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Sweden's Ikea pitches to enter India

The privately-held Ikea, which uses its profits as a means to invest in social programmes, could also help with upgrading Indian production technologies in such areas as textiles, plastic goods and other products, Ohlsson said.
by Staff Writers
New Delhi (AFP) Sept 20, 2010
Swedish home furniture giant Ikea pitched Monday for fast-growing India to open up its huge retail market to foreigners and said it planned more stores in emerging market giant China.

India's tight investment rules restrict overseas retail firms to "back-end" wholesaling -- except for single-brand outlets such as Nokia or Reebok -- to protect local, family-run stores which fear being driven out of business.

Ikea chief executive Mikael Ohlsson urged the government to relax the strict regulations to allow the company to open its superstores in India, saying there was "room for all players."

The furnishings chain, which sources 500 million euros (655 million dollars) in textiles and other goods from India annually, plans to boost that figure to one billion euros "within three to four years," he said.

And if Ikea -- famed for its flat pack stylish furniture -- could open up stores in India it could supply at least half the volume of goods from Indian production sources as it does in China and Russia, he added.

"We believe we can create employment -- jobs in cities and outside cities, we can be part of transforming industry," Ohlsson told AFP in New Delhi.

The privately-held Ikea, which uses its profits as a means to invest in social programmes, could also help with upgrading Indian production technologies in such areas as textiles, plastic goods and other products, Ohlsson said.

Ikea sees huge potential in India's burgeoning middle class, estimated at around 300 million and set to climb, whose "wallet is still thin" but who want "inexpensive but nice home furnishings," Ohlsson said.

Ikea believes it could replicate in India its success in neighbouring China where Ikea stores are "highly appreciated," said Ohlsson who is visiting India to inspect Ikea's 125-million-euro South Asia development programme helping children and women.

"If you go to Ikea stores in Beijing or Shanghai, they are as busy as London," he said. "That's a scenario I can see in India."

Ikea, which has annual global sales of around 30 billion dollars, already has 10 stores in China and is looking at opening around five more in the next few years to meet demand, Ohlsson said.

Foreign retailers are seeking to develop new sales outlets in the face of saturated Western markets, and India and China with populations of more than one billion loom large in their sights.

Ohlsson met with India's Commerce Minister Anand Sharma during his visit to press for changes in the retail ownership legislation.

"It was fantastic to have an opportunity to describe what we could see for the future and how we could participate," he said.

The left-leaning Congress party-led government recently kicked off public debate on opening up the 500-billion-dollar-a-year retail market to foreign investors.

Ikea has a long-term business model which makes it hard to conform to Indian rules requiring foreigners to set up joint ventures, Ohlsson said.

The company shelved plans to enter India's retail market in 2009, saying it would wait until the country allowed it to "fully own its retail operations."

Ikea is one of a slew of global retailers that include France's Carrefour and Wal-Mart of the United States pushing the Indian government to open up its retail sector to serve consumers in the country whose economy is growing by nearly nine percent.

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