The decision of the world’s largest home products retailer comes in the wake of the company’s desire to own 100 per cent of equity in its India operations. This, however, is not possible as currently the country allows foreign direct investment of only up to 51 per cent in single-brand retail. IKEA’s hopes of change in the policy guidelines following the installation of new investment friendly UPA government (sans support of the Left) were, however, dashed as the first official statement of the new government as reflected in the President’s address to the parliament did not contain any positive signals on this account. India’s new commerce minister Anand Sharma even went to the extent of saying that there is no poosibility of changing the prevailing investment norms for retail in the near future. IKEA, according to media reports, had not only zeroed in on the site for its first store, but had also employed a few people to set up its new business.
IKEA, though, has not given up on its India plans entirely, as it can not ignore its vast market and wants to be a part of its retail growth story. “In a few years we are bound to reconsider our decision,” said IKEA sources.
While, the new government recognises the importance of opening up the country’s retail sector, it may do so gradually in a phased manner as two of the government’s allies Mamata Benerjee-led Trinamul Congress and DMK are vehemently opposed to the entry of big corporates and foreign retailers in the retail sector. IKEA may have a better luck than multi-brand retailers as the government may consider allowing 100 per cent FDI in speciality single-brand retail and luxury retail, which do not affect fortunes of millions of small traders who for centuries are engaged in retail sector now called ‘conventional’ or ‘traditional’ sector.
IKEA was founded in Sweden by Ingvar Kamprad. It specialises in selling functional products that can be self-assembled by customers. It chose to specialise in selling flat-pack products as they help the company in controlling transportation costs. The popularity of IKEA can be gauged from the fact that its website which displayed a range of around 12,000 products was visited by over 470 million persons in 12 months. IKEA sources its requirements from nearly 1,400 vendors located in around 50 countries across the world. Even, vendors from India account for sourcing of $500 million worth of home products.
Click here
Click here
4 responses so far ↓
Anil Dogra // Jun 12, 2009 at 9:42 am
Its good for them. Their 20 acres plus stores would have flopped in India.
The FDI in retail should remain restricted. Can the Indian Government guarantee jobs for such a large population. If yes, then allow full FDI.
Furniture // Jun 13, 2009 at 1:28 am
I always loved Ikea. The city I grew up in had an Ikea store and I used to go to just hang out there. Now I live in the US and there is an Ikea near my house. I bought some accessories there, I find their prices very affordable.
Sudhir kumar // Jun 19, 2009 at 12:46 pm
The concept of Ikea is quite unique ie flat-pack products and primarily Markets Functional Products . The concept and Ikea Products have been accepted by Young Students / Executives staying in Urban / Suburban area’s . These products would be quite acceptable for the Youth in India also .
The Urban croud who have been exposed to the well designed Products which are self assembled and are generally available at reasonable rates are bound to be received with some relief. This would excuse this catagory of consumers from the tyranny of the Small time carpenters and Stores selling Furniture of Doubtful quality.
While understanding the political and Administrative compulsion of Policies and the opposition from some well established Associations and organisations we need to find ways to give oppurtunities to newer concepts . Finding a solution should not be very difficult and Single Brand Specialised stores should be allowed to operate.
The Ikea and other such organisations which want to market their products in India need to educate the Politicians and Policy Makers to the Concepts and Benifits of such concepts to the Consumers. Getting stuck due to the opposition from Trade organisations , Groups / Politicians should not be allowed to derail the Economic benifits to be reaped by opening the Economy .
In case these Global Organisations are allowed to operate in India the benifit and service to the consumers would get a marked flip. The various organisations would be building their own Supply Chain Organisation and distribution Channels apart from the Sourcing and Buying assorted goods which would be benifit the Economy. The sourcing and buying would be getting a major boost with the opening of their offices in India. The employement Generation resulting from such ventures also need to be taken into consideration.
The above points need to be considered by the Policy Makers as well as the business Enterpreneurs to find solutions so that the Mutually benificial business oppurtunities are not blocked due to preconcieved notions .
Kind Regards
SK.
PB // Jun 22, 2009 at 4:39 pm
We had a taste of Socialism and have built an economy that has some strong fundamentals. Even today, after nearly 2 decades of reforms, our economy is predominantly dependent on domestic consumers. Hence, I feel we can open some more sectors to FDI.
Agreed, we need to be cautious. But, current FDI policies seems to be influenced by Biyanis and Ambanis than the actual merit (or the lack of it). Opening some of these sectors would see economy getting stronger.
Retail today is second most employing sector, after agriculture. But the organized sector is around 3-4%. Meaning, it is controlled mostly by Banias who are not necessarily helping the farmers, local entrepreuners or small scale industries in any way.
By having right policies, the organized sector can provide better prices for our farmers and entrepreuners. It would be interesting to see how long the government can resist FDI in retail.
PB
Leave a Comment