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India's furniture market, valued at around $25.7 billion in 2016, is projected to cross $32 billion by 2019. The industry is anticipated to grow at a brisk pace in the coming years, due to India's expanding middle class and the increased splurges on household furnishings. The ongoing trend is that Indians mostly buy their home-furnishing products from family-run shops that are located nearby. This is mainly due to the absence of any dominant players making the Indian market mostly fragmented. But now, to bring about a shift in that kind of approach, Swedish home furnishing retailer, IKEA has opened its first brick and mortar store in Hyderabad (also known as City of pearls) named IKEA HITEC City, 75 years after it was first founded by Ingvar Kamprad. For the uninitiated, IKEA has been one of the world's largest furniture retailer which offers a wide selection of relatively inexpensive, yet stylish and modern furniture. Add to that, the furniture made and sold boasts of maximum flexibility which add to the overall customer satisfaction.

Having a diversified presence all over the world, IKEA didn’t have any presence in India until now. According to Patrik Antoni, IKEA's deputy country manager for India, India’s market is very different compared to markets of Sweden or Portugal. He is of the opinion that here the same product is used for a variety of activities. Say, for example, bedroom. It is being used to sleep, to have dinner, to store products, watch TV and a lot more, unlike foreign markets where a bedroom is only used to relax and store things without doing any such activities. To meet these kinds of expectations, IKEA opened its newly built store which received an overwhelming response on the day of its opening (August 9, 2018). Over 40,000 enthusiastic shoppers showed up on its inaugural day thus leading to infuriating chaos, long queues to get inside, and an extended traffic jam outside.

A question might arise as to why Hyderabad was chosen and not any other city or state. The reason behind this is a man named Pradeep Chandra, Principal Secretary (Industries) at the time. Initially, when IKEA planned to enter India, back in 2013, it was aiming for a place in either of the 3 locations-Delhi, Mumbai and Bengaluru. But it was Pradeep Chandra who persuaded and insisted on selecting Hyderabad majorly due to 2 reasons. First, because the State government was ready to support the Furniture retail giant by making large pieces of land available to build the store. The government even proposed to set a metro station opposite the store to attract the maximum crowd.  The idea behind facilitating its operations was that the government was on the lookout for potential suppliers in Telangana in categories like sofas, bookshelves and mattresses as well as products made in new sustainable materials such as bamboo, mango, jute and other natural fibres. Another factor could be to make IKEA, which was looking for a place to establish itself in India, a part of the state’s growth story. Second, the area surrounding the store consists of professionals like IT / Banking / Finance, who belong to a high-income group and are aware of the brand. This not only provides IKEA with a considerable customer base but also adds to brand visibility as Hyderabad is said to be an epitome of cultural diversity.

What is there for the Indian consumers

After 12 long years of planning and six years after it made an announcement, IKEA’s store is finally in India. The new store is unlike the stores overseas and Indian consumers stand to benefit a lot from it. Spread over an area of 13 acres, the new store would remain open throughout the year from 10 am to 11 pm. Catering to a diverse audience, the brand offers a wide range of products which are both local and affordable. 7,500 products are displayed from utensils, potted plants, and chandeliers to beds, cupboards and storage boxes, out of which nearly 1,000 of those are priced at less than &undefined;200. This has been done to avoid missteps made in Australia and China, where its initial higher pricing discouraged potential customers. Keeping in mind the weather conditions and abundant choices available to the generation of today, IKEA has come up with a lot more colour options considering the dusty and humid environment. Talking about luxury, IKEA has a 1,000-seater restaurant which is its biggest globally so far. Half of its restaurant menu consists of vegetarian options, including idli and sambar, samosa and vegetable biryani. To give you a feel of what price it would be, the restaurant sells samosas at an attractive price of &undefined;10, besides its signature cinnamon buns, coffee, and meatballs. It is also said that these food items are obtained from about 25 vendors, mainly women-led social enterprises giving a major boost to the domestic manufacturers. Not only this, but the restaurant area also houses a kids’ play area named Småland where customers can leave their children while shopping.

Furthermore, with an aim to host close to 7 million visitors each year, IKEA has employed 950 on-ground staff and 1500 workers indirectly in services which are a mix of internationally experienced workers and locally recruited. Yet another unique aspect of IKEA has been selling its products in a dismantled form, or what is commonly known as DIY-Do it Yourself. As the name suggests, DIY means to create or do something on your own rather than getting it created or done by a hired professional. In the furniture world, it means requiring to be assembled after the product is bought. But, because of lack of knowledge regarding this DIY culture in the country, IKEA will also be offering in-house and outsourced assembly, i.e. an option to pick up and avail a delivery service as well as for assistance. For this, it has collaborated with UrbanClap. As a part of the collaboration, consumers buying specific furniture from IKEA would be able to book furniture assembly services via the UrbanClap app or the website.

