Ikea India Online Sales Surge, Footfalls At Stores Still Below Pre-Pandemic Level

Ikea India, the domestic unit of the Swedish designer and seller of ready-to-assemble office-to-home accessories, saw its online sales surge while footfalls at its physical stores are yet to surpass pre-Covid levels.

“We are seeing continued interest among consumers to shop online and we are developing our online presence aggressively and parallely with physical expansion,” Susanne Pulverer, chief executive officer and chief sustainability officer at Ikea India, told BloombergQuint on the sidelines of RAI Retail Leadership Summit.

Online sales now account for 30% of the company’s overall sales in India compared with 25% in December and around 12% before the pandemic.

“In the long term, we expect the share of online sales to increase as consumers look for convenience, want their orders faster without having to visit a store, and avoid travelling due to lack of time.”

Ikea’s online channel is operational in Hyderabad, Bengaluru, Mumbai, Pune, Ahmedabad, Vadodara and Surat.

“Most of the sales have come from metro cities and Pune. E-commerce sales are yet to pick up in Gujarat as we have not been very active in the marketing of the app,” she said. Bengaluru, Delhi and Mumbai currently remain its “prioritised” omnichannel markets.

In the next phase of expansion, the furniture brand will foray into tier 2 markets. But it plans to explore a “digital-first” strategy.

“We have no concrete plans to set up stores there (tier 2 markets and beyond) as of now, but we could be looking at these markets through our e-commerce channel,” said Pulverer.

The trend underscores the digital shift underway in the world’s second-most populous nation, accelerated by the Covid-19 pandemic as everything from work and education to shopping moved online. Market researcher Redseer estimates that the Indian digital economy has been expanding at more than 50% every year, led by high-speed internet access and rising online shopping. It is likely to touch $1 trillion by 2030.

For Ikea, however, it’s too early to call it a trend, says Pulverer.

“Footfalls in offline stores haven’t crossed pre-pandemic sales. But that’s because it has been only a few months that stores have opened up and now we are living in an inflationary world,” she said. Elevated costs seem to have dented demand.

“In the times we are, starting with the pandemic and the rising geopolitical tension is having an impact on everything—be it raw material prices or logistics costs,” she said. “While we are trying to absorb a lot of the price increases, we were forced to take some price hikes to offset the cost pressures on margin.”

Pulverer is confident of the country’s long-term demand prospects and doesn’t see the e-commerce acceleration will diminish the significance of physical retail. In 2022, Ikea plans to open its second city store in Mumbai and a large-format store, and another city store in Bengaluru.

It also plans to open smaller-sized retail outlets in four-five more locations to help reach more customers. Currently, the company has two big format stores—first set up in Hyderabad in 2018, and another in Navi Mumbai set up in 2020.

This is part of its plan to invest a cumulative Rs 10,500 crore ($1.6 billion) in its Indian retail operations by 2030, of which Rs 6,000 crore was earmarked for Maharashtra.

“We will still need stores as many are still willing to get a touch and feel experience of a wide range of products and get immediate cash and carry. Stores will be leveraged to fulfill more of these orders,” said Pulverer.

Ikea has been sourcing from India for more than 35 years with close to 60 suppliers. The company aims to double its local sourcing to 50% in the next few years. “The pandemic has created a lot of disturbance in sourcing from China, and accelerated the local sourcing push.” The company is working with over 45,000 direct employees and 4 lakh people in the extended supply chain in the country to produce for Ikea stores worldwide.