It was almost a decade back that Swedish furniture major IKEA first thought of entering India. With FDI regulations being eased and the Make in India programme gaining momentum, it was just a matter of time before things moved beyond the concept stage — a very calculated move considering that India is where multinationals are looking for growth opportunities. It has been over six years since the idea caught steam and IKEA finally inaugurated its first-ever store in India at Hyderabad on August 8. The four lakh sq ft store houses over 7,500 products including its global bestsellers. Its group CEO Jesper Brodin says, “Many think that IKEA is good for India but I will point out that India has been good for IKEA too.” The company feels that the learnings it has gathered from the country have been unique and will only help the brand grow in India as well as other markets.
Upping the game
India’s indoor furniture market grew at a CAGR of 10.9% between 2012 and 2017, and is forecast to grow at 3.8% between 2017 and 2022, according to Euromonitor International. India’s home furnishings space, traditionally dominated by local and unorganised players is expected to become more organised with IKEA playing a significant part in aiding the change.
Sowmya Adiraju, research analyst at Euromonitor International, says, “The entry of IKEA has brought in a renewed focus on the home furnishing industry in India and with its motto of Furniture for All, it is expected that the demand for home furnishing products will stir up.”
IKEA’s main agenda for the country is to be affordable which is, ironically, also its biggest challenge. In a country where value for money plays an important role, the company wants to accomplish the task without compromising on quality. “Yes, keeping the fine balance between the two is difficult but we are here for long; as volumes pick up, profit will come too,” says Ulf Smedberg, country marketing manager, IKEA India.
Staying true to the IKEA concept, the company has brought in minor changes to suit the Indian customer sensibilities. Sourcing from Indian partners has its own advantages and since the company has been doing so for years, partners are aware of IKEA’s quality and design standards. “As volumes and business grows, the sourcing and distribution becomes more dynamic,” highlights Bimal Patel, manager, distribution operations at IKEA India, while adding that the company is sourcing 350 million euros worth material globally from India already.
With a plan to start its e-commerce business by next year, the company will focus on its own website rather than partnering with others, as of now. In addition, the aim is to have 25 touchpoints by 2025 across the country to reach as many customers as possible. “Apart from the standard IKEA stores, these touchpoints will help customers experience products and order online,” adds Smedberg.
Challenges and competition
IKEA’s DIY (do it yourself) rule followed globally will be altered for India, bearing in mind the consumption habits of Indians. The company has employed more than 150 workers at the Hyderabad store to help assemble items bought at the store. “Consumer experience is more important than ever as both traditional and online furniture retailers are striving to differentiate themselves in a challenging and crowded market,” says Harsha Razdan, partner and head — consumer markets, KPMG India. The Indian consumer demands value and convenience with more options in terms of design and pricing and hence preference for online shopping is increasing. The DIY concept is expected to take some time for consumers to embrace. Further, DIY requires educating consumers on the usage of tools prior to purchase.
Rajiv Srivatsa, CPTO, Urban Ladder notes that from the family carpenter’s custom-made furniture to beautiful furniture designs at a click, India has come a long way in a short time. “However, there is a flipside to this story — only one in five people in India shop online today,” he highlights.