IKEA Expands in India Despite Slowdown, Bets Big on E-Commerce Growth:

“Regardless, any growth that we have experienced has only come from the Indian market, and we believe that we can do a lot more from new regions as well. We saw a similar phenomenon in the food deliveryWe are still looking up which is evidenced by the money control statement, so, consumption has slowed down and we have not been affected this far. There is a shift in demand that has has been positive for us and is aiding our initiatives. Our e commerce sales are continuing to grow at a two-digit rate,” remarked Jaiswal during the interview with Moneycontrol.

To verify, this is notable growth but it is from a very low baseline because the firm is quite new in the Indian market. From his headquarter in Hyderabad, IKEA launched its first major store in India in 2018 followed by other stores in Navi Mumbai and Bangalore, thereafter. Now, the company has e-commerce operations in over 60 cities within southern India.

This trend is most pronounced among fast-moving consumer goods (FMCG) giants such as Hindustan Unilever (HUL), ITC, and Nestle, all of which reported weaker financial numbers in the December quarter. Nevertheless, that mark comes at a time when many firms that are heavily consumer-facing have disclosed amidst a shred of weaker demand for their spending.

Even the new-age sectors, such as food delivery services, have not been untouched. It reflects in quarters three and four during which companies like Swiggy and Zomato reported markedly slowed growth.

Jaiswal was giving a speech during the commencement of IKEA’s e-commerce service in Northern India, starting from Delhi-NCR, as well as, nine adjacent regions. Starting March 1st, consumers from these regions will be able to purchase from IKEA’s catalog featuring over 7,000 products, the company stated.

With this, the company plans to open two new full-size stores, one in Gurugram by 2026, and another in Noida by 2028, with an approximate total investment of ₹7,000 crores to build stores. The company has close to 3,000 employees in India and has invested a total of ₹10,500 crores in the country till now.

IKEA will also open smaller retail stores in the NCR region before opening its larger stores, with roughly 4,000 to 5,000 of IKEA's products, as they look to expand. Afterward, the Swedish retailer intends to construct physical stores in Chennai and Pune, although the dates have not been set yet.

“E-Commerce has worked for the company’s entry and expansion in India unlike other international markets which usually rely on great brand names,” said Jaiswal.

IKEA’s expansion in India is driven by a primarily digital approach at a time when stores are the focus in most other countries. The individual customer's need for online shopping is met retail stores and marketplaces which keeps the country overtime generous. With over 250 million e-commerce users as of my last research, India certainly is a mature market. We have adopted our strategy in India accordingly,” she said.

“As for now, a research I conducted suggests that about 30 percent of IKEA’s revenue is obtained through its online channels, while the rest is gathered through offline retail,” she added.

India represents a goldmine for e-commerce. We can reach well beyond forty percent in market share revenue,” Jaishwal said while acknowledging the set back and looking on the bright side.

It is revealed that e-commerce is claiming a larger share of Indian markets and with the expansion in urban areas, IKEA is expanding its outreach. Owning to Jaiswal's statements, competition will have little to use against them during these times. Rather, they have a lot more to concern themselves with.

“Almost all niche categories aim to market themselves to Indian buyers, even most online furniture retailers focus on as many unattained categories as possible. Competition will be fierce, but the industry remains underdeveloped,” she both comforted and frustrated her audience.

In any event, the firm is focused on improving the delivery speeds to stay competitive against ever-expanding quick commerce companies.

“We have always worked on cutting down delivery timelines…In 2022, we started our deliveries in Bengaluru with a delivery time of 7 days. In Delhi, we aim to do next-day deliveries,” Jaiswal said.

“With quick commerce, we remain open to all possibilities and we are watching this space. I don’t think we will look at quick commerce for furniture, but there are definitely accessory categories where demand could increase,” she said further.

As per filings with the Registrar of Companies (RoC), Ikea India, a subsidiary of Ingka Holdings based in Netherlands, records a wider loss of 1,299.4 crores in FY24. Revenue from its operation stands at 1,809.8 crores, which registered an increase of 4.5 percent in the FY ending March 31, 2024.