IKEA is not letting the lengthy process of opening physical stores come in its way of growing its footprint across Asia’s third-largest economy.
Last August, it had launched its online store in Mumbai ahead of a physical store—a first for the company, globally. IKEA plans to set up a physical store in Navi Mumbai, along with small-format stores in the city of Mumbai later in 2020.
The online push in Pune comes before the launch of its signature large-format stores. The move is part of a shift in its retail strategy, wherein IKEA is reaching out to shoppers across e-commerce, small stores, and large retail formats.
“Pune is the second market in India after Mumbai to open online first without the presence of physical stores," the retailer, which has set an ambitious task of reaching a 100 million shoppers in India in two years through various retail formats, said in a statement. Customers in Pune will be able to choose from over 7,000 products online. It is yet to identify land or location in Pune, and said that it was too early to share its plans.
The move marks a shift in the furniture retailer’s global strategy, as it builds more small-format stores in cities such as New York and Paris, while pushing sales on the internet, as shoppers the world over sway between shopping in-stores and online.
“Globally, we are going through a transformation of our business direction and organisational structures to be geared up for the future. This is all in line with IKEA wanting to meet its customer at their point of convenience, wherever and whenever possible," said Per Hornell, market and expansion manager, Pune market, IKEA India.
India is no different—though online sales here are still small, but cheap data and increased penetration of smartphones is making more shoppers get online. Consulting firm Deloitte expects India’s e-commerce market to grow from $24 billion in 2017 to $84 billion in 2021. Overall, the retail market is expected to grow to $1.2 trillion by 2021.
Getting online first will help the retailer cut time taken in building its stores—takes 18-24 months for completion. “(The) ambition is to enter the top Indian cities as quickly as possible with a combination of big IKEA stores, smaller city-centre stores, pick-up points, digital touchpoints and e-commerce," the company said.
In 2012, IKEA had promised to invest in 25 large-format stores in India under single-brand retail FDI—a plan that could now see it open more points-of-sale across formats.
In a recent interview, IKEA India chief executive officer Peter Betzel had said that the company decided to transform its business model a year-and-a-half ago, to look at a multi-retail model to build its business here.
“We need to be much more accessible to many people, which means adopting a true omni-channel approach. This means the big stores and small formats in the big cities of Mumbai, Delhi and Bengaluru, and then also having an online approach," Betzel had said, indicating that over the next few years IKEA could have well over 25 points of sale in India, albeit in different formats.
“If we look at how many physical meeting places we will have, may be in 8, 10 or 15 years, it would be much more than 25. So, we have plans for the big store, but we have many more plans for smaller store formats in the city which will range between 5,000-10,000 sq.m."
IKEA has built its first distribution or fulfilment centre in Pune and plans to add two similar centres in Delhi and Bengaluru to ramp up its fulfilment capabilities across the country.
IKEA, which had opened its maiden store in Hyderabad in August 2018, clocked ₹400 crore in revenue for FY19. Its Mumbai e-commerce store has seen close to 4 million visits since August 2019, the company said.