50% of the company’s turnover is from furniture and 50% from accessories
Ikea, known for its large-format stores (spread over four lakh sq ft) globally, has customised its retail strategy for India. Kavitha Rao talks to Devika Singh about the company expanding ‘cautiously’ in India, its plans to launch smaller stores in the cities, its omnichannel retail strategy, and more.
How differently did consumers shop during the pandemic? What tweaks did Ikea make to its offerings?
The home took centre stage during the pandemic as consumers stayed indoors. We saw the demand for work-from-home, kitchen and hobby-related segments such as gardening rise. Consumers also started shopping online — our sales from the platform grew as much as 7-10 times during the peak period. Now, this surge has steadied; we are seeing two-three times the growth as compared to the pre-Covid period. Earlier, e-commerce contributed 9-10% of our sales; this has now gone up to 20-30%. We supported this growth by launching services such as online personal shopper, remote planning, and also revamped our planning tools.
Ikea is planning to launch stores in two formats in India. How different will these be in terms of location and inventory?
Our strategy is to give consumers a choice in terms of how they want to shop. The intent behind the small stores, which will soon be opened in Mumbai, is to make it easy for customers to reach us. There are customers who start their journey online, but would like to purchase the product after experiencing it. Travelling to Navi Mumbai might not be feasible for them, as it is a long drive. However, another set of consumers would like to spend half a day enjoying the experience of shopping at a large Ikea store. This is how we are thinking about our presence in any mega city in India. We have close to 9,000 items in our large stores, and all of those are also available online. In the small-format stores, spread over two lakh sq ft, we will offer a limited range. For instance, if a sofa set has six colours, only one of them will be displayed in the smaller store.
We had launched our e-commerce platform in Mumbai prior to the physical outlet, and it has been received well by customers. This is a part of our omnichannel approach for India, and very different from the other markets we are present in. It gives the customer an opportunity to get familiar with the brand before we launch the retail outlet. We are evaluating if we should adopt a similar strategy for Bengaluru. However, we are still in the start-up phase in India, and want to be cautious about our expansion. Currently, we offer online shopping in Hyderabad, Pune and Mumbai. We can quickly launch a pan-India e-commerce channel, but the question is whether customers, who are not aware of our brand, will buy products online. Also, several products need assembly and installation services. For a pan-India online platform, we would also need to have a fulfilment network across the country. Keeping all of this in view, we are expanding one step at a time, as we build our network and create remote planning tools and capabilities.
How challenging is it to crack the furniture delivery market here?
It is, of course, challenging because in most markets across the world, we charge for delivery. Similarly, consumers in other countries instal Ikea furniture on their own. But India is a different market; there is a need to work on services such as delivery and installation. Here, we are not trying to make money through these services, but ensuring good customer experience.
A large part of Ikea’s sales in India comprises lower-priced items. How are you driving demand for the big-ticket products?
Although, quantitatively, we sell more accessories, furniture is a big contributor to our overall sales turnover. We bifurcate our offering into four categories — home furnishing accessories, small furniture, large furniture and then complex systems such as kitchens and wardrobes. If you look at complex systems, it is a one-off buy for Indian consumers. They ideally visit Ikea two-three times a year, but buy large furniture only once. Also, as a new brand, consumers will test and try our products by buying accessories and then move to large furniture. Broadly, about 50% of our turnover is from furniture and 50% from accessories.