Swedish chain with ex-IKEA execs sets up sourcing base

As Ikea awaits CCEA nod, H&M sets to apply

At a time when two Swedish companies, and Hennes & Mauritz (H&M), are waiting to enter India’s single-brand retail market, Rusta, a multi-brand chain from the same country, has announced an initiative to strengthen sourcing from India.

Rusta, whose senior management comprises many former IKEA executives, operates in the furniture and furnishing space, as does IKEA. While IKEA plans to invest Rs 10,500 crore in India in the long term (possibly through 15-20 years), Rusta has announced it would set up a buying office in India, its fifth in Asia, after three in China and one in Thailand.

Rusta global chief executive Goran Westerberg, who worked with IKEA for about a decade, told Business Standard the objective behind setting up the office was to boost sourcing from India. The company plans to make India its second-largest sourcing destination in two to three years, after China (currently, India is ninth on the list). Rusta is targeting sourcing worth $40 million (about Rs 200 crore) annually in three years, against the current $10 million (Rs 50 crore). Sourcing from China stands at about $100 million (Rs 500 crore) a year.

IKEA is the largest furniture company in the world, with revenue pegged at about ^25 ($32 billion). Rusta is much smaller; its revenue is about $400 million. Westerberg, however, said his company was the fastest-growing in Sweden, with growth at 14 per cent.

While IKEA awaits a nod from the Cabinet Committee on Economic Affairs for opening retail stores in India, Rusta says currently, it isn’t looking at opening stores in India. Westerberg said currently all the 67 stores of the company were based in Sweden. The company plans to expand into other Scandinavian regions as well.

“I and other managers who have worked with IKEA earlier saw the same potential in this company, as the basic principle is the same,” Westerberg said. On why so many Swedish companies were betting big on India’s retail sector, he said, “That’s because there are many successful retail companies in Sweden.”

Meanwhile, government sources said fashion retailer H&M was slated to submit its proposal to invest about Rs 700 crore through four to five years to the Centre this week. The company wanted to operate wholly-owned single-brand stores in India, its chief executive Karl Johan Persson had said after his recent meeting with Commerce Minister Anand Sharma. H&M sources goods worth about $200 million (Rs 1,000 crore) a year from India, sources say. Globally, the company competes with chains such as Zara.

Arvind Singhal, chairman of Technopak Advisors, a retail consultancy, said, “The entry of chains such as H&M and IKEA will be a global reaffirmation of the potential of India’s retail sector.”