Ikea to double India sourcing to USD667 million as roll out nears

Ikea Group will double sourcing from India to 600 million euros (USD667 million) as the retailer opens its first domestic outlet next year in a nation pegged to grow into the world’s third-
largest consumer market.

The retailer, which broke ground yesterday for a store in the financial capital Mumbai, is sticking to its goal of opening 25 outlets by 2025 in India despite trouble acquiring land, Juvencio Maetzu, chief executive officer of Ikea India, said in an interview. Its first store is set to open in Hyderabad early next year followed by more in Mumbai, Bengaluru and New Delhi.

The world’s largest furniture retailer hasn’t been fazed by problems acquiring land for its stores, which would typically span four football fields and offer around 9,000 products under a single roof. The Asian nation is an attractive bet for the company with Boston Consulting Group predicting consumption will grow at more than double the global rate, placing the India market behind only the U.S. and China by 2025.

“For us, what is more important is full compliance, right title, right connectivity and an ethical way of land acquisitions,” Maetzu said. India’s economy and middle-class are growing, he said, as is its transportation infrastructure. “There are challenging and difficult situations, but Ikea won’t give up. India will make Ikea better in future.”

The first Ikea India store was originally slated to open in Hyderabad by end 2017.

Maharashtra state Chief Minister Devendra Fadnavis said yesterday that the country’s archaic laws have hampered land acquisition by companies such as Ikea. The government is streamlining procedures to pave the way for companies to set up shop in his state, Fadnavis said.

Consumption in India is set to triple to $4 trillion by 2025 as rising affluence drives changes in consumer behavior and spending patterns, according to a March report by The Boston Consulting Group’s center for customer insight. Nominal year-over-year expected expenditure growth of 12 percent is more than double the anticipated global rate of 5 percent, the report said.

Ikea is capitalizing on its advantage as the first major foreign retailer to receive government approval to set up stores in India. It also plans to set up its first distribution center in Pune in Maharashtra, Maetzu said.

“Sourcing is an integral part of Ikea,” he said. “We are production-based retailer. We have been sourcing from India for the last 30 years. We will double sourcing by 2020 for India and global stores.” Bloomberg