Eyeing the promising Indian market for almost a decade, Swedish home furnishing brand IKEA is all set to open its first Indian store in Hyderabad, come 2017. In an interview with Meghna Sharma, IKEA country marketing manager Ulf Smedberg shares the company’s plans for India and how relaxation in FDI is helping it become the first-ever single international furniture brand to enter the country. Excerpts:
With a Rs 500 crore per store investment plan, how do you hope to address the real estate problem in metros like Mumbai and Delhi-NCR? Will we see emergence of smaller concept stores to increase footfalls across cities or will IKEA stick to its big store template?
The most difficult thing in India is to find a piece of land. And we are aware of the fact that our projected investment is bound to go up. But that isn’t going to hamper our plans.
The most important thing is to let people experience IKEA and hence, our focus is to open big IKEA stores like we do across the world. However, before the launch in a particular city, we will open smaller, experience stores so that people can come and get a feel of our products, apart from the main store. However, we are not sure if we will continue with such experience stores post launch.
IKEA is also planning on an e-commerce presence eventually. What is going to be your strategy to address tough online rivals which are cheaper as they don’t follow the inventory model?
We believe in delivering the full experience of IKEA because the store is not about furniture. We are a restaurant, a Swedish sweet market, a children’s activity zone and apart from all this, we also have weekend activities. These experiences are what connect the consumer with the company. We sometimes call an IKEA store an amusement park.
That doesn’t mean e-commerce isn’t important for us, but like I have said before, we are currently focussing on setting up stores and have them running.
How did the ease in the FDI sourcing policy impact IKEA?
IKEA first came in with the purpose of launching in India in 2007, but FDI wasn’t opened up then. It was in 2013 that we first got licences to start. So, only after 2013 did we start to rethink our marketing and entry strategy and started studying land, Indian demographics etc. We are very happy that we are the first single brand retailer to get an approval to enter India.
IKEA currently sources 300 million euros worth of goods from India and plans to double this number by 2020. Will we see IKEA setting up factories in India, or will you continue with suppliers?
We will continue to source our products from India. However, now we will focus on different styles and materials to broaden our export offers. The idea is to not only source but to also offer products at good price in India. So, the more local sourcing we do, the cheaper will be our products. But we want to build big capacities so that we can also export these items. We want to sell ‘Made in India’ in India, apart from other countries.
The supply chain in India is strong and very supportive. We currently work with 50 suppliers, particularly textile ones, and are looking at more. We recently got on board a carpet supplier from Telangana. IKEA does have factories around the world, but we don’t know yet if we will set up factories in India. Having said that, we are always open to opportunities.