Exclusive: Ikea in India opens shop in 2018 and might source more from India than China for its global operations, if things work out

The world’s largest furniture retailer has been present in India since the past 42 years with an office in the country since 30 years but it is finally opening a retail store in the country by 2018. The company had employed 135 people till last year and the number has been consistently growing. IKEA has been mainly sourcing textiles which make up for about 70% of the imports, but also sourcing materials like plastics and metals.

“We are looking at different materials such as Mango wood, Rubber wood, Neem wood, and Bamboo in the coming months as it is an optimal material for furniture in India,” Henrik Gunnerling, Purchase Development Manager, IKEA Range & Supply told Business Insider.

According to India’s retailing policy, foreign companies have to meet the 30% local sourcing norm, preferably from SMEs. The Swedish company’s first two stores in India would be in metro cities of Hyderabad and Navi Mumbai, and both are expected to open in 2018.
Make In India to Sell In India

Gunnerling said that the retailer gives volume commitments to its partners to drive growth in terms of investments and technology.China is the largest sourcing hub for the furniture giant but Gunnerling said that it is possible for that to change over time, as they enter the Indian market next year.
Ikea also said that it would double its sourcing from India by 2020 to €600 million, up from its existing base of €318 million, while complying with the 30% local purchase norms as it makes its commercial debut in the Indian economy.

The company said it plans to hire 500-700 direct employees for each store. Sandeep Sanan, the new business development manager for Ikea South Asia, said the company is looking to add suppliers to its existing categories, such as textiles and rugs, and plastics and metal.
The company also plans to set up its first distribution centre in Pune.
Sanan said that while the company has been sourcing from India since 4 decades, the entire process has not been easy, “We have a very good Textile supplier base in India; companies that have global standards and they have been exporting out of India. In furniture industry, it has not been the same case. There are very few companies that have set-ups that include modern technology and machinery. The challenging part has been to find the right supplier that meet our standards or even have the right mindset to attain those standards that are people-friendly and environment-friendly.”

Sanan also thinks that the local Indian regulations regarding furniture production are outdated and need to be updated, “We are working with the government to reduce chemical emissions created during furniture production as there are no regulations regarding the permissible chemicals being used.”

Mr. Sanan says that the company is looking for a long-term collaboration with the suppliers, “Our average time working with suppliers on a global level today is 12 years. We work at skill development, technology transfers and provide any support to make sure that supplier stay with us for the long-term.”
“We are looking to cut costs to make products affordable and accessible to many people. We make sure that we can make economically viable products and if that means sourcing more from countries like India, we will do it. Not just for the country market itself but for the entire range across all our 393 and counting stores,” Gunnerling said.