IKEA eyes production unit in India

With an eye to tap the great Indian middle class market, Swedish home furnishing major Ikea is considering to set up a production unit in the country amidst reports of setting retail stores in India next year.

According to an agency report from Almhult in Sweden, Ikea which has already purchased land in Hyderabad and Mumbai to start retail operations, is also looking to double sourcing of products for its global operations from India by 2020.

"It is important for us to set up our production (unit) in India," Ikea Group President and CEO Peter Agnefjall said.

Having production facilities in India would not only support the economic growth of the host country but would also enable Ikea to sell its products without compromising on its margins, Agnefjall said.

“What we do is that we sell products, which are inexpensive. You cannot distribute these inexpensive products long distances because if you do that then you would ruin the margin of the product.

"So it's important for us to go in for the local production… Then only, I think we can reach the big middle class and not the affluent few but the many people in India. There is enormous growth of the people of the middle class year by year and by 2025 it would look different from today."

Agnefjall disclosed that Ikea planned to invest more than 1.5 billion euros in the near future in stores and distribution. “It's very difficult to be spot on but I think it would be enough," he said.

Ikea is slated to open its first store in India at Hyderabad in next year. It has also bought land in Mumbai as part of its expansion in India and is looking for more sites in Delhi-NCR, and Bengaluru.

Agnefjall said that once the company covers the four territories in Bangalore, Delhi, Mumbai and Hyderabad, it look beyond to expand.

The Ikea boss gave no time frame for opening stores in Delhi- NCR region saying that it depended on how quickly IKEA could manage to identify and acquire sites, obtain retailing permits and then build its stores there.

For a big city like Delhi, IKEA would probably need three to five stores to cover it in a good way, the CEO said adding that the company would ideally like to locate its stores where there is good connection to public transportation too.

Describing these plans acting as starting points, Agnefjall said: "It would keep us occupied for a number of years to go but eventually we would like to be (there) for the many people living in India beyond those territories too."