IKEA India, the local subsidiary of Swedish furniture retailer IKEA of Sweden AB, plans to invest Rs 4,000 crore to set up multi-format stores and experience centres in Maharashtra. With the investment the company is planning to launch two stores in Mumbai, few experience centres and a first fully owned distribution centre in Maharashtra over the next 2-3 years. It is also planning to launch its own eCommerce portal in 2019 to offer omni-channel service to the end consumer. Thus, talking about the IKEA India future strategy for Maharashtra and the country Patrik Antoni, Deputy Country Manager,IKEA India, spoke to Indianretailer.com on the occasion of announcement of its Maharashtra plans in Mumbai
What are your plans for the Maharashtra market?
IKEA is now about to enter in the Maharashtra market. We see a big market opportunity in Maharashtra which will play a very central and a long term role for us. In Mumbai, we are planning to launch two stores in the next 2-3 years and a handful of experience centers and IKEA India’s first fully owned distribution centre in Pune. Our first Mumbai store will be opened in Turbhe, Navi Mumbai in 2019 to be followed by Bangalore and Delhi. IKEA Hyderabad store will be functional in mid-2018.
We have four pieces of land so far in Hyderabad, Mumbai, Bangalore and in Delhi. Further we are looking at more land pieces in Chennai, Pune, Surat, Ahmedabad and Kolkata as these are the potential places. The Navi Mumbai store will be of 4,30,000 sqft and Hyderabad store - 4,10,000 sqft. Currently, we have our experience centre in Hyderabad which is spread across 5000 sqft.
Please tell us about your smaller stores expansion plan?
We will also launch the small format stores which will be much smaller. These stores, in addition to experience centers, will contribute more to the company’s ‘25 stores by 2025’ goal.
We will also launch our eCommerce portal by 2019 and also exploring to launch our experience centers, because we want our brand and our solutions to become accessible for customers. In Maharashtra we have 11 suppliers across categories like textile to plastics to other categories and overall 55 local suppliers across the country.
The store properties will be the leased one or the company built?
Our ambition has always been that we own the land and building. The reason being,IKEAis preparing for 100 years.
Please give us a sense of amount of investment you are putting in for the expansion of stores?
In total we are investing around Rs 4000 crores in Maharashtra and Delhi too will have a same amount of investment followed by the other states. Each large store will typically require about Rs1,000 crore of investment.
Our overall investment in India of Rs 10,500 crores was the initial approval from FIPB in 2013. Hence the number will significantly go higher as we have a much better understanding of the potential that India has so we will invest more than Rs 10,500 crores.
What could be the investment for logistics centers?
Also are investing Rs 750 crores in our logistics and distribution centre in Pune which will cater to Mumbai. It will be further expanded and will be the hub for logistics for the whole country.
Also there will be big logistic footprint around Mumbai and Pune because we want to be affordable for the customer. The more we are open up to the omni-channel we will have more number of logistic centers closer to the cities.
For this value for money market what strategies that you have devised?
In our store or on our ecommerce platform you will be able to find everything that we offer at affordable pricing. We will have total 9500 articles. The range will be affordable and will offer something for every home with almost 1000 products priced below Rs 200. One of our focus is to create solutions for small spaces in Mumbai. Thus, we want to offer space efficient yet multifunctional solutions to the consumers. Therefore, the Mumbai store will focus on different living conditions in the city.
Initially our ecommerce portal will not cater to pan India pin codes. In order to deliver the customer experience we will not deliver to too far away places from our set up of stores. We want to expand our ecommerce operations phase by phase.
According to you which are the major factors that will drive the demand?
Country’s growth rate, big population and urbanization are the major factors that drive the demand in India.
To be relevant to the customer have you studied the Mumbai market?
We are studying the Mumbai market and are conducting surveys to understand fluid living in Mumbai. So far we have done 100 home visits.
How much India contributes to your global sourcing?
Globally India stands at 3 percent of the total IKEA sourcing. IKEA started sourcing from India 3 decades ago, we are currently have more than 55 suppliers in India and does business worth 350 mn Euros.
In India if we open the store may be 5-6 percent we will source locally and that number is about to grow more than 30 percent. For us the manufacturing of our furniture is based on global competitiveness and India as a market at the moment is not big enough to have a manufacturing factory.
What are the challenges that you see in the Indian market?
It takes times to find the right land parcels which are appropriate for IKEA store and are connected to public transport. We want to invite more of the many people to our stores hence easy connectivity is crucial.