Ikea makes a splash in India: The furniture giant's entry into the market
A critical analysis of IKEA's expansion into India
18 January 2023
IKEA was founded in 1943 by Swedish born Ingvar Kamprad at age 17 (IKEA, 2020). The first furniture showroom opened in 1953 in Älmhult, Sweden and continued growing from there to the IKEA that we know today
India is an emerging market with political stability, low cost of labour and a middle class of 350 million. India is ranked number 58 out of 140 countries on the global competitiveness index in 2018 (WEF, 2018).
IKEA saw this as a top growth opportunity for their business.
Indian customers' spoken needs such as design, price, and lightweight are inherent to the product, and reliability and durability are fulfilled by IKEA.
IKEA’s target clientele in 2023 will be middle-class people aged 20 to 34.
Ikea is a Swedish home furnishings company that has recently entered the Indian market. The company is known for its affordable and stylish furniture and home decor items and has gained popularity among Indian consumers looking to furnish their homes. Ikea has opened several stores in India and has also launched an online platform to make it easier for customers to shop for their products.
IKEA was faced with a challenging external environment, especially culturally. DIY is alien to Indian consumers and they are loyal to their local companies
There are a lot of well-established brands in India already that IKEA has to try to compete with India has a high GDP but the average income does not allow purchases on top of the bare necessities.
IKEA's low-cost competency was used in the expansion to make IKEA products affordable to the average Indian consumer.
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Although, Ikea India's unit revenue from operations was up 77.07 percent to ₹1,076.1 crore in FY22 from ₹607.7 crores during the financial year that ended in March 2021.
The company's revenue from 'other income' was up over two folds to ₹48.2 crores in FY22. Ikea India's total income has risen by 73.1 percent to ₹1,125.5 crore in FY22, from ₹650.2 crores in the year-ago period. The company's total operating expenditure, excluding interest, depreciation, and amortisation, was also up 45.62 percent to ₹1,590.8 crore.
During the FY22, the expansion plan and operations were impacted due to the global Covid-19 pandemic, said Ikea India in its financial report. "The company has continued to perform reasonably well, and the management is optimistic about its prospects too," it further added.
A company spokesperson stated that India is an important market for Ikea in response to a query. "We are in India for the long term and still in the initial years of operations, where we continue to invest in omnichannel expansion in our priority markets.
We have almost doubled sales in India over the last year and we will continue to focus on reaching many people in with our accessible, affordable, sustainable products and solutions that are relevant to life at home in India," the spokesperson said.
In FY22, Ikea continued to focus on positioning, growth, and profitability for its omnichannel business in India.