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Ikea puts India expansion plans on ice

Ikea puts India expansion plans on ice

Published: 23 Jan 2012 14:14 GMT+01:00
Updated: 23 Jan 2012 14:14 GMT+01:00

Swedish furniture retailer Ikea has put off plans to open stores in India due to local sourcing requirements despite a recent loosening of rules about foreign ownership of single brand retailers.

Speaking with the Financial Times (FT) newspaper, Ikea CEO Mikael Ohlsson said that rules stipulating that single-brand retailers source 30 percent of their goods from local companies remained a stumbling block to Ikea's plans for expanding into India.

“We need to see what [the rules] will mean for us,” Ohlsson told FT.

“We are patient because the conditions need to be right. In this sector, when everything seems to be okay, then we will be in.”

Nevertheless, Ohlsson said a recent change allowing foreign ownership of single-brand retailers was “a very positive change”.

Back in 2009, Ikea cited a rule preventing stores being 100 percent foreign owned as the primary reason for the company putting off plans to open stores in India.

Regulations at the time capped foreign investment in single-brand retailers at 51 percent.

Earlier this month, however, the Indian government agreed to allow foreign companies to own 100 percent of single-brand retailers.

Despite the move, Ikea's Ohlsson remained cautious about when the Swedish retailer may eventually open outlets in India.

“We have always been cautious. Now we will take a step-by-step investment in existing stores,” he told FT.

According to the newspaper, Ikea plans to source €1 billion of its global product range from India within three years, doubling the current amount.

Last week, Ikea reported record profits due in part to fast growing sales in China and Russia.

Currently, Ikea operates furniture stores in 26 countries around the world.

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Your comments about this article

15:05 January 23, 2012 by Puffin
Well here are counties of Sweden that they might consider expanding into first

- Dalarna for example!
15:07 January 23, 2012 by cupidcub
Go to Bangladesh! They will not disappoint you.
17:11 January 23, 2012 by Fernandis
Bangladesh----they need food not IKEA.
18:05 January 23, 2012 by Dazzler
Hey Puffin...Borlange will be getting an Ikea this year,if I remember what the wife told me, she works as a store designer for Ikea.
18:38 January 23, 2012 by Munmun30
IKEA is not sure about entering India with the 30% sourcing restriction, is because they are now manufacturing almost everything in China. The 30% restriction is very good, 'coz it will force companies to invest in India, build up manufacturing units, bring in international standards.

Of course IKEA does not want this, so that they can just dump all they get manufactured in China into India.
20:21 January 23, 2012 by gabeltoon
Why is it that everything we use in the western world is made in CHINA or INDIA.???
16:06 February 7, 2012 by Navras
India should only those companies to invest,do business in india ;who want to invest and buy from local supplier.

If they want to follow Indian rules,they are invited!
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