In the fiscal year 2023–2024 (August 1, 2023–September 30, 2024), Ikea’s operations in India recorded a modest 5% increase in revenue, hitting Rs 1,852 crore. This was the slowest expansion since the Swedish furnishings giant launched its first shop in the nation in 2018. The Economic Times said that the company’s large spending in infrastructure and retail growth caused its net loss to increase by 15% to Rs 1,303 crore.
The development of supply chains and distribution centers, three large-format stores in Hyderabad, Mumbai, and Bengaluru, as well as a smaller store in Mumbai, are the main causes of India’s current cumulative losses, which stand at Rs 5,550 crore.
Ikea cut the prices of a number of products by 20%, helped by decreasing raw material costs, despite economic difficulties and slack consumer spending. As part of its Rs 10,500-crore investment plan that was approved more than ten years ago, the company plans to open 25 outlets by 2025 in the National Capital Region (NCR), including stores in Gurugram and Noida.
Global revenue drops 5 per cent
Ikea saw a 5.3% drop in revenue worldwide in FY24, totaling 45.1 billion euros, with decreased prices being the main cause. It recorded 47.6 billion euros in FY23. Nonetheless, the business opened 56 new stores in several areas, including Colombia, as part of its retail expansion.
Ikea CEO Jesper Brodin reaffirmed the significance of increasing operations in India and voiced optimism about the country’s economic potential, noting that opening eight to ten shops would be necessary to achieve economies of scale.
Home furnishing industry facing slowdowns
The majority of Ikea stores throughout the world are owned by Ingka Group, which said in October that its fiscal year ended August 31, 2024, had total sales of 39.6 billion euros. The number represented a difficult year for the store as the home furnishings sector and the global economy both saw concurrent slowdowns not witnessed since the 2008 financial crisis.
According to Jesper Brodin, CEO of Ingka Group, “we experienced an economic deceleration in all our markets and a corresponding decline in the home furnishing sector,” as reported by Reuters. “This impact level hasn’t been seen since 2008.”
Affordable pricing drives Ikea’s growth
Ikea had to make significant price cuts as a result of the slowdown, which also caused a decline in shop visits and product sales. The change, according to Brodin, increased foot traffic and sales volume. In order to assist the retailer keep its 5.7% market share in home furnishings worldwide, Ingka Group invested more than 2.1 billion euros in price reductions throughout its international marketplaces.
However, Ingka Group pointed out that Ikea profited from a change in customer behavior around this time as well. Many households chose less expensive options as a result of the global real estate market slowdown, which benefited Ikea.
Ikea’s continued pricing modifications and emphasis on affordability are anticipated to be key factors in maintaining growth in these uncertain economic times.
