.
Susanne Pulverer, who has been associated with IKEA’s India operations for over a decade, is aware of the market dynamics and is prepared for the long haul. “Of course, our presence is limited, and we need further expansion. Entering the Delhi market is a step in that direction, and we need to complement it with physical (store) expansion,” Pulverer, Chief Executive & Chief Sustainability Officer of IKEA India tells Business Today.
The significance of the northern market needed a meticulous planning process that spanned several years. Setting up an IKEA store in India typically takes 3-5 years, as the company invests time in conducting physical surveys of city dwellers’ homes, establishing a robust supply chain, and designing the store to meet local needs.
THE LONG GAME
IKEA has shunned fast-paced expansion for steady growth, which also requires significant investments. The company has already exhausted the Rs 10,500 crore planned capex in setting up the four stores in west, south, and north India (including upcoming stores in Gurugram & Noida). As per estimates, the store in Navi Mumbai—spread across 500,000 sq. ft—may have cost IKEA over Rs 600 crore.
According to Anuj Puri, Chairman of real estate consultancy Anarock Group, the land and construction costs alone may have been around Rs 12,000 per sq. ft. Additionally, operating these large-format stores comes with significant overheads, requiring up to 1,000 employees to manage facilities such as extensive parking, a crèche, and a sprawling restaurant.
IKEA’s expansion plans for the NCR market are significant. The upcoming Gurugram store in Sector 47 will span 400,000 sq. ft. and will also house India’s first Ingka Group mall (Ingka Center), featuring other retail and leisure brands.
Meanwhile, the Noida store in Sector 51 will cover 200,000 sq. ft. and, like many IKEA outlets in India, will be strategically located. To better serve Delhi customers, IKEA is also planning 5-6 smaller city stores in key districts like South Delhi. While a typical IKEA store-such as the one in Bengaluru-covers around 400,000 sq. ft, these city stores will range between 60,000 and 100,000 sq. ft, offering a more compact retail experience.
Running a large-scale operation comes with significant risks since the breakeven point takes years to reach. IKEA India’s financials reflect this challenge. Despite expanding its reach to 70 cities, the company has remained in the red for several years. In FY23, it reported a net loss of Rs 1,133 crore on an operational revenue of Rs 1,732 crore. In FY24, losses widened by 15% year-on-year to Rs 1,299 crore, even as revenue grew 4.5% to Rs 1,810 crore. Data from the Registrar of Companies (MCA) shows that since FY17, IKEA India’s annual losses have steadily increased from under Rs 200 crore.
Pulverer remains confident. Having observed the market for nearly 15 years and gained a deep understanding of local consumers, she believes IKEA is on the right path to long-term success.
Over the next five years, her focus will be on three key markets-Delhi-NCR, Pune, and Chennai. “It is a huge developing market and has a rapidly growing middle-class segment, which is expected to become 300 million soon. That means a greater number of people will be able to invest in their homes as a home is important to everyone,” she says.
@arndutt
