Ikea plans to set up smaller format stores this year, decides to go online

Swedish giant Ikea is coming to a neighbourhood near you soon. As part of a major change in its strategy, the company is scouting for locations in Mumbai to set up five to six smaller format stores. 

These smaller outlets will offer a more limited array of products and services.

The stores will be in the range 50,000-150,000 square feet, one-third to a tenth of the size of their flagship stores, which go up to 500,000 square feet. The Navi Mumbai store is over 400,000 square feet. 

If the experiment works, the small format stores will be opened in other locations in India, possibly later this year. 

The smaller stores, apart from stocking products which are smaller in size, such as furnishings, lighting, and kitchen products, will also showcase some limited furniture and storage too.

Consumers will also now have the option of booking online from the store, seeing the product digitally on the screen, and consulting experts on their needs. Ikea has identified Mumbai as the first city where it will begin its online service and is expanding the reach of home delivery through its pilot launch. The products will either be supplied from its Hyderabad centre or through its distribution centre in Pune. Ikea will also launch online services in Hyderabad and Pune.

“As part of entering Mumbai, Ikea has done a detailed analysis of the dynamics of Mumbai and looked at ‘life at home’ in the city to enable us to provide innovative multi-functionality solutions for Mumbai,” said an Ikea spokesperson. 

He added that, since consumers are getting busier, they are looking for ‘faster gratification for most of their purchase journeys’. 

The decision to opt for smaller stores is a change from its earlier strategy to stick  to giant, sprawling stores and open 25 such stores across the country in a decade. However, with the new plan, the company is looking to set up 49 stores in 10 years.  

It’s taken only one year of operations at its first store in Hyderabad for the company to change tack. Experts say that growing competition from online stores such as Urban Ladder and Pepperfry, which also have an offline presence, and the fact that consumers do not have the time — or even a car — to travel to the outskirts, prompted the decision to go online and opt for smaller outlets. 

There is also competition from Landmark’s Home Centre, Future Group’s HomeTown, and Godrej, amongst others, which all have stores within cities. Arvind Singhal, chairman of Technopak, a retail consultancy firm, said that building a large format store like Ikea takes years, extensive planning, and a lot of land, which means it’s hard to expand fast.

“We believe Ikea sees a boom and a large consumer base, especially among the young, and they clearly want to reach them faster than they can by just setting up a few large format stores,” said Singhal.

He also pointed out that, in the last decade, the average age of homebuyers, who look for furniture and furnishings, has moved from 20-30 to 40-plus and this older age group prefers to have stores nearby.

Ikea’s goal remains the same: To reach 100 million people in India in three years.