Swedish furniture major IKEA is expected to increase local sourcing from the current levels and add about 20-30 suppliers from its 50-supplier base over the next 3-5 years, Sandeep Sanan, new business manager, purchasing & logistics South Asia at IKEA told FE
Swedish furniture major IKEA is expected to increase local sourcing from the current levels and add about 20-30 suppliers from its 50-supplier base over the next 3-5 years, Sandeep Sanan, new business manager, purchasing & logistics South Asia at IKEA told FE. IKEA is expected to double the size of sourcing from 300-350 million euros annually. Foreign Investment Promotion Board (FIPB) approved IKEA’s 100% FDI in 2012 and the company has since been laying the groundwork for retail operations in India. According to the regulation that governs 100% FDI in single-brand retail, IKEA must fulfil at least 30% local sourcing. “In the last two years, we have added 15 suppliers in new categories to the total number of suppliers at 50,” Sanan said.
IKEA will be looking at expanding to categories such as bamboo, wood and natural fiber. “We will also focus on natural fibers such as the waste grasses, which are grown widely across the coastal region and see how we can convert them into products in a sustainable way,” he added.
Among the largest furniture retailers globally, IKEA is gearing up to launch operations in India with its first store coming up in Hyderabad by April 2018. Besides Hyderabad, IKEA will be exploring markets in Telangana, Maharashtra and Karnataka, among others. The store will also have a 1,000-seat restaurant – IKEA Cafe as the company is targeting 5-6 million visitors for the store each year. IKEA is leaning more towards local sourcing to offer competitive pricing against other retailers, such as Urban Ladder and Pepperfry. In addition to ‘do-it-yourself’ furniture, IKEA will also offer assembling services for a premium, which will depend on the size of the furniture. “Our approach, going forward, on the services part will be dependent on skill development, quality control and sharing knowledge,” Sanan added.
IKEA was working largely with textiles, but over the past one year, it has forayed into a lot of new categories. “We have started exporting sofas from India under partnership with Kurl-On and also producing mattresses with partners”, according to Sanan.
Currently, 70-75% of the sourcing from India consists of textiles from markets, such as Punjab, Haryana and NCR, among others. Going forward, IKEA will be looking at North-eastern states for bamboo plantation. Other states of focus include Telangana, Maharashtra, West Bengal, Odisha and Andhra Pradesh. “We focus on having a relationship that is long term and create a positive impact in the supply chain. Private-public and entrepreneurs can also become partners at various levels such as plantation, local techniques for handicrafts, etc. The supply chain will be built in a way to help both – industrialised setups and handicrafts,” Sanan said.