India is a "top one, two and three market" in terms of investment for furniture retailer Ikea, according to Jesper Brodin, Global CEO of Ikea's franchisee holding company Ingka Group.
Acknowledging that India is a "challenging market", Brodin in an interview with The Economic Times said it is tough "keeping up with the rapid development of digital and physical infrastructure in the country".
“It has been interesting to see the speed of development over the last five to ten years. India has moved from a country catching up to being a country that in many aspects are leaders in digital and more so the economic progression," Brodin said.
Ingka, the largest global franchisee of Ikea, contributes close to 90 percent to its total sales. The brand is owned by Inter Ikea, a separate entity responsible for manufacturing all Ikea products.
India's Furniture Market Potential
Brodin, who previously served as an assistant to Ikea founder Ingvar Kamprad, said he identifies India as the primary focus for the company's expansion.
He emphasised India's significance due to its size, adding that Ikea's global vision aligns with the characteristics of the Indian market, aiming to serve a large population with substantial needs at affordable prices.
“In terms of investment priorities, India ranks one, two and three. We have consciously decided we cannot financially afford to be in the startup phase in too many places. But India is the top priority for us now. India is the ultimate market for us with all these people who have thin wallets, so many needs, and big family situations. So, for us to succeed in India I think is the most exciting expansion project that we have," he said.
In terms of pricing, Ikea has strategically reduced costs following a softening of raw material prices, resulting in a price cut of around 20 percent on various products, both in India and globally. This reduction is expected to drive higher sales volumes.
Ikea has successfully overtaken local competitors such as Urban Ladder and Pepperfry in its first operational year with a single outlet — its inaugural store in Hyderabad in 2018. Cut to now, and in 2023, the company reported sales of ₹1,768 crore, marking a 61 percent increase from the previous year.
However, there was a widening net loss of over ₹1,134 crore, attributed to investments in new infrastructure, including land acquisition and the establishment of distribution centres for upcoming stores.
Expansion Plans and Market Prioritisation
Brodin said he was "deeply impressed" by the economic development in India and its leadership in terms of growth. "...if you compare to any of the big countries out there, it's (India's) outlook is quite optimistic," he added.
As of date, Ikea has opened three large format stores and two smaller city stores, with plans to inaugurate larger stores in Gurgaon and Noida in the National Capital Region. In addition to physical expansion, the company has broadened its e-commerce services in Maharashtra, Karnataka, Telangana, Andhra Pradesh, and Gujarat. Furthermore, the Swedish retailer is also targeting the start of online operations in Delhi later this year.
The company said efforts are ongoing to establish a stronger presence in the Indian market, emphasising the need for at least 8-10 stores to achieve economies of scale.
“The sooner we can get to that, the better. Chapter one was the sourcing and foundation and then getting the first door up and running. And then the intention is to get the company into top big cities. We are measuring out and laying out plans to see how we can do it for 1.4 billion people. And if I am certain about anything, it is that the economic outlook for India is looking good," Brodin said.
IDBI Capital reports that the domestic furniture market is valued at $32 billion, and it is anticipated to grow to $38 billion by 2026 — largely driven by a growing middle class, as per the report.