IKEA Postpones Entry to India

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Jun. 12 – Swedish company, IKEA, says it is postponing plans to open in India until the country allows full foreign ownership of single-brand retailers.

Talks between the company and the Indian government to lift restrictions have fallen through and led to the cancellation of the US$1 billion plan to open 25 showrooms nationwide.

“As far as retail development in India is concerned, the IKEA Group has postponed any decision to enter the market due to the fact that regulations have not been changed to allow IKEA to fully own its retail operations,” the company wrote in an email.

IKEA is the largest furniture retailer in the world with more than 300 stores in over 40 countries. The company has been eyeing India’s huge population as an untapped market for international retailers. The Indian retail economy is estimated to be worth more than US$350 billion with organized retail taking 5 percent of this figure.

Currently, India only allows up to 51 percent foreign investment in single-brand retailers and requires investors to have an Indian partner.

The company was waiting to see if restrictions would be changed once India’s  newly elected leaders came in office but commerce minister Anand Sharma said that FDI rules are unlikely to be revised in the near future.

“India is still seen as a long term potential market for IKEA and we will continue to press for changes to the existing regulations,” the company said in a statement. “If and when changes are made to the foreign direct investment regulations allowing 100 percent ownership of single brand retailers then IKEA will reconsider its position.”