IKEA to shrink store size and grow exponentially

Taking a cue out of India’s leading omni-channel players, IKEA plans to shrink its store sizes by up to 5% of some of its biggest stores. However, the the Sweedish furniture giant plans to take its total count of stores in India to 25 by 2030.

IKEA entered India in 2013 with a commitment (back then) to invest INR 10,500 Cr (USD 1.5 Bn) in retail stores, alongside buying Indian made produce for its local and international consumption.

“We have an ambition to be profitable by the end of FY28,” said Patrik Antoni, India CEO for IKEA in an interview with The Economic Times.

India is among one of the top 3 priority countries for the group, said the CEO of the company’s Indian operations, who returned last year for his second term in the country.

“We will open another 25 stores in the coming four or five years. So we have now have full speed on the expansion,” he said, adding that these new stores “will range from 27,000 sq feet to 215,000 sq feet depending on their location.”

Editor’s Note

India is a tough market and glad that IKEA has learned it the hard way, after investing close to a billion dollars over the last decade.

Peers like Pepperfry, Urban Ladder, Wooden Street, etc. have been operating an incredible omni-channel model, perhaps which even global peers have not pivoted.

The average size of a Pepperfry store is no more than 2,000 sq ft., but clocks annual revenues of INR 2 Cr and above.

The store showcases over 550 SKUs and drives customer exploration, billing with discounts and scheduling deliveries – all through its integrated online portal which is open to customers as well.

IKEA, on the other hand went in to an offensive, opening large – really large stores, spread over 4 lakh sq ft, which is bigger than the average size of malls in India.

These stores carried over 20,000 SKUs and had omni-channel capabilities too. However, the cost of rent per sq ft and the sales per sq ft were not in sync.

One of the key insights that IKEA brought in with its decades-long, international expertise is the concept of D.I.Y – Do it Yourself, which the company presumed Indians would embrace like their global peers, thanks to a young population.

But that was not the case to be, as the countrymen would rather prefer a local carpenter to fix even a small nail on the wall, let alone setting up complex furniture such as cots and tables.

For FY 2025, IKEA reported revenues of INR 1,749 Cr, with losses widening to INR 1,299 Cr.

Clearly, IKEA has not got it strategy right in the country yet, which has an estimated market size of INR 270,000 Cr. (USD 30 Bn) annually for furniture and furnishings.

For FY 2025, IKEA reported annual sales of EUR 44 Bn (USD 51 Bn).