IKEA makes a strong debut in India with a tweaked product line-up and affordable price points.
IKEA makes a strong debut in India with a tweaked product lineup and affordable price points.
ISwedish KEA's grand India plans are finally taking shape. In October, the
home furnishing retailer celebrated the ground-breaking ceremony of its store in Bengaluru, the third one in the country.
The world's largest furniture retailer committed to invest around Rs 1,000 crore in the new retail store. It also added that it would set aside Rs 2,000 crore for its operation in Karnataka on a long-term basis. The 5,00,000-sq-ft Bengaluru store, planned to open in 2020, is expected to employ around 1,000 people.
The work on the Bengaluru store comes close on the heels of IKEA throwing open its first Indian outlet in Hyderabad this August. Six years after it was first planned, the 4,00,000sq-ft Hyderabad store marks the first step by the Swedish company in fulfilling its ambitions in India. IKEA's second store is set to open in Mumbai soon. The furniture retailer has so far invested Rs 4,500 crore in India of the committed 1.5 billion euros (over Rs 12,150 crore).
"India is an exciting country and emerging market with a lot of spending power, growth potential and good GDP. Besides, it is a young country. We want to serve everybody to have a beautiful, sustainable, cosy and affordable home," notes IKEA India CEO Peter Betzel.
Part showroom and part warehouse, IKEA stores are sprawling outlets that are far away from city centres. Each outlet contains mazes of giant bins and floor-to-ceiling shelves. From beds and sofas to cutlery and showpieces, the Swedish furniture retailer stocks almost everything and offers a wide range of home-furnishing solutions. Moreover, with ample car-parking space and a large restaurant serving Swedish and Indian delicacies, IKEA stores promise memorable experience for customers.
Besides, with solar panels, LED lights, rain water harvesting, water treatment plants and modern waste management systems, all IKEA outlets make it a point to include ecofriendly solutions in its day-to-day operations. The company is also in the process of using electric vehicles for delivery of furniture to customers and for transportation of its employees.
Founded by Ingvar Kampradin in Almhult, Sweden, in 1943, IKEA - an acronym derived from the founder's initials (Ingvar Kampradin) and his hometown (Elmtaryd Agunnaryd) currently operates 423 stores in 50 countries with revenue of 38.3 billion euros (over Rs 3,10,000 crore) in 2017. The home furnishing company, which has its global headquarters in Leiden, The Netherlands, witnessed around 94 crore customers visiting its outlets across the globe and more than 230 crore online visitors in 2017.
IKEA's retail venture in India began this year. However, the company's association with the country goes back to over 35 years, with
"India is an exciting country and emerging market with a lot of spending power, growth potential and good GDP. Besides, it is a young country."
PETER BETZEL, CEO, IKEA India
IKEA sourcing a large number of products from the country for its global stores. The company has been working with seven suppliers in India and is looking to sign up many more suppliers. The home furnishing company aims to maximise local sourcing from India in the long term to make its products more affordable.
Having entered India, the Swedish furniture retailer finds the country a market quite unique from the rest of the world. In fact, IKEA's employees visited about 1,000 homes in various cities to understand how people live and what they need. They found that Indian families spend a lot of time together, with relatives visiting frequently. Indian households generally favour heavier and bulkier furniture compared with lightweight and lean furniture preferred in different parts of the world. "In India, a lot is driven by the price of the goods and not so much about the quality," notes Anil Talreja, a partner at Deloitte's India arm who works with retailers.
All these typical Indian characteristics have forced IKEA to rethink its product line-up and store operations for India. Although the Hyderabad store has the classic IKEA layout, what is on display there is somewhat different. Given India's lower income levels, IKEA's stores in India feature hundreds of products - from dolls to spice jars - priced between Rs 100 and Rs 200. In some cases, IKEA is selling a product in India for less than it charges elsewhere.
In other instances, the company is tailoring products for local tastes. For instance, most Indians do not use knives to eat and primarily want spoons. So, the company has ditched its children's plastic cutlery packs and instead sells four spoons for Rs 15. Besides, the company has added more folding chairs and stools that can serve as flexible seating, given frequent visits by friends and relatives in India. The company has also been selling some very unique Indian products, such as chapati-maker and masala boxes.
On an average, Indian women are also shorter than Europeans and Americans. So, the company has decided to showcase some cabinets and countertops at lower heights. More- over, IKEA's model bedroom squeezes in a child's bed amid all the other furniture, as children often sleep in the same room as their parents until they are in elementary school.
Besides its big format stores, IKEA will also be creating a multichannel experience for its customers. As a part of the strategy, IKEA is planning to focus more on digital channels and expects online growth in the Indian market to be higher than the global contribution in its total e-commerce sales.
IKEA seems to have adopted the right strategies to crack the Indian market. The home furnishing company is betting that crores of middle- and upperclass Indians will drive its growth in the country. IKEA's bets do not appear to be misplaced. Most of India's 130-crore population spends around Rs 2,13,000 crore a year buying furniture, lighting and household items, like bed linens and cookware, notes Technopak. The leading Indian retail consultancy further adds that with a growing middle class, the Indian furniture market is pegged at about Rs 71,000 crore.
At present, the company is locally sourcing 20 per cent of the products and planning to increase the local content to around 50 per cent in a few years. "We are also planning to have meeting touch points where we can interact with customers and make them experience our products," adds Mr Betzel.
IKEA has been gearing up to tap huge opportunities available in India. The company already has more than 55 suppliers and 45,000 direct employees. By 2025, the company is looking to have 25 stores in India, some of them in a new, small format. Having made a good beginning, IKEA is looking to reap rich returns from India in coming years.
Recently-opened IKEA store in Hyderabad
IKEA has stocked some products priced between Rs 100 and Rs 200 to tap low-income customers.