Ikea India is strategically shifting its focus from large-format stores to smaller city outlets, planning to open three to four such stores within the next 10 months. This move signifies a major change in the company's expansion strategy in India, aiming for broader accessibility and deeper market penetration.
The Shift to Smaller Formats
Ikea's decision to embrace smaller store formats is a direct response to the unique challenges and opportunities presented by the Indian market. Unlike its traditional large-scale outlets, these compact stores can be as small as 10,000 square feet, making them suitable for neighborhood shopping malls and high-street locations. This approach allows Ikea to be more agile and establish a presence in areas where large-scale operations are not viable.
Pooja Grover, IKEA India’s Country Expansion Manager, has emphasized that these smaller stores will provide "a lot of accessibility" for consumers and enable the company to expand more rapidly. The shift also aligns with changing consumer behavior, where convenience and accessibility are increasingly valued.
Key Features of the New Stores
While the smaller stores will feature a limited physical display of products, customers will have access to Ikea's full catalog of around 7,000 items through digital platforms. This omnichannel approach allows customers to browse the entire range and order items for home delivery, pick them up at collection points, or use third-party services.
Ikea is also introducing the 'Plan & Order Point' (PaOP) format, offering personalized design consultations and access to the full product catalog via digital platforms. The first PaOP has already launched in Bengaluru, providing a dedicated customer interaction hub with expert home design guidance and installation services.
Strategic Expansion and Investment
Ikea's expansion plans extend beyond the initial three to four small city stores. The company aims to double its number of stores and customer touchpoints in India over the next 12 to 18 months. This includes a mix of large-format stores, smaller city-center outlets in malls, and a strengthened e-commerce presence.
Ikea is focused on six core markets: Hyderabad, Bengaluru, Mumbai, Delhi NCR, Chennai, and Pune. The company is also exploring Tier II cities for future growth, with plans to penetrate adjacent cities in a phased manner. To support this expansion, Ikea is investing in its supply chain and aiming to increase local sourcing from 30% to 50% by 2030. The company currently works with 45 Indian suppliers, primarily in textiles and toys.
Ingka Centres, a division of the Ingka Group that runs IKEA retail, is investing €1 billion to establish two retail and entertainment complexes in Gurgaon and Noida under the Lykli brand. These mixed-use developments will incorporate residential and commercial elements, creating vibrant community hubs.
Challenges and Future Outlook
Despite its rapid expansion and strong market presence, Ikea has faced challenges in achieving profitability in India. In FY24, the company posted a widened loss of ₹1,303 crore, compared to ₹1,134.3 crore the previous year. However, Ikea remains optimistic about the Indian market, viewing it as a key hub for both retail growth and supply chain development.
Ikea's commitment to India is underscored by its significant investments and its focus on customer experience, affordability, and accessibility. By blending large-format stores, smaller outlets, and online retail, Ikea aims to reach a wider consumer base and solidify its position in the Indian market. CEO Jesper Brodin expects India to be Ikea's fastest-growing market over the next two decades.
