Almhult, Sweden, Aug 19 (PTI) The new tariff regime by the US under the Trump administration will have economic consequences, however, there is still a lot of uncertainty over its impact, said Ingka Group CEO Jesper Brodin.
Ingka Group, which operates IKEA stores in 31 countries, is monitoring the situation as it sources goods from several countries, including China and India, among others, for its global retail operations.
Besides, Brodin expects India to be among its top ten markets for the Swedish furniture retailer in the coming years, where it looks to add around 6 touch points every year as part of its expansion plans in the second phase of growth.
The retailer, which already has completed Rs 10,500 crore FDI, granted under single-brand retail policy, is now gearing for fresh round of investments in the country to expedite its growth journey.
When asked about the impact of the tariff imposed by the Trump administration on several markets, including India, Brodin said: ”It’s still a lot of uncertainty on where it’s going to land.” “ So we continue to monitor it. But since we actually have very little opportunity to influence it, we need more (time) to get ready to adapt to it.” However, he also added that now IKEA’s supply chain is “more regionalised”. However, there are certain categories which are still import dependent.
“But I think the impact of any trade additional value add will of course, lead to economic consequences and then we will have to see in IKEA if we can absorb or what we need to do with it in the future,” he said adding “It is going to continue for a couple of weeks and months and then “we will have to see what happens for the future.” Over the negotiations going on between the European Union and the Indian government for a Free Trade Agreement, Brodin said he is a “big believer” in these pacts, which are a “win-win” for both sides.
“ We do welcome and encourage these negotiations and think they will be able to the benefit both India and Europe. What we have seen over the years in IKEA is that when countries collaborate, it opens up for win-win across borders,” he said.
Europe is the largest market of IKEA, where it operates 250 stores,while India is among the top ten countries from where it sources for its global retail operations.
“At the same time, I think the long-term strategy for IKEA in India is still to increase the share of local sourcing. So it is a game, you can say, where the most important factor for us is to build volumes locally,” said Brodin, who is handing over the baton to Juvencio Maezto, who was first IKEA India head for 5-6 years.
Brodin will remain with Ingka Group till February and then act as a senior advisor for Ikea Foundation, the group’s philanthropy arm.
IKEA has been sourcing from India for the last five decades, though it started its retail operation in India in 2018 by opening its first store at Hyderabad, followed by Navi Mumbai and Bengaluru and several others such as Delhi NCR, are in the execution pipeline.
Over expansion of retail network in India, Brodin said:”I think to a certain extent, we have been delayed a little bit due to the pandemic in particular. So that had an impact on our expansion plans. But right now, I think we are showing with our investments that we are serious.” IKEA’s current sourcing basket includes textiles, plastics, and metals, among others, and the company plans to add more items. Presently, Europe is IKEA’s biggest supplier, followed by America and Asia, in which China leads.
“I think the long-term strategy for IKEA in India is to increase the share of local sourcing. The most important factor for us is to build volumes locally,” he said.
According to Brodin, in the coming 12 to 24 months, IKEA will double its store capacity in India.
“We are heading there. So we’re building up volumes. And I would say, regardless of great trade relations, IKEA’s direction will continue to be to increase the share of local sourcing in India,” he said.
When asked about the non-tariff barriers such as QCO (Quality Control Order) over imports of goods in India, Brodin said:” I have a slightly different view on the Indian policy.” “ I think some people call it protectionism, but I think the Indian government is trying to stimulate domestic growth, and is very successful in that. So of course, there is a dialogue with different parts of the government to see, how can we be part of that,” he said.
For IKEA, it is not a political question or a matter of trade relations but a game of volumes. PTI KRH KRH ANU ANU
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