Ikea looking at next phase of investments in India, plans smaller format stores in adjacent markets

Global furniture retailer Ikea is looking for the next round of investments in its priority market India as it enters the second phase of growth, its India CEO Susanne Pulverer said.

Ikea will open small-format stores with a retail area of 30,000 to 70,000 square feet, in the adjacent markets of its existing and coming large-format stores besides growing its online presence here, she added.

"We have done phase one, where we invested in the three first markets in four stores. We have taken the learnings. We have seen and learned even more from the Indian consumers, and now we take that to the next phase of the investment and expanding in India," Pulverer told PTI.

Ikea's next destination is Delhi-NCR, where it will first start online sales in the first quarter of 2025 and then open its first physical store at its first 'Lykli' centre, which would come up in Gurugram in 2026.

Currently, Ikea has large format stores in India at Hyderabad (4.8 lakh sq ft), Navi Mumbai (5.3 lakh sq ft) and Bengaluru (4.6 lakh sq ft). It had also opened two small city centres in Mumbai, of which one was later closed.

Asked about the pipeline of the new stores for the second phase, Pulverer said: “We are in the finalisation.”

Pulverer also pointed out that land in India is "valuable and very expensive" and interest rates are also higher, which make it more challenging.

"At the same time, being a low-cost company and really cost-conscious, we try to find ways to work around and compensate. We look at, together with our colleagues in sourcing, how to have more of local source products that will help gross margins," she said.

In 2013, the government approved a Rs 10,500 crore FDI proposal by Ikea to set up 10 stores with allied infrastructure in 10 years.

Ikea has plans to expand its operations to other parts of the country in a phased manner.

Pulverer said Ikea has decided to focus on six markets - Hyderabad, Mumbai, Bengaluru, Delhi, Chennai and Pune.

"We are planning to penetrate the adjacent cities. We can not spread all over India in one go, because you need to have the logistics set-up behind it. We are taking step by step," she added.

In the second phase, Ikea's next big market will be Delhi, where it will also look at the adjacent areas with smaller formats.

"Of course, we are looking at in the vicinity of Delhi-NCR and cities like Chandigarh as to how could we reach there...a bit smaller formats, which is easier to invest in," she said.

Delhi will be the next big market to open in the beginning of 2025. It's coming closer with the CDC (customer distribution centre) first, and then the company is looking at smaller store formats, she added.

Ingka Centres, a part of Ingka Group that operates Ikea retail on Monday laid the foundation for its second meeting place in India at Noida under the Lykli brand.

It is investing 607 million euros (about Rs 5,500 crore) to set up its second centre, which will be ready by 2028 and also have an Ikea store inside.

Asked whether it plans to add more such meeting places in India, Ingka Centres Global Expansion & Development Director Sebastian Hylving said:" Yes, we see India as a very interesting market with big potential. When it comes to Ingka's expansion, we follow Ikea retail. So wherever Ikea will go, that's an opportunity that we will evaluate."

In FY23, Ikea India's revenue was at Rs 1,768 crore.