India's booming economy and young population give it 30+ years of growth potential, says IKEA

Economic Times

20 hours ago

Synopsis
IKEA India anticipates significant growth in the next three decades, driven by India's economic expansion and a burgeoning young consumer base. The company is expanding its omnichannel strategy with city stores and aims to increase local sourcing to 50% in five years.
Reuters Swedish home décor and furniture giant IKEA expects India to deliver sustained growth over the next 30 years, buoyed by the country's strong economic trajectory, young population and expanding base of consumption-driven families.'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,' IKEA India CEO Patrik Antoni told PTI.The company, which entered the northern market on Wednesday with a 15,000 sq ft city store in West Delhi, is stepping up its local sourcing for Indian retail operations from the current 30% to 50% over the next five years.'We have a target by 2030 to reach 50 per cent (local sourcing for India retail) and it will be achieved 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,' Antoni said. 'Volumes are needed in order to get bigger suppliers to work and operate for us.'IKEA is now in its second phase of growth in India, adopting an omnichannel strategy that combines large-format stores, smaller city stores and online sales. Online currently accounts for around 30% of its revenue in the country.
'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,' Antoni said.The retailer began sourcing from India five decades ago, and now counts the country among its top 10 sourcing markets, buying goods worth about €400 million annually for global operations. Its retail journey started in 2018 with the opening of its Hyderabad store, followed by outlets in Navi Mumbai and Bengaluru.IKEA launched online sales in Delhi earlier this year and says response in the region has been strong. 'We have 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,' Antoni said.The Delhi city store marks the company's first physical outlet in the region, and similar small-format stores are planned for 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,' Antoni said.Large-format IKEA stores, typically spanning 400,000 to 500,000 sq ft, are usually located on city outskirts. The new city store format allows the retailer to operate from shopping malls and high-footfall urban centres.'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,' Antoni said.Affordability remains a priority for IKEA as it tries to attract a broader customer base. '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,' Antoni said.On the challenge of high property rentals in India, Antoni noted: 'The rents are higher, but some of the operational costs are also lower here than it are in other markets. So, as a totality, the business case suits us well. So, we are optimistic at this moment.'IKEA India reported revenue of ₹1,852.7 crore in FY24. With new store formats, an expanded sourcing base, and a growing online presence, the company aims to deepen its reach in one of its most promising future markets.