Ikea India to invest as much as Rs4,000 crore in Maharashtra

Mumbai: Ikea India Pvt. Ltd, the local subsidiary of Swedish furniture retailer Ikea of Sweden AB, plans to invest Rs3,000-4,000 crore in Maharashtra to set up multi-format stores and experience centres, the company said on Thursday.

The investment will be deployed over two-three years to build two large stores in Mumbai, a handful of experience centres and Ikea India’s first fully owned distribution centre in Pune, said Patrik Antoni, deputy country manager at Ikea.

A sum of Rs750 crore, out of the total investment, has been set aside to develop the distribution centre.

“We are making some head-on investments when it comes to building the logistics because if we want to be affordable, we need efficient logistics infrastructure,” Antoni said, adding that the Pune centre will be a large hub connected to smaller distribution centres across India.

The first store in Maharashtra is expected to open in the Turbhe area of Navi Mumbai in 2019 while the first store in India will be functional in mid-2018 in Hyderabad.

These stores are being built on land acquired by Ikea India because it gives the company “greater control over the business environment and is also a commitment for the longer term”, said Per Hornell, head of the Maharashtra market at Ikea India.

The firm has so far bought a land parcel each in Hyderabad, Bengaluru, Mumbai and New Delhi to build stores, with more land to be acquired in cities such as Pune, Surat, Ahmedabad, Chennai and Kolkata, according to Antoni.

The company will also open more stores, albeit smaller in scale, in Hyderabad, Mumbai, Bengaluru and Delhi, he added.

Each large store will typically require about Rs1,000 crore of investment, Antoni said.

Smaller stores, in addition to experience centres, will contribute more to the company’s ‘25 stores by 2025’ goal, a downward revision from the earlier ambition of 25 large stores. The reason for the modification is to reach more customers by opening smaller stores closer to their residences in India’s space-constrained cities, Antoni said.

Going forward, an omni-channel strategy will be adopted with the launch of an e-commerce portal in 2019, he added.

Ikea India had committed Rs10,500 crore in 2013 but this amount is set to rise “much more because India is more interesting than we thought”, Antoni said, without divulging specifics.

In terms of sourcing from India, the parent company and its various subsidiaries presently buy materials and products from 55 local suppliers, including 11 in Maharashtra.

The company is looking for more suppliers in new categories for its India operations, as well as the broader global business, to further reduce costs and price, Antoni said.

Currently, under 6% of Ikea India’s materials and products are sourced locally with plans to “actively” increase localization to the government-mandated 30% over the next five years, said Hornell. This level will be achieved by increasing the number of products and materials purchased from existing suppliers as well, he added.

The India stores will offer delivery and assembly services in a marked digression from Ikea stores worldwide.

A recent survey that the company undertook here said that only one in four Indians would opt to transport and assemble furniture on their own. Therefore, small training centres for assembly are being set up close to the stores, Hornell said.

With 9,500 products, the Navi Mumbai store will be spread across 430,000 sq. ft and is expected to serve 4 million visitors per year, the company said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.