Ikea, the world’s largest furniture retailer known for its signature warehouse-style stores across markets, is now looking at a compact store format of around 30,000-40,000 square feet in the country. This is a strategic shift in a key market like India. The retailer is eyeing a couple of locations for the initial rollout of its relatively smaller stores. One is likely to be Delhi, while the second small store could come up in any of its existing markets of Mumbai, Bengaluru and Hyderabad, a top official told FE.
These mini stores are expected to focus on specific product categories, accessories and planning services in contrast to the larger stores which are a one-stop destination catering to all needs of a consumer from shopping to dining and a playroom for kids.
“In a market like India, access and reach are crucial. While destination stores are great to have and ensure a fun day-out for the entire family, you need convenient store formats too, where a consumer can easily walk in and shop. The idea of these smaller stores, ranging from 30,000-40,000 sq. ft., that we are considering for India, is aimed at ensuring further reach and introducing more consumers to our products,” Adosh Sharma, country commercial manager, Ikea India, told FE.
While Ikea has experimented with smaller stores in markets such as the UK, the US, Sweden, Spain, Japan, Hong Kong and Taiwan, India has so far seen the retailer introduce mostly larger formats in the six years of its existence. These include its big-box outlets measuring 400,000-500,000 sq. ft. in Hyderabad, Navi Mumbai and Bengaluru each, and 72,000-80,000 sq. ft. city-centre outlets in Mumbai.
Sharma did not specify timelines for the mini store launch in the country, but industry sources say the rollout could happen by 2025.
The 72,000-sq. ft. store in Ghatkopar in Mumbai was closed earlier this year due to poor business performance. The 80,000-sq. ft. Worli store continues to be operational in central Mumbai. The retailer also has an online store in India.
Sharma did not specify timelines for the mini store launch in the country, but industry sources say that the rollout could happen by 2025. Since the launch of its first store in Hyderabad in 2018, Ikea has had about 180 million visitors to its outlets, averaging about 30 million visitors annually. The plan is to serve over 200 million people by 2025, for which it will require to open new stores quickly, industry experts said.
The company’s sales in India surged 61% year-on-year to Rs 1,768 crore in FY23, but net loss widened to more than Rs 1,134 crore due to investment in infrastructure and business operations, according to regulatory filings by the retailer. FY24 numbers are not available yet with the registrar of companies.
Unlike other markets, India stands out for the significant contribution of food to Ikea’s overall revenue, with menu offerings attracting at least 20-30% more patrons to dine-in apart from shopping at its outlets, experts tracking the market said.
In the past three years, the contribution of food to the total revenue has increased from about 4-5% to about 8-10%, industry experts said, with the retailer offering locally-adapted and affordable meal options to consumers visiting its large stores.
“Pricing is integral to us across all categories, whether it is furnishing or food. For example, out of the 6,500 articles at our outlets, 1,000 items are priced under Rs 200. Similarly, our food offerings include children’s meals at Rs 99 and over 45 dishes in our restaurants (at the large outlets) are priced under Rs 200,” Sharma said.
From: financialexpress
Financial News
