Why Ikea’s parent is betting big on shopping malls when quick commerce rules the day

New Delhi: The Ingka Group,  parent company of global furniture retailer Ikea, will open its ₹5,500 crore shopping centre, Lykli Noida, by 2028.

“India is in the top three markets for Ingka globally. There is a big interest in the market,” Sebastian Hylving, global expansion & development director at the group's Ingka Centres, told Mint. “When we see the numbers of India, we are very keen on continuing our expansion, ” Hylving added.

India’s young, growing middle-class population is a big draw for large global companies that are facing moderate growth in Western markets. However, the market is also shifting pace with the rapid adoption of e-commerce and quick commerce becoming increasingly popular.

While most consumers continue to shop offline, the shift does impact smaller categories that consumers may choose to buy offline.

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Analysts at Deloitte expect e-commerce in India to continue its exponential growth and surpass organized retail in scale and size, according to a report last year.

“Emerging channels such as social commerce, quick commerce, D2C will reshape how millennials and Gen Z will shop in the future. Investment in specialized vertical e-commerce is also expected to grow in the near future,” they said. “Retailers recognize the need to move beyond transactional interactions and create immersive, memorable experiences that leave a lasting impact.”

India’s overall market for offline retail is expected to touch $1.6 trillion by 2030. Meanwhile, online retail is expected to touch $325 billion by the end of the decade, as per Deloitte estimates.

Harminder Sahni, founder of consulting firm Wazir Advisors, however, said e-commerce sales are still a small fraction of offline. “It makes sense for Ikea to focus more on food and entertainment,” he said.

Ingka's Noida centre will focus more on food and entertainment along with co-working space and concepts that enable greater socializing.

Hylving said global visits to Ikea stores have crossed pre-covid levels, indicating a renewed interest in shopping offline after the pandemic pushed consumers to buy more goods online. 

Ikea projects

First announced in 2021, the Noida development follows a similar plan for Gurugram in Haryana.

Tenants are showing interest in the Noida development, but Ingka does not want to lock in on retailers given the changes underway in the market. 

“Well, 2028 can seem like a short time but a lot of things are happening in the market. So we will not go out and fill our centre tomorrow,” Hylving added.

The Noida centre will house over 200 tenants with allocation to retail, a hotel, a co-working space, entertainment, cinema halls, restaurants. It is expected to draw more than 25 million visitors. The development will consist of two office towers and an Ikea store as an anchor tenant. 

“There's a huge interest (from tenants) to join our meeting places,” he said. “Transactional retail might go more online. If I need toilet paper, I don't need to go to the store; I can get that sent home but it's very difficult to replace a physical meeting space; people like to meet. So food will be a big portion in our meeting places,” he added.

Ingka Centres is the group's shopping centre business—the company develops large format shopping destinations that house a range of brands, including its flagship Ikea store. It has over 35 such “meeting places” in 13 markets.

The investment for the Gurugram project was then pegged at € 400 million ( ₹3,500 crores) with construction starting in early 2022. In all, Ingka Centres will spend €1 billion to open the centers.

Interestingly, Ikea had earlier announced it would discontinue operations at its store in Mumbai's R City mall and consolidate its Mumbai operations at the Worli store.

To be sure, Ikea has invested ₹10,500 crore in India’s retail market over the past decade. In fiscal year 2023, Ikea India reported a 61% jump in sales to ₹1,768 crore. Its loss for the period stood at ₹1,134 crore, per regulatory filings.

The retailer made its India debut in 2018 by opening its first big-box retail store in Hyderabad. Ikea is currently present online in Mumbai, Pune, Hyderabad, Gujarat and Bengaluru; it operates three big-format stores in India in Hyderabad, Navi Mumbai and Bengaluru, apart from one small store in Mumbai.  

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