Swedish furniture manufacturing giant Ikea which recently completed its one year journey in India has now witnessed surge in annual pretax earnings despite of the higher cost values. The company started its venture by establishing a format store in Hyderabad a year ago. At present, the turnover of the company is held up while the funds and online trade venture related pricings shrunk the margins.
ET reported IKEA brand owners announcing that its pretax profit increases by 5 percent to 1.79 billion Euros in the last couple of months. The company has already localized its strategies and as set up five-six smaller format stores in Mumbai, it scouted in ‘The City of Dreams’. These smaller outlets range from 50,000 – 150,000 square feet which is a digression from its flagship store stretch which is up to 500,000 square feet. It is also expected to offer a more limited line-up of products and services.
The company would expand its scouting expanse to other locations in India if this new experiment works well.
The furniture manufacturing and designing major is striving to implement new shopping habits and maintain its hallmark budget values among raw materials and other costs.
IKEA is investing in the new outlets and format stores while looking forward to establishing 25 sites by 2025. However, the next store is expected to begin its operation in Mumbai by 2020. The outlets are considered as experience centers to boost the customers within the city limits and also take charge of India’s online sales segment which is currently dominated by Flipkart and Amazon, reports the Economic Times.
The status of the firm is reportedly stable in spite of the constraints on the gross margin and other investments. The gross profit shrunk to 18 percent from 18.8 percent. The operating profit was slowed down to 7.3 percent from 7.9 percent while the costs for packaging and other needs such as logistics and e-commerce business rose sustainably.
The company is planning to step faster into the digital innovations to meet the customers digitally, through smart phones and the established experience centers as well.
The company is making an effort to step ahead of the soaring competition in the industry by offering better accessibility of stores. It has invested around 175 million Euros to increase the quality of the product portfolio.