Bloomberg News

Ikea to Consider India Entry, Plans More China Stores

June 08, 2012

Ikea to Consider India Entry, Plans More China Stores

Shoppers at an Ikea store in Beijing. Photographer: Mark Ralston/AFP/Getty Images

Ikea Group, the seller of sofas, bookshelves and cutlery, will consider entering India after policy clarity, and open stores faster in China as it boosts sales outside Europe.

The company is watching legislative developments in India to weigh a potential entry, Chief Executive Officer Mikael Ohlsson said in an interview in Shanghai. In China, where Ikea is increasing store openings to three annually from one, sales are expected to rise by at least 20 percent this year, he said.

Expanding in Asia would allow the furniture retailer to reduce its reliance on Europe, where the company gets about 80 percent of revenue. Sales at Ikea have risen every year since 2001, and climbed 6.9 percent to 25.2 billion euros ($31.4 billion) in the fiscal 12 months ended Aug. 31.

“Cautiously we are adding new markets,” Ohlsson said today. “We have big interest in opening in India. When the conditions are ripe in India we can start to prepare for an opening there.”

India’s government in January removed a 51 percent limit on foreign ownership of stores selling a single brand, a decision that was seen benefiting firms such as Ikea. Overseas companies selling one brand have been still slow to enter because of rules that mandate them to procure at least 30 percent of their requirements locally.

‘Positive Movement’

The Indian government is drawing up plans to ease the foreign investment norms for single-brand retail, including the sourcing conditions, the Hindustan Times reported this month citing government officials it didn’t name.

“We are following very closely positive movement of legislation in India and try to understand the consequences,” Ohlsson said without providing a timeline.

Unlike Ikea, Wal-Mart Stores Inc. (WMT:US), Carrefour SA (CA) and other foreign chains selling multiple brands are still not allowed to retail directly to Indian consumers.

The global economic slowdown hasn’t affected expansion, Ohlsson said. In January the furniture company, founded in Sweden, said it plans to spend 3 billion euros on expanding in the coming year to add stores, factories and retail centers.

In China, Ohlsson said he plans to keep lowering prices after bringing them down 50 percent over the last decade.

“Over the past years we have dramatically reduced our prices in China,” he said. “We will continue that this year and also next year to be more affordable for more people.”

The furniture retailer is expanding in China amid slowing economic growth in the country. The world’s second-largest economy expanded 8.1 percent in the first three months of this year, the fifth quarterly deceleration.

The company expects to add about 1,200 new jobs per year in China, where it currently has about 5,500 employees, he said.

Ikea, which saw some of its fastest growth in Russia, China and Poland last year, plans to open in South Korea “in a couple of years,” Ohlsson said.

To contact Bloomberg News staff for this story: Huiwen Yang in Shanghai at hyang66@bloomberg.net

To contact the editors responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net; Stephanie Wong at swong139@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • WMT
    (Wal-Mart Stores Inc)
    • $76.32 USD
    • 0.51
    • 0.67%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus