India is a unique market where Ikea will go full throttle: Patrik Antoni

Ikea has been in India for over 30 years, sourcing textiles, plastic, carbon metal that are shipped to its stores around the world. The company currently has about 55 suppliers in the country, around 45,000 people working in the direct supply chain building Ikea furniture and around 400,000 people in the extended supply chain. And in the last five years, it has been working on its retail agenda. Patrik Antoni, deputy country manager, Ikea India, in conversation with Ashish K Tiwari, speaks about the company’s India plans and more.

Could you give us an overview of store roll-out plans in India?

This year, we will be opening our first store in Hyderabad, which is a 400,000-square feet large ‘home entertainment centre’ if we can call it that. Customers will be able to purchase products, solutions and meet co-workers, etc. It’s a total experience of how you can see your home in a way. We have bought land parcels in four cities at the moment i.e., Hyderabad, Mumbai, Bengaluru and Delhi. Going forward, Mumbai will be our second store that will open in 2019. Looking ahead, we see more cities getting added including Pune, Surat, Ahmedabad, Chennai and Kolkata.

Does your current sourcing meet the 30% criteria for single-brand retail?

The 30% criteria will have to be met in five years after opening the store. It’s time to ramp up our sourcing and we are confident that by 2023 we will have 30% local sourcing. So to answer your question, if we would open a store today in India, maybe 5% to 7% is locally sourced. We still have a lot of work to do in that direction. We are working with more and more suppliers offering more range than what they are currently doing. For instance, if they are doing 10 different textiles, maybe they will do 40 in the near future. It’s about increasing the number of products made by the existing suppliers while also finding new suppliers who have the same values/beliefs -- big volumes and low margins -- and are compliant with the way we work.

How do you plan to deal with this challenge?

We are working with corporations, entrepreneurs and government in setting up plantations and these are long-term plans that will take 10 years for the trees to grow up. We are looking at bamboo that takes five years to grow. We are also looking at starting to import material, setting up businesses and then turning it over into locally sourced material later. We are working with a lot of social entrepreneurs. At the moment, we look more for semi-established to established players who can provide that possibility of economies of scale. The willingness and insights are here but the challenge is if there was raw material available, we could do a lot more. It’s tough to find recycled plastic and wood because we just cannot. It’s a bit difficult today to really get it going; as a result, we are looking more at the bigger players.

You talked about exceeding the Rs 10,500 crore capex earmarked earlier for India foray.

We see lots of positive things in the Indian market that’s much different from markets like Korea, Thailand or Japan so to speak. With young demography, organisation and growth of the economy, India is a unique market where Ikea is going out full throttle, something we have not done before. In other markets, we open one store and see how things progress and then expand. In India, we will be opening four stores in a short period, we are going omni-channel, we’re building warehouses, etc.

Fully-furnished homes as a concept is picking up. Are you collaborating with any real estate players?

We are already in touch with a few. It’s a very interesting segment to work with because the modern, durable, modular, flexible range that we are coming with fits very well with what the real estate companies want to do. We have already tied up with one such player, can’t give out the name at the moment. It will be part of our business to business operations.