IKEA is a Swedish-founded multinational group that designs and sells ready-to-assemble furniture, kitchen appliances and home accessories. With an investment of Rs 1000 crore, Ikea the largest furniture retailer in the world will inaugurate its first Indian store in Hyderabad this month. That’s happening six years after the company got permission for single brand retail in 2012 in India. Let’s see what took them so long and what their future plans are.
- Ikea’s 6 years research before launching the first store
Since 2012, Ikea has invested a lot of time, resources, and money in understanding the market before setting up the first store. 800 houses were visited across the country, to understand the needs of Indian consumers. Some of the major findings are First, Indians are very proud of their homes, as they are of their family, food, and children. Second, India is extremely advanced when it comes to digital communication, and people expect to find everything on their mobiles. So, IKEA may soon introduce VR and AR. Third, People are interested to find out more about DIY model, which has to be altered for Indian consumer to ‘assemble-on-premises and ship the next day option’. Fourth, copy-paste attitude of business model may not be successful in India, it needs to be localized. And Fifth, Indians love for food. IKEA has mined the insights from its thorough study to plan its store design and layout, decide on its product mix, and customize its offerings to suit a uniquely Indian aesthetic and need.
- Challenges faced in India to set up the business
Ikea has faced many challenges. Few of them are Design of their furniture, where they had to bring the local flavor while maintaining their image and exclusivity. ‘Do it for me’ attitude of consumers has been well understood and twist their model to Indian needs. Competition could come from anywhere be it a local retailers or big names in this field. Branding the name IKEA itself was a challenge. Although Ikea plans to gradually ramp-up local sourcing, one challenge to keeping prices low will be taxes, the one of the biggest challenge is (import) duties.
- Target Customer
There is no particular target audience in terms of age or income and would try to approach the market on a need basis. The trick is to make everybody feel welcome, they want to be inclusive. Majority of India is families with kids. But Ikea serve single youngsters too. Be it with thin wallets or hefty, traditional or trendy, needy or wishful, IKEA would have something for each one of us.
- Ikea will also follow Omni-channel approach
Ikea will focus on physical stores, complemented by a multichannel approach to create many offline and online touch points for customers. It is debatable that would it be their own Ikea.in platform, as that gives them better hold over their quality of service or a tie-up with e-commerce platforms like Flipkart (now Walmart) and Amazon India or both. E-commerce in India will be roll out in 2019.
- Make in India for India
IKEA has a very long term view on India, and it will be expanding the supplier base and making more in India. IKEA started sourcing from India more than three decades ago and has 53 suppliers that accounts for nearly 3% of its global products sourcing. By 2025, it hopes to employ 50,000 people in the country, open three distribution centers and source 30% of IKEA India’s requirements from within the country. And IKEA is about securing low prices for many people. So for that, they need to set up (local) sourcing. That’s what IKEA has been focusing on – sourcing in furniture and also food. So about 90% of their food, for instance, will be locally-sourced. In order to alter its DIY strategy, and provide service to it consumers, Urban Clap has become the furniture assembly partner for them.
- Indian Consumers acceptance to ready to assemble model
Ikea is open for both models be it ready to assemble (DIY) or service providing for assembling the product for customers. There will be customers to whom IKEA will provide everything, too. And then there will be customers who will buy one chair and will want to try (assembling it) themselves. There are mix set of consumers, few want assemble product delivered at their doorstep and few would definitely love to ‘do-it-yourself’. There are many people who have got exposure to Ikea store outside India they would like to keep the exclusivity of brand alive and enjoy doing it.
- Brand Building and Promotion
It was strategized, building the strong brand image even before launch, Ikea has done enough to create brand awareness and provide brand experience to the potential customers. We all know Ikea is super powerful when it comes to market the brand be it social media or TVCs or print media. For marketing too, IKEA will move with local language in print and TV, in addition to online route.
- Message to Indian Furniture Retailers
Furniture retail is not easy in India. Local retailers like Future Group (Home Town), Landmark (Home Centre), and Shoppers Stop (Home Stop) are still struggling to get the format right while a Reliance Retail’s Reliance Living has already exited the business. Furniture retail is no longer a priority for most of these big players today. Retailers have to think like Ikea and look at all parts of the value chain. It is not just buying and selling that will help in making it a success. They should take lessons from Ikea, who has paid adequate due diligence before entering India, where merely 4% of the ₹72,000-crore furniture category is organized, rest is still very fragmented
- How IKEA will change the Home Retail Space?
In a country where three-fourths of the furniture industry is still dominated by standalone stores and carpenters, IKEA’s entry is likely to cause quite a disruption. IKEA will bring the self-help furniture-assemblage culture to the new age Indian household. The shift in the nature of consumer behavior in India has led to a marked increase in demand, which new and indigenous furniture brands are rushing to cater to. Ikea will make consumers more interested in their homes. Ikea research has found that people are looking for small things that make their life easier – in terms of storage, kids’ space, etc. That’s the kind of solutions Ikea hope to provide Indian consumers with.
- Ikea’s mantra to success in India
To sum up, first key is Localization. After research only Ikea conclude the range of 10,000 and more products and put it together in a way that suits the local market. It is not tailor-made products that are needed but tailor-made solutions. Second, is something for any or every home in India, ie. to maintain the minimum entry price points covering huge range of product, to avoid missteps made in Australia and China, where its initially higher pricing discouraged potential customers. Third, is to provide cultural shift to Indian consumer by DIY experience. Fourth, Multiple customer touch points, be there where customer willing to spend their time.
Points to Ponder:
Why since 6 years none of the big retailers actually focus and create opportunities to capture this market before Ikea launch?
Written by – Deepshikha Malav
Edited by – Dhwani Swaminarayan