A quality control order for furniture under consideration of India is set to be the next big challenge for Swedish home furnishings major IKEA as it stabilises retail operations after impact of such regulations introduced for toys and steel in recent years.
The norms for furniture could be the biggest, IKEA India CEO and CSO Susanne Pulverer said on the likely bearing of the upcoming regulation for the business. Since the standards vary from those elsewhere globally certification of products conforming to the new norms will be necessitated, which sometimes can mean more time.
“You need to take care of the range to make sure it’s compliant. We will never compromise on selling anything that is not compliant,” she asserted, pointing out to how following the 2023 QC order for steel IKEA took out non-compliant pots and pans and restocked empty shelves with those in line with the norms. A similar approach was adopted when the order governing toys came in 2021.
Supply chain changes
Changing supply chains and setting up local sourcing, however, required time, she said, adding another group entity was incharge of sourcing. Unlike toys and steel products, furniture accounted for a bigger share of IKEA’s 7,000 product range in India. Home furnishings industry is already in dialogue with the government and looked forward to harmonised standards. Optimising the supply chain will be a challenge in the event of different standards, she said during a select media interaction at IKEA’s store in Hyderabad recently.
The proposed regulations for furniture were discussed at WTO’s Technical Barriers to Trade (TBT) meeting. Welcoming India’s objective to ensure only products with a high level of quality find their way to the market, European Union voiced concern at how the QC order sets mandatory requirements on quality and performance, which will lead to over engineered products, demanding separate production lines, with at best marginally better consumer utility benefits and have an impact on the cost of the product.
Cumbersome process
EU said the Indian certification process is extremely cumbersome, costly and lead to year-long go-to-market delays, WTO documents on the meetings, including one in November 2024, showed. India responded saying the standards have been formulated with considerable assistance from various international standards like ISO/EN and considering typical Indian consumer expectations and usage conditions.
In terms of localisation, IKEA has achieved 30% and targets 60%. IKEA, which has been sourcing from India for decades, in 2018 made a retail foray with opening of its first store in the country, a 4.8 lakh sq. ft facility in Hyderabad. In the first phase, it committed to Rs.10,500 crore investment and as part of which opened, besides the Hyderabad facility, a big format store each in Navi Mumbai and Bengaluru as also city store in Worli, Mumbai.
Maharashtra, A.P., Telangana, Gujarat and Karnataka are States where it has rolled out e-commerce operations. Two IKEA store-anchored Ingka Centres Meeting Places are taking shape in Gurugram and Noida. On the next phase expansion, she said it is yet to be finalised. Chennai and Pune figure in list of new cities under consideration of IKEA for setting up facilities.
On profitability, Ms. Pulverer said COVID-19, inflation trends and disruption in supply chains, besides the QC orders, were factors that impacted operations. However, with its continued focus on affordability for customers IKEA is hoping to achieve operational profitability in a couple of years.
Published – February 20, 2025 08:04 pm IST
