Ikea Expects to Double Buying in India

Ikea, the inexpensive and stylish Swedish home retailer, is not earning any money in India. But the company is spending it here, the chief executive, Mikael Ohlsson, said Monday.

Ikea, which has 317 furniture and housewares stores worldwide, scrapped plans last year to open dozens of stores in India, after the Indian government would not lift limits on foreign investment in the retail sector.

Despite the setback, Mr. Ohlsson said he was determined to continue to do business in India. Ikea plans to double the amount of goods it buys from India, including textiles, in the next three to four years, to 1 billion euros, or $1.3 billion, he said at a news conference here.

Mr. Ohlsson said he had not given up on entering India’s retail market, and had an “interesting” meeting with a government minister about the issue during his visit here. The government requires name-brand foreign retailers to form partnerships with local companies before opening stores in India, and limits the foreign company’s stake to 51 percent. Mr. Ohlsson said Ikea could not meet that requirement.

Because Ikea, which is privately held, does not have to meet shareholders’ demands for quick and steady earnings, it can, and often does, let its stores operate for “years and years” before making a profit, he said. That makes it an unlikely partner for many investors.

“We don’t see ourselves as a normal retailer,” Mr. Ohlsson said. Ikea has tried joint ventures before, and they did not work, so the company avoids them, he said.

International retail brands, including Izod, Nine West and the Body Shop, have flocked to India in recent years, forming local partnerships, to take advantage of an economy that is growing faster than any other major country’s except China’s and a new middle class with disposable income.

India’s overall retail sales will be $380 billion in 2010, predicts Business Monitor International, a London research firm. It forecasts those sales will grow to $680 billion by 2014.

India’s government should not see Ikea as a threat to domestic retailers, Mr. Ohlsson said. The needs of the market are “so big there will be space for everybody,” he said.

Ikea “has more to do in markets where people do not have much money,” Mr. Ohlsson said, because the company focuses on customers whose “needs are big and wallets’ thin.”

Among other developing markets, the company has 10 stores in China, which are as busy as any in London, he said. Ikea is adding two stores in Beijing and two in Shanghai, he said.

The company also has 13 stores in Russia.

Ikea said it was investing about 125 million euros, or $163 million, in social programs to help women and children in India and South Asia. These investments make Ikea the largest corporate partner in the world to aid agencies including Unicef and Save the Children, representatives of those organizations said Monday.

Ikea had worldwide sales of 22.7 billion euros in 2009, up slightly from 2008, when sales for many other retailers shrank because of the global economic downturn.

Leave a Reply

Your email address will not be published. Required fields are marked *