IKEA India Expansion Targets Smaller City Stores

Swedish home furnishings giant IKEA is reshaping its India growth strategy by prioritising smaller urban store formats as it works toward profitability in the country. The retailer plans to open 25 small and medium-sized stores over the next four to five years, part of a broader expansion aimed at improving accessibility for city residents and strengthening its retail footprint.

The company has set an internal target of achieving profitability in India by the end of the 2028 financial year, following several years of heavy investments in large-format stores, supply chains and digital infrastructure. Executives say the next phase of expansion will combine physical retail spaces with online sales, allowing the brand to reach customers across dense metropolitan regions as well as emerging urban markets.Unlike the brand’s traditional warehouse-style outlets, which can span hundreds of thousands of square feet, the upcoming stores will be designed at a smaller scale and located closer to residential districts. The new outlets are expected to range from approximately 27,000 square feet to over 200,000 square feet depending on location, reflecting a shift toward flexible store formats suited to city environments.

Industry analysts say this strategy reflects changing patterns in urban retail and mobility. Large suburban stores require significant travel time for shoppers in crowded cities, whereas compact formats within city centres can integrate more easily with mixed-use developments and public transport networks. As India’s urban population continues to expand, proximity and convenience are becoming increasingly important factors in retail planning.The company’s India operations have grown steadily since the opening of its first store in Hyderabad in 2018. However, high upfront investments in real estate, supply chains and fulfilment centres have delayed profitability. Recent financial filings show that losses widened to over ₹1,200 crore in the last fiscal year, underlining the scale of investment required to build nationwide operations in a complex market.

To improve margins, the company is focusing on multiple operational changes. These include increasing local sourcing of furniture and home products, improving store efficiency and expanding omnichannel capabilities that combine physical stores with digital ordering and delivery services. Executives say such measures will help reduce fixed costs while supporting higher sales volumes.Urban development experts note that the expansion of large global retailers into India’s city centres can reshape local commercial real estate dynamics. Compact retail formats allow international brands to enter dense urban neighbourhoods where large plots are scarce but consumer demand is strong.For India’s growing home furnishings market, the company’s new strategy signals a shift toward accessibility and scale. As cities continue to expand and housing demand rises, retailers focused on home interiors and furniture are increasingly adapting store formats to match the realities of urban living.

If the expansion plan succeeds, the retailer could establish a far broader presence across India’s urban landscape while positioning itself to achieve financial sustainability in one of the world’s fastest-growing consumer markets.

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IKEA India Expansion Targets Smaller City Stores