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IKEA trashes Indian retail juggernaut

February 20, 2008 15:50 IST

Swedish home furnishing retail chain IKEA on Wednesday trashed the Indian retail growth story saying that the country was not even 'an emerging market' ready for big retailers with players making more mistakes than success.

The company, which sources around 5 per cent of its global consumption from India, also slammed the government for not opening foreign direct investment (FDI) in single brand retailing, especially the companies, whose presence in India would not affect the mom-and-pop stores.

"India is not ready for big retailers yet, may be we can talk about it in 2015-16. I am not impressed by the big investments happening in this market today. I want to see return on investment, which is not happening," IKEA India Property and Establishment Manager Staf Lenders said at Technopak Retail Summit in New Delhi.

He said India lacked basic conditions like infrastructure, supply chain, FDI regulations, value added taxes and heavy import duty, required for retailers to succeed. Besides, soaring land prices and human resource are some of the other major issues.

Lenders also accused the government of being partial to local players and considering only sectors like electronics and sports goods for relaxing FDI norms.

"If a big Indian company opens a large number of retail stores that also affects the small businesses, then why FDI norms are followed for foreign players," he said.

Commenting on the local players' business model, Lenders said: "I cannot understand how an Indian company can open 200 stores in one year? May be you (India) are just copying the mistakes of others. Also the local companies, including Reliance do not know how to respect customers."

The Indian retail market is estimated to be at $ 330 billion and has attracted a lot of homegrown organised retailers including, Bharti, Reliance, Future Group, Aditya Birla Group, as international players wait for FDI relaxation and announce cash-and-carry operations like Wal-Mart.

Despite all the issues, Lenders said, IKEA was ready to launch its retail operations in India as soon as FDI was allowed. The company would take 3-4 years for land acquisition and training of personnel before becoming fully-operational.

"Time and again I keep on meeting officials at different levels in the government, but I can not understand why they (government) cannot open FDI," he said.

The company also expects a dramatic increase in local sourcing and employment once it starts retail operations here. Currently, it employs 1,00,000 people in India for sourcing. IKEA has around 265 stores across the world, while its plan for India was to open around 20 stores over a long term.

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