Ikea India CEO sees 30% of sales coming from online orders due to Covid

In a Q&A, Peter Betzel, CEO and chief sustainability officer of Ikea India, talks about the company's expansion plans in India

In its effort to be closer to customers in India, home furnishings brand Ikea is set to open its first city store in Mumbai. The store, spread across 80,000 sq ft, is smaller compared to its other two big box stores in Hyderabad and Navi Mumbai.

As the pandemic hit, customers have turned to ordering online and Ikea now sees about a third of its overall revenue coming from online sales, both in India and globally. In an exclusive interview with Sharleen D’Souza, Peter Betzel, chief executive officer and chief sustainability officer of Ikea India talks about the company’s expansion plans in India. Edited excerpts:

Now that you've opened your first city store in India, will you be more aggressive with opening city stores in order to be closer to the customers?

The city store is part of our accessibility strategy, and we would like to be an omnichannel retailer. Our stores in Hyderabad and Mumbai are a great success and we are also available online in Bengaluru, Hyderabad, Mumbai, Pune and three cities in Gujarat. We are committed to India for the long term and have another city store coming up in the coming 12 months. We will open our next big store in Bengaluru in early summer. We are already working on our city store in Bengaluru. We are exploring online opportunities and smaller format opportunities in tier two and tier three cities for the future. I wouldn't say it's aggressive. I think there is a change in our approach. We are not only counting on the bigger stores but we are counting on wherever customers would like to meet Ikea and see our range of products.

What is the product assortment that is available at the city store compared to your big box stores that you have in Hyderabad and Mumbai?

There are over 2,000 items available for immediate takeaway at the city format store. A customer can also plan their full home with our workers and it can be ordered and delivered at their home. 

How many more cities will you expand your online presence into by the end of 2022?

We are not looking at timelines now because there's also one dimension which is having a fulfilment backbone ready, so we were able to deliver services there. The future in India can be an omni-channel approach, it can be an online approach in some areas, but we are exploring opportunities to grow further in India.

Has Ikea increased its sourcing from India even for other markets?

We have been increasing local sourcing in India. We have been opening new categories. For example, mattresses are sourced completely from India for the Indian market. We are happy to say that we are sourcing almost 2,000 articles, and its share is 25 per cent already. We would like to continue that journey and expect 50 per cent of all sourcing could be from India for what is needed in India. The way we do business, the skill building, and competence have to go hand-in-hand. We see opportunities of India becoming a hub for manufacturing and exports, but there's still some way to go.

What has been the demand at your stores and online, and has the contribution of online sales to overall revenue increased?

The interest for home furnishing has been increasing in India during the last one and a half years due to Covid. We are happy that home furnishings have become a higher share in India and commands a higher share of the wallet. During the lockdowns, while retail stores and our stores needed to be closed, people are now more concerned about a healthy way of shopping. Demand has increased online not only for orders but also for services. We have introduced services like virtual planning for the full home. Online order has been increasing overall for Ingka (holding company for Ikea) globally. Online sales has been growing at 70 per cent and now its share is 30 per cent of revenue and we saw the same in India. It (online sales) has increased from 10-12 per cent earlier. We have also introduced contactless click and collect at the store as a safe way to shop.

What is the contribution of your food sales to overall Ikea India’s revenue?

On a sales share, it's between 7 and 9 per cent and that is really good success even while we have been careful at our restaurants and the stores have been shut (due to Covid). So that is super good.

Are you looking to tie-up with food delivery platforms to take your food offerings online?

Not now. But this is an idea we are trying to explore.

Ikea promised Rs 10,500 crore investment in India. Do you have plans for further investments?

Only the key retail investment is Rs 10,500 crores. More investments will come in and we are in talks with our colleagues at our head office. So, they are (Ingka Group) investing additionally in global business office and digital hubs in India and these will have additional investments which need to come.