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Will IKEA’s Price Cut and Expansion Plan Add to India’s Growth Story?

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If you’ve had a stylish but expensive piece of furniture or home decor item from IKEA on your wishlist, you may soon be able to own it. If you head to an IKEA store in the coming weeks, you will find more than 250 items with discounts of up to 20% off. Juvencio Maeztu, Deputy CEO and CFO of Ingka Group, the company that runs the Swedish home furnishing brand, stated this at the World Economic Forum 2024, being held in Davos, Switzerland. 

With this move, the brand, known for its do-it-yourself furniture, wants to impact people’s lives positively. As we deal with inflation and high-interest rates, the price cut is their way of helping customers save money. Although the price cut will reduce IKEA’s profit, they are making do with thinner margins to support people this year. 

The Ingka Group has invested over $1.1 billion in price reductions across its markets from September–November 2023. The retailer aims to continue lowering prices in 2024. Here’s what it means for those in India. 

Attracting the Indian Middle Class 

IKEA’s price reduction plan is both bold and strategic. India’s growing middle class stands at an estimated 432 million, making it a massive market for home furnishing. 

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However, affordability has been an issue. By slashing prices, IKEA aims to make its furniture more accessible, tapping into this vast, untapped potential. 

Competition from Local Players

You may remember the excitement IKEA’s first physical store launch in Hyderabad in 2018 caused. But the brand faces stiff competition from local giants like Pepperfry, Urban Ladder, and HomeLane, which have made their own strong places in the Indian market. So, price control becomes important for IKEA to stand out and win hearts.

But the brand sees India as more than just a market – it’s a potential production hub for exporting to the world, as Maeztu stated at the annual WEF meet. While lower prices will excite you, by increasing production within India, IKEA plans to create volumes so that costs can further be slashed for their Indian consumers. 

More Stores in India

IKEA has been actively ramping up local sourcing and manufacturing in India. They promised to invest ₹10,500 crore and source 30% locally, which they have achieved. Now, they plan to move to the next phase: expansion. As they launch a store in Delhi later this year, they will set up online stores in Andhra Pradesh, Telangana, and Gujarat. The move makes sense considering they have 2 million consumers in India alone.

Part of India’s Growth Story

Who wouldn’t like more affordable furniture options? But IKEA’s move means an exciting time for the Indian economy, too. With its online and offline stores, this is how it will potentially benefit other sectors:

  • Retail Boom: Increased consumer spending on IKEA products could boost revenue for shopping malls, logistics companies, and appliance manufacturers.
  • Leap for Logistics: Efficient supply chain management and local manufacturing will need a strong logistics infrastructure. As the furniture will need to be shipped around the country, it will create more opportunities for transport companies and more space to store it, giving opportunities to warehouse developers.
  • Job Creation: Expansion plans promise significant job opportunities in manufacturing, retail, and logistics, contributing to India’s skilling and employment goals.
  • Boost Manufacturing: Increased local sourcing and manufacturing will strengthen India’s domestic furniture industry, attracting further investment and innovation.
  • Consumer Confidence: Affordable and stylish furniture options could enhance consumer confidence in the economy, increasing spending and overall growth.

While the price cut allows you to finally own that dream sofa or sleek coffee table without overspending, IKEA’s plans go beyond individual wallets. The retailer’s strategic move holds immense potential for India. By making furniture more accessible, creating jobs, and boosting the manufacturing sector, IKEA could boost India’s furniture segment and overall economy.  

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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.

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