IKEA India CEO sees 3-decade growth potential, pushes local sourcing to 50% by 2030

New Delhi: Swedish home decor and furniture retailer IKEA sees growth potential coming over the next three decades in India on the back of the country's economic growth, demographic dividend and young families coming into the consuming class, said IKEA India CEO Patrik Antoni.

IKEA, which on Wednesday entered the Northern market with the opening of a city store here, is also working to increase local sourcing for its local retail operations from 30% to 50% in the next five years, he said.

"The population size itself, the economic growth, but also the whole demographics of the society, where there are so many young people, so many young families that are coming out. So, I think it's probably the growth potential we see over the coming 30 years," said Antoni.

IKEA, which has now entered into the second phase of growth in the country, is working with an omnichannel strategy here, where it has classical large-size stores, along with small city stores, supporting its online sales, which currently contribute around 30% to sales, said Antoni.

"IKEA has always seen India as a potential. Firstly, from a sourcing perspective, which we have been doing for over last 40 years, built up a lot of sourcing both now for India and globally. But as a retail market, obviously, it's one of the core growth opportunities for the future," said Antoni.

IKEA has been sourcing from India for the last five decades, though it started its retail operation in India in 2018 by opening its first store at Hyderabad, followed by Navi Mumbai and Bengaluru and several other as Delhi NCR, in the execution pipelines.

India is among the top 10 markets in the sourcing countries list, from where it is procuring products worth around 400 million euros for its global retail operations.

Besides, Ikea has plans to increase the local sourcing for its India retail operation from 30% to 50% in the next five years, said Antoni, who has been recently appointed as the first CEO of IKEA India.

"We have a target by 2030 to reach 50% (local sourcing for India retail) and it will be achievede by, working really hard together with our colleagues in the purchasing organisation, but also by the expansion plans that gives bigger and bigger volumes in India," he said adding " volumes are needed in order to get bigger suppliers to work and operate for us." IKEA, which had launched online sales in Delhi along with some other cities in earlier this March, has opened the gates of its 15,000 sq ft city store in a Mall in West Delhi.

According to Antoni, IKEA India has witnessed a "very good uptake in Delhi and in the northern areas since we opened online six months ago, and we believe a lot that this will grow." IKEA also plans to come up with a similar kind of small city stores at other prime locations as Lucknow and Chandigarh.

"Then we see from a consumer experience point of view that if we combine the online and offline experiences, which we also aim to do also in Lucknow and probably in Chandigarh, the total sales go up a lot. So, the combination of offline and online is so far the success recipe for us," he said.

IKEA India, which had a revenue of Rs 1,852.7 crore in FY'24, currently gets around 30% from online sales.

On being asked, as he expects this current ratio to increase in favour of online, Antoni said, "We probably will see an increase of that share." However, he also added, "The combination of store experience is important".

"We understood that we are in an omnichannel environment and need a variety of store formats to reach the many customers. So, we still believe in the classical big IKEA store that we have today in Mumbai, Bangalore and Hyderabad and that we are building outside Delhi also in Noida and Gurgaon. We see that together with online, we need more stores for the customers to be close to IKEA. And that's where the city stores that we have in Worli, Mumbai, and now opening up in Delhi," he said.

IKEA's large stores, which measure around 4 to 5 lakh square feet, are generally at the outskirts of the city, while these small city stores can be opened in any shopping mall in the heart of the city.

"The need today of being closer to the customer is bigger than ever. So, online has driven this change in customer behaviour that people want to meet something near them. And now our idea is to complement big stores with smaller formats like this city store, so we can be more accessible," he said.

Besides, IKEA is working on affordability to bring more customers in its fold.

"We have a lower average ticket, but we, in that sense, have to drive more visitors. And I think the possibilities of the biggest cities in India to have a high visitation and the conversion into customers," he said.

Over the challenges of high property rentals in India, Antoni said, "The rents are higher, but some of the operational costs are also lower here than they are in other markets. So, as a totality, the business case suits us well. So, we are optimistic at this moment."