Unlike its global peers, the world’s largest furniture retailer, the Sweden-based IKEA is not going to depend on the well travelled Indians to shop in its stores in the country.
Come next year, the company will launch a mega marketing campaign to introduce the brand to first time buyers. “We will not rely heavily on the global consumer, we will begin our marketing campaign in the mid of next year; we will make sure that people know us by the time we launch,” said Patrik Antoni, deputy country manager at IKEA India on the sidelines of India Retail Forum.
This will be the first time that a foreign brand will campaign as a brand building exercise. In the past, industry experts have pointed out that major global brands, mainly in the apparel segment have not invested in advertisements tailored to capture first time customers.
After signing a land deal in Navi Mumbai for more than Rs 200 crore for its maiden store in the city, Antoni said the launch in Mumbai will be in the middle of 2018, about six months after the launch in Hyderabad. It is also aggressively scouting for land in the national capital region or NCR and Bengaluru.
The company has already announced its goal to open 25 stores by 2025. As ambitious as this might seem, international brands have found real estate a major challenge, hindering pace of growth for players like Inditex and Forever 21.
“Yes, we find real estate cost expensive but our view is long term so we feel that land prices will increase, we might as well lock in the locations that fit our bill,” Antoni said. All our locations are well connected by public transport, roads, bridges etc because shopping in IKEA is an experience, he added.
Retailers typically find high streets too expensive and settle for the top performing malls. Although IKEA’s DNA is to own more than 300,000 sq ft shop floors in peripheral regions of cities, where people drive down once in a while for bulk purchases, there are doubts whether Indians will adapt to this culture.
“We started evaluating an online strategy last November and we will have some delivery centres in main city areas but I would not like to say whether those stores will be our own or in partnership,” Antoni said.
Will malls be an option? “Yes, should we not have to compromise on the size of stores,” Antoni reiterated. But to allot such a large format store to anchor is impossible for malls sized approximately 1 million sq ft. In India, at the moment, only one mall is sized 2 million sq ft. Each of the top 10 performing malls are about a million sq ft or thereabouts.
Not only is IKEA adamant about holding on to the size of stores but also its product mix. Most international brands have had to pander to the local pallete in some manner but as Antoni pointed out, the price IKEA will offer will be its only USP. “We will price our products much cheaper than any competition, I cannot say by what percentage but certainly much more competitive. We have our signature style, Apple does not tweak its product to suit a certain taste,” he added.
Still, in order to achieve the cost advantage, the company is re-strategizing its sourcing norms. According to Antoni, currently IKEA has 52 suppliers in the country and the aim is to source 40% of the total value of sales locally. But large part of the game plan also depends on materials.
“We can take advantage of the textile industry, mainly cotton products but wood is more challenging,” Antoni said. We are building our sourcing network simultaneously but our sourcing capabilities will have to supply to our global markets, not just India, that’s how it will be cost effective to us, Antoni added.