International Joint Ventures and Merger & Acquisitions

Impact of IKEA Entering in India

August 20, 2018

After 12 years of wait and groundwork, the Swedish home furnishing giant IKEA is all set to make an incredible entry in India although it got approval from

After 12 years of wait and groundwork, the Swedish home furnishing giant IKEA is all set to make an incredible entry in India although it got approval from the Central government for its Rs 10,500 crores investment plan five years back. IKEA is opening its very first store of India in Hyderabad’s Hitech city to redefine and pace up the expansion of Indian’s organized furniture market.

After understanding the needs and requirements of Indian market, IKEA has planned to enter with a very clear-cut strategy of Affordability & Accessibility. After Hyderabad, IKEA is looking forward to launch stores in Mumbai, Bengaluru, Delhi NCR, Ahmedabad, Surat, Pune, Chennai and Kolkata.

Why IKEA chose Hyderabad?

The man who made IKEA choose Hyderabad as their launching pad in India was Pradeep Chandra (Principal Secretary Industries). He personally got in touch with IKEA’s CEO Jesper Brodin and convinced him why Hyderabad would be the best pick for IKEA’s first store in India. Pradeep Chandra helped IKEA in land allotments and permissions and alongside promised a potential metro station opposite the store.
What special does IKEA has in store for Indian customers?

  • Furniture retail is an awfully convoluted market in India. 90% of the furniture marketplace are unorganized and comes under the category of small or medium scale industries. Indian furniture market is very pocket friendly but fragmented. Swedish furniture retailer IKEA, after all the research decided to offer the lowest possible price to Indian customers along with an aesthetic experience.
  • IKEA visited 1000 houses in India to understand how people live and what they use. To match the customer’s needs IKEA has localized and tweaked its products. So now, you can get local items like spice boxes, tava, pressure cookers, idli makers, etc at affordable prices in IKEA easily.
  • IKEA is planning to become one step solution for all your furniture needs- be it office or home. Taking into account the price sensitivity of Indian customers, Indian IKEA store has almost 1000 products under the price range of Rs. 200. It has wide range of products in kitchenware, dining and bathroom ware too.
  • As the concept of DIY furniture is new to India, IKEA has put in place ‘a plan to assist shoppers’ corner for shoppers to help them learn the assembling of their DIY products. Moreover, to ease the process, IKEA has also collaborated with UrbanClap for furniture assembly service. They will also help in training the carpenters on UrbanClap in certain skills to become professional IKEA assemblers.

Employment opportunities

  • The Hyderabad IKEA store has an army of 950 on-ground staff which actually makes it the retail store with largest ever headcount. Beside this IKEA has provided employment to almost 1,500 people indirectly.
  • IKEA plans to employ almost 2500 employees per store out of which 1000 which will be a mix of internationally experienced workers and locally recruited while 1,500 will indirectly engage in services.
  • IKEA promotes gender neutrality and promises to employ 50% women managers and co-workers in their organization at all levels. Even today, 37% of the workforce in Hyderabad store is women out of which almost 100 girls are from the DISHA pilot project.

IKEA Restaurants

  • IKEA knows how to take care of their customers. They have opened their largest restaurant in the centre of the Hyderabad store. It has a seating of 1000 people and offers Swed-esi food i.e. food for Indian dinners with a twist of western dinner concepts.
  • The restaurant offers 50% Swedish delicacies like salmon, chicken and their famous meatballs along with 50% Indian local delicacies like biryani, samosa and dal makhni. They have limited their food menu to just 5 items for now and everything comes at a super affordable price.
  • There is a special area for kids in the restaurant. It is named Smaland and customers can leave their children here while shopping.

IKEA’s impact on Indian economy

  • IKEA came with the plan to invest Rs. 10,500 crores in India. IKEA has already spent more than Rs 1,000 crores on land, construction and capital goods for their Hyderabad store. IKEA’s CEO, Jesper Brodin announced that IKEA will increase the investment as it expands in India due to availability of great opportunities and potential market growth.
  • With the entry of big shots like IKEA and Walmart, retail fever is going to swell in the stock market in the coming years. Any business investment plan would pay off in India with the development of better supply chains and mass production. This will lead to global integration and increased tax collection in India which will positively impact the economy.
  • The market structure has witnessed a relatively slow change in view of the emergence of retail chains in recent years. Furniture retail in India is unorganized and needs restructuring. Many local retailers like Future Group (Home Town), Landmark (Home Centre), and Shoppers Stop (Home Stop) are still experimenting with format that goes well with Indian customer base. With the entry of IKEA, there is hope that small and medium retail furniture market will get a standardized structure and shape.
  • The foreign investment in retailing mandates foreign owned companies to locally source 30% of their products which benefits the local markets majorly. Currently, IKEA is local sourcing about 20 percent of its products and will increase it to 30 percent in the next five years. Moreover, it won’t be difficult for IKEA to locally source products as it was already importing textiles from local Indian vendors since many years.
  • Juvencio Maeztu, CEO of IKEA India, talks about how IKEA won’t be just furniture shopping but an experience for Indians. Maeztu said, “You bring all your frustrations and anxieties when you come to the store and leave with inspirations and solutions for your home”.
Considering the steep graph of IKEA’s global experience it seems it would be able to perform well in India. There might be challenges initially as Indians generally prefer heavy and sturdy colonial style furniture while IKEA is more into contemporary straight line designs. But IKEA is clear with their approach, the targeted audience is young generation who is brand conscious and is always on move. IKEA’s products would be fitting to their needs and pockets.

Getting into a new market is never easy but nobody knows that better than IKEA. After conquering furniture markets in different countries, India won’t be a rough brawl for IKEA. They know the price sensitivity of Indian market pretty well and the strategy of affordability and accessibility will definitely help to get a strong customer base in India.

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