India is the “first, second and third market” in terms of investment for furniture retailer Ikea, according to Jesper Brodin, global chief executive of Ikea franchisee holding company Ingka Group.
Acknowledging that India is a “challenging market”, Brodin, in an interview with The Economic Times, said it was difficult to “maintain the rapid development of digital and physical infrastructure in the country”.
“It’s been interesting to see the speed of development over the last five to ten years. India has gone from a country that is catching up to a country that is in many respects a leader in digital and even more so in economic development,” Brodin said.
Ingka, Ikea’s largest global franchisee, contributes nearly 90 percent to total sales. The brand is owned by Inter Ikea, a separate organization responsible for the production of all Ikea products.
India’s Furniture Market Potential
Brodin, who was previously an assistant to Ikea founder Ingvar Kamprad, said he has identified India as a key focus for the company’s expansion.
He highlighted the importance of India due to its size, adding that Ikea’s global vision is in line with the characteristics of the Indian market, aiming to serve a large population with significant needs at affordable prices.
“In terms of investment priorities, India ranks first, second and third. We have consciously decided that we cannot financially afford to be in the startup phase in too many places. But India is a top priority for us now. India is the best 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 it’s the most exciting expansion project that we have,” he said.
On the pricing front, Ikea has strategically cut costs following a softening in raw material prices, which has resulted in around 20 percent price cuts across products, both in India and globally. This reduction is expected to result in higher sales volumes.
Ikea successfully outpaced local rivals Urban Ladder and Pepperfry in its first year of operation with a single outlet – its first store in Hyderabad in 2018. Cut now and in 2023, the company reported sales of ₹1,768 crores, marking a 61% increase over the previous year.
However, there was an increasing net loss of over ₹1,134 crore attributed to investment in new infrastructure, including land acquisition and setting up distribution centers for upcoming stores.
Expansion plans and market prioritization
Brodin said he was “greatly impressed” by India’s economic development and its leadership in terms of growth. “…if you compare with any of the big countries out there, (India’s) outlook is quite optimistic,” he added.
To date, Ikea has opened three large stores and two smaller urban stores, with plans to open larger stores in Gurgaon and Noida in the National Capital Region. In addition to the physical expansion, the company has extended its e-commerce services to Maharashtra, Karnataka, Telangana, Andhra Pradesh and Gujarat. The Swedish retailer is also looking to launch online operations in Delhi later this year.
The company said efforts are on to establish a stronger presence in the Indian market, stressing 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 procurement and the foundation and then commissioning the first door. And then the intention is for the company to enter the biggest big cities. We’re measuring and making plans to see how we can do it for 1.4 billion people. And if there’s one thing I’m sure of, it’s that the economic outlook for India looks good,” Brodin said.
IDBI Capital reports that the domestic furniture market is valued at $32 billion and is expected to grow to $38 billion by 2026 — largely driven by a growing middle class, according to the report.
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