India is a land of limitless opportunities for IKEA, a market where it is betting on doubling its business each year. In an exclusive conversation with CNBC-TV18, Juvencio Maeztu, Deputy CEO and CFO at Ingka Group and IKEA, who confessed to having a deep emotional connection with India, said IKEA has a whole menu of growth opportunities listed down, from growing its retail presence to doubling down on sourcing and making India a digital hub for the world.
Over the past decade, IKEA has made substantial commitments to the Indian market. "We have delivered on our promise," Maeztu emphasised, referencing their Rs 10,500 crore investment announcement of 2013 and their successful achievement of 30% local sourcing. He mentioned that while their goal was to have 50% of women in the workforce, they have achieved 46%, acknowledging room for improvement.
What are the focus areas for IKEA in India?
IKEA has been in the retail space in India for the past five years, and is now thinking of the next 100 and how big it should be. Maeztu said, "IKEA loves India, and Indian consumers love IKEA." He recognised the current juncture as a "sweet spot" for the brand, aligning IKEA consumers' preferences with India's growing economy.
He identified three crucial focus areas for the future.
Firstly, developing IKEA Retail and ensuring the availability of certified raw materials to integrate into the global supply chain.
Secondly, establishing international standards to enhance product quality and global integration.
Thirdly, the need for "international standards", not only to elevate the quality of products within India but also to facilitate their integration into the global supply chain.
The future of IKEA in India
While IKEA has been sourcing from India for four decades, it established its retail presence with the first IKEA store in 2018, and since then has expanded its presence to Mumbai and Bengaluru with three flagship stores and two city stores, along with an online presence.
IKEA is now in the process of putting together a plan outlining a second phase of investments in India. While Maeztu declined to comment on how much that figure would be, he said it would be a big one. This, comes on the back of the company seeing its growth double over the last year, with the aim of further doubling its business in India each year.
“We are now investing in Gurugram and Noida with two very big shopping centres. The Gurugram centre will hopefully come in less than two years, followed by Noida and then many more,” Maeztu said.
Highlighting India's tremendous potential, Maeztu reiterated that "India has a fantastic opportunity to be a manufacturing hub for the entire world, with the value of sourcing estimated to be more than Rs 5,000 crore". This, he says the company can double.
IKEA had set up a global operations centre in Bengaluru in 2020 and at the time said this would be the focal point for digital development, innovation and operations. Maeztu noted that the operation in Bengaluru is exporting financial, digital, and HR services.
As part of its digital strategy, this hub, Maeztu says is developing digital capabilities in India that are being implemented in India and elsewhere. Maeztu adds that the new development of the ‘app of the future’ is also happening here to make shopping a ‘seamless and fester’ process. “So that's how the digital hub in Bangalore is feeding IKEA's global operations.”
Not entirely focused on retail?
The head said the next phase of investment will not be entirely focused on retail. The larger idea for the Indian market is to make it a holistic presence combining sourcing, and manufacturing with retail and added services from the Indian market.
“We want to see how we can combine production and sourcing possibilities with retail growth. We are also exploring how to grow faster and deeper in the markets we're in. It is critical for us to secure that by talking to suppliers, industry and the government to also support exports. If we don't build an economy of scale, we are limiting our growth possibility,” Maeztu added.
And so, apart from developing its retail presence in India, the focus on sourcing and production is critical for its growth, he outlined. IKEA currently sources 30% locally in the country, with ambitions to take this to over 50%.
IKEA aims to expand its footprint further and establish more partnerships with Indian companies. Maeztu shared that IKEA currently collaborates with 65 suppliers in India, impacting around 500,000 workers in the supply chain. He praised the progress in improving quality standards and emphasised the importance of securing the right international standards for scalability and consumer welfare.
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