Ikea has been around in India for about eight years, with another three years before that spent studying the market. It has developed a range that it deems “locally relevant” — like the roti maker, the tawa (pan), the belan (rolling pin), and the pressure cooker — which now constitute about 5% of the products it offers in the country. It has shifted its communication strategy to sync with local culture and fit into local spaces and has worked hard to beef up its omnichannel sales model with about 30% of its sales originating online.
But profitability has remained elusive for the retailer whose global sales reached approximately €45billion in the 2025 financial year (FY25).
Just for context, the company’s India entity widened its losses by about 2% to Rs 1,325.2 crore in the financial year ending March 31, 2025 (FY25). The revenue also dipped 3% to1,749.5 crore from Rs 1,809.8 crore in FY25.
So now the brand is taking a leaf out of its China playbook and tweaking its retail formats. Starting last year, it started piloting smaller store sizes — ranging from 15,000-20,000 sq ft — that are more cost-effective to set up and faster to integrate with its omnichannel model. “The goal is to create a simpler and more efficient shopping experience,” Ingka Group Retail Manager Tolga Oncu had said when the concept was unveiled last August. Five months on, the furniture retailer is looking to take a step up the ladder — setting up new stores in the 50,000-70,000 sq ft range in the country, which will sit comfortably between its smaller stores (15,000-20,000 sq ft) and big-box retail outlets (4 lakh sq ft), Adosh Sharma, country commercial manager at Ikea India told FE recently.
Ikea’s broader plan also includes doubling its investments in the country to over Rs 20,000 crore ($2.2 billion) over the next five years and improving local sourcing. Will all this help the retailer grab a larger share of the highly fragmented furniture and furnishing market in the country? Will the brand achieve profitability in the next two years in keeping with its plans?
Building for the long term
The India home decor and furniture market is growing at a rate of 5.6% and is expected to be valued at Rs 3.6 lakh crore by 2033, it faces many challenges. “A large part of the Indian consumers still rely on local carpenters to furnish their homes,” says Vivek Mehta, CEO, Urban Ladder. According to research by Redseer Consultant Strategy, the category remains highly fragmented and is spearheaded by unbranded products. Unbranded and local retail and handicrafts businesses control about 70% of the Rs 18,000 crore ($2 bn, excluding furniture) home decor market. Pan-India brands make about 27% of this share. Moreover, regional nuances of culture, art and craftsmanship still rule. That apart, price sensitivity remains high. People are willing to pay, but they want to pay only when they see tangible value, say observers.
Ikea realises copy-pasting its global retail strategy in India is not going to work. That explains its recent moves to tweak store sizes and product design. Over and above the regular S-M-L strategy, the fourth format the brand is developing comprises no-frills planning and order points, focused on customers who want to design homes or seek complex solutions without distraction. “Smaller stores, which fulfill purpose-led needs will help them to get closer to their customers,” says Devangshu Dutta, founder & CEO, Third Eyesight.
Slow purchase cycles
The furniture and home decor segment has been up against slow purchase cycles in India. Smaller sized stores that are closer to residential areas might help step up the frequency of purchases. “Players are moving towards a higher purchase frequency strategy and smaller stores will help Ikea cash in on this opportunity,” says Kushal Bhatnagar, associate partner, Redseer Consultant Strategy. He says quick commerce has helped improve the purchase cycle in the home decor space, and that is something Ikea will likely tap going forward.
Dutta says Ikea has taken a long-term view on India and the investments in the pipeline is an indication of the opportunity that awaits players. The brand claims it has served close to 110 million customers in FY25 across channels, and online sales are growing 34% compared to the previous fiscal. While furniture contributed the lion’s share of its revenue, the food business contributed 10% and Ikea for Business (tailored solutions for businesses) another 19% to its topline.