Impact on local players

Although Indian furniture makers, in general, are not too concerned about the entry of the Swedish brand, they have started thinking already. Pepperfry (the biggest online furniture retailer in the country) now wants to expand its physical presence from 21 stores to 45, Urban ladder (another online marketplace) is keen on paying attention to lead on the design front and Godrej Interior, one of the leading furniture makers in India, is planning to launch its own e-commerce website. While the Local retailers like Future Group (Home Town), Landmark (Home Centre), and Shoppers Stop (Home Stop) are still struggling to get the store format right, Chief executive of IKEA, Peter Betzel said the company is keen on trying multi-channel sales which includes large format (part of a chain of stores), small format (offering only part of their product range), and online selling. Furniture retailers that have little or no differentiation today would be hit the hardest as most of the products are imported at low cost whereas IKEA, a foreign brand considers low cost but differentiated, value for money product as its priority. With the kind of knowledge and expertise IKEA has, it can take over smaller independent shops of furniture that have been leading the Indian furniture marketplace for the past so many years.

Prospects 

With the continued focus on affordability and accessibility, IKEA will soon launch a store in Mumbai in 2019, which will be followed by Bengaluru and Gurugram in the upcoming years. It plans to open retail stores in more than 40 cities across the country. But the major challenge for the company will not be offline but online. Considering the impact Amazon, Walmart, Flipkart has had over past so many years, IKEA needs to build a robust online presence for attaining success in the long term. It has started to think it this way, though, by experimenting smaller showrooms equipped with high-end touch screens which give the customers an idea of how the furniture will look in their homes

Another challenge for IKEA would be being profitable. In a country like India, where most of the customers belong to middle class, are price sensitive and tend to prefer buying furniture from small, family-run shops (available in abundance) whose owners visit homes and then build customised furniture from scratch, profitability will take some time.

The lessons learned from two decades of operation in the Chinese market, overcoming of significant regulatory hurdles and visiting and interviewing over thousands of people to know about their preferences, needs, household sizes and structure has set the stage for IKEA in India. It now knows that region-specific knowledge and the ability to provide products that are customised to local needs, dreams, aspirations are the mantras for success in Asia’s third-largest market. If it implements all or even some of the measures mentioned above, it has the potential to create a long-lasting impact on India’s household furniture industry in the years to come.

 

References

Economic Times. (2018, August 10). IKEA is now open for business in India: Here's what it offers. Retrieved from https://economictimes.indiatimes.com/industry/services/retail/IKEA-opens-its-first-india-store-tomorrow-heres-what-it-offers/articleshow/65319086.cms

Khanna, S. (2018, August 21). IKEA’s real challenge in India lies online. Live Mint. Retrieved from https://www.livemint.com/Companies/evTuanw9EhdWbzpUJkswUJ/IKEAs-real-challenge-in-India-lies-online.html

Qingqing, C. (2018, August 21). IKEA’s experience in China may help it grow in India. Global Times. Retrieved from http://www.globaltimes.cn/content/1116361.shtml

Richi, P. (2018, August 10). Why Hyderabad was chosen by IKEA for its first India store. The News Minute. Retrieved from https://www.thenewsminute.com/article/why-hyderabad-was-chosen-IKEA-its-first-india-store-86330

Sharma, P. (2018, August 18). Overcrowded IKEA Store in Hyderabad Has Found a Way to Calm Down Indians. News 18. Retrieved from https://www.news18.com/news/buzz/overcrowded-IKEA-store-in-hyderabad-has-found-a-way-to-calm-down-indians-1848797.html

Sridharan, V. (2018, July 17). Can IKEA make it big in India?. DW. Retrieved from https://www.dw.com/en/can-IKEA-make-it-big-in-india/a-44710040

The News Minute. (2018, August 9). IKEA opens its first store in India in Hyderabad, 10 things to know. Retrieved from https://www.thenewsminute.com/article/IKEA-opens-its-first-store-india-hyderabad-10-things-know-86223

Venkatesh, S. (2018, August 9). Ikea’s India Play. Outlook Business. Retrieved from https://www.outlookbusiness.com/the-big-story/lead-story/ikeas-india-play-4588

 Image source: IKEA

 

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Written By Siddharth Jain

Management Student at SSCBS, DU

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