The Swedish furniture chain Inter Ikea Systems BV, the world's largest furniture retailer, is set to increase its sourcing from India, which is only 3 per cent of its total global purchase at present. In a conversation with Chandan Kishore Kant, Ikea's Trading Area Manager for South Asia operations Susanne Bergstrand says India will get a business of ¤500 million (nearly Rs 3,500 crore) from Ikea in the next five years. Excerpts:
What are your plans for India?
We plan to increase our sourcing from India. There is potential to source more textiles, carpets and other materials from India, as the country has shown increased capability to cater to Ikea's needs.
Do you plan to enter the Indian retail market?
No, not at present. The plan is on hold until conditions are more favourable for us, though consumers are ready in India. It is probably the right time as there is a big need and interest, with rising purchase power in India. And there will be a demand for Ikea's offers as well. However, we feel that the time is not right for us to open stores in India.
Compared with China, Ikea’s sourcing from India is very low. Why?
India makes up 3 per cent of our global purchase. Though volumes from India have slightly increased in the past few years, it can increase even quicker. Our focus in this region is on textiles, but there is scope for other products, too, in Ikea's range. We buy where we get the best offer, which is based on quality, international standards, reliable delivery and then, of course, the price and competitiveness. And, in this context, China has been more competitive until now and that is why China constitutes 20 per cent of our global sourcing.
You mean Indian firms need to address efficiency issues?
Efficiency in all parts of the process is required, so that the end result comes with a good quality at a low cost. And I see there is potential in India to work in a more efficient way, which is certainly an area of improvement. Moreover, there is still a gap in India in terms of understanding consumers' expectation of quality. And, if there is no right understanding, which we face quite often in India, there is a cost to that, which comes to Ikea and thereby to the suppliers. To understand the expectation of quality and deliver the right quality is really the area where Indian firms can improve at.
How much business can India get from Ikea in the next few years?
We are looking to grow more with our existing partners but we also need new suppliers who have the volume scale and systems to cater to fulfil Ikea's requirements. So, it will be growing both with existing partners and by finding new partners. I understand that a business of ¤500 million (nearly Rs 3,500 crore) will come to India in the next five years.
Are you changing your strategy for suppliers in India?
We have consolidated our supplier base. Earlier, we had more suppliers. Now, we have bid goodbye to those suppliers who could not fulfil our requirements when it came to quality and sustainability. Ikea is looking towards big scale suppliers, which are more professional and more industrialised and can deliver high volumes at low cost. Smaller players in India are not able to deliver better. We need bigger and much more efficient players. We look for suppliers who under- promise but over-deliver, as we believe that not over-committing and delivering more is the key to building long-term successful businesses.
How are the markets where Ikea has its stores doing? Especially Europe and America?
They are recovering. Last year, despite a recession, we grew 3 per cent and this year we are seeing a much stronger growth. Demand and consumer confidence is coming back in many of these markets.
