Almhult, Sweden: With its first store in India set to open next year, Swedish furniture retailer IKEA expects production units to be set up for its products in India in order to fully tap the potential of "big middle class" consumers in the market.
The company, which has already purchased land in Hyderabad and Mumbai to start retail operations, is also looking to double sourcing of products for its global operations from India by 2020.
"It is important for us to set up our production in India," IKEA group president and CEO Peter Agnefjall told PTI here.
Explaining the reasons for the need to have production facilities in India, he said: "On one hand that would support the growth of the economy and secondly, what we do is that we sell products, which are inexpensive. You can not distribute these inexpensive products long distances because if you do that then you would ruin the margin of the product."
"So it's important for us to go for the local production. If we have the right technology, right raw materials which is existing there then we can combine with the knowledge of IKEA and turn into a fantastic product," Mr Agnefjall added.
"Then only, I think we can reach the big middle class and not the affluent few but the many people in India. There is enormous growth of the people of the middle class year by year and by 2025 it would look different from today."
When asked about the total investments that IKEA is planning for India, he said: "Well, we are estimating that we need to invest more than 1.5 billion euros in the coming period in stores and distribution etc. It's very difficult to be spot on but I think it would be enough."
IKEA will open its first store in India at Hyderabad in the second half of 2017. It has also bought land in Mumbai as part of its expansion in India even as it scouts for more sites in Delhi-NCR, and Bengaluru.
The company, which received government approval in 2013 for its Rs 10,500 crore proposal to open retail stores under 100 per cent FDI, plans to open 25 stores by 2025 in nine Indian cities.