Swedish furniture retailer IKEA has introduced a 365-day return policy in India, allowing customers to return items within a full year of purchase. The returned goods would be reintroduced to the inventory and sold at discounted rates.
"We will refund you in the refund card or by the same method as your original payment. If the exchange and returns criteria are not fully met, we may refuse the exchange or return," the company policy said on its website.
Products that do not sell in the “As Is” section would be disposed of using sustainable methods, Adosh Sharma, Country Commercial Manager, IKEA India, told Moneycontrol in an interview on September 16. The "As Is" section offers slightly used, discontinued or ex-showroom items. The return policy is effective September 1.
“IKEA endeavours to create a convenient shopping experience and make it more easy and flexible. From the date of purchase till 365 days within that period, one can come with the product which is either packed or open but not damaged, and proof of purchase (an online or physical receipt) and we will return it without any questions,” Sharma told Moneycontrol.
The return policy represents a shift from IKEA’s 60-90 days window. The extended period reflects customer behaviour in India, where setting up a home is described as a process that involves adjustments and reconsiderations, the furniture retailer said.
The company aims to provide customers with more flexibility, particularly during the growing demand for home furnishing, a trend driven by rising home ownership. The ongoing festive season is also expected to see a pickup in demand.
“We understand building a home takes time. It also is a process of errors and efforts — sometimes things fit in, sometimes they don't, or simply, you realise you want something better or something different. I think this gives option and flexibility for customers to come and change their mind,” Sharma said.
The return policy applies to both online and offline purchases. There are exceptions such as food items, plants, customised products and gift cards.
IKEA has confirmed that no additional fees will be charged for returns. The company is also prepared to manage the logistical and operational costs that come with reverse logistics, including shipping, restocking, and labour.
Sharma, however, acknowledged the potential costs associated with the initiative, including the risks of reverse logistics and the need to manage returned products efficiently.
Returned products that meet the company's criteria will be resold through the "As Is" section at a reduced price.
Sharma said the process allows IKEA to keep products in circulation, offering a lower-cost option to customers. Unsold products would be disposed of sustainably, he said, without sharing specifics.
Returns to hit top line?
Returns can affect the company’s top line, particularly if customers take advantage of the extended return period to claim refunds.
Industry experts have raised concerns about the potential financial burden posed by returns, which can include costs for shipping, labour, packaging, and depreciation.
A former chief financial officer of an online furniture retailer, who didn’t wish to be named, said the total cost of returns can be as high as 20 percent of a product’s value.
IKEA has indicated it is prepared to absorb the costs but there are concerns about the policy affecting sales and profitability.
“We are not particular about sales impact and it's hard to say what can be the impact. It could go either way but, it is an opportunity for customer interaction with the brand,” Sharma said.
Customers over costs
IKEA aims to enhance customer convenience and trust by leveraging its legacy of quality. “...then things like the rate of return becomes a secondary concern for us. We are ready to absorb the cost as we bet on the quality of our products,” he said.
Data from Forrester Research, cited by the Wall Street Journal, says brick-and-mortar stores typically experience return rates between 8-10 percent, while e-commerce returns can reach 20 percent.
The cost of handling returns, especially in the context of reverse logistics, is a challenge for the retail industry as a whole.
A study by Bengaluru-based Return Prime found that returns in some e-commerce segments can be as high as 40 percent, with businesses potentially facing billions of dollars in revenue losses by 2025.
IKEA’s new return policy comes in as the company expands its presence in India. The company operates stores in Bengaluru, Hyderabad, and Mumbai. Online they are present in Mumbai, Pune, Hyderabad, Gujarat, and Bengaluru.
The retailer plans to open stores in Gurugram by 2026 and a large store in Noida by 2028. The Noida store, expected to cost Rs 5,500 crore, is projected to attract up to 25 million visitors annually.
IKEA sources 30 percent of its products sold in India from local suppliers, working with 45 partners. These suppliers provide a range of products, including textiles, rugs, home décor, metals, and plastics.
The company has longstanding relationships with many of these partners, with some collaborations spanning more than a decade.
As the return policy is rolled out, it remains to be seen how it will affect IKEA’s operations and financial performance. While the initiative is designed to enhance customer convenience, the costs associated with returns and reverse logistics may pose challenges.
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