Ikea built a global empire selling affordable furniture that people assembled themselves. For its first store in India, the Swedish retailer is upending its business model.
The India store, set to open next month in the southern city of Hyderabad, will feature Ikea’s first in-house furniture-assembly team, with 150 full-time employees. Ikea created the optional service after research indicated many Indians would be unlikely to buy bookshelves and tables they had to screw together.
The store will also have items tailored for Indian preferences, such as lunchbox sets to carry multiple-course meals, pans to cook Indian flatbread, and mattresses containing coconut fibres, which many Indians find cooling. The outlet’s 1,000-seat restaurant will be Ikea’s biggest to date, serving samosas and biryani as well as Swedish meatballs made with chicken or vegetables because most Indians don’t eat beef or pork.
“This is the moment of truth,” said Juvencio Maeztu, the company’s deputy chief executive, who spent the past six years preparing for the India launch. “India is an opportunity to make the next 75 years of Ikea.”
Ikea, like many big Western retailers, is betting that India’s mushrooming middle class and young population will spur demand for the company’s products. Roughly half of India’s 1.3 billion people are under the age of 25. While only a small minority can afford an Ikea bed or table set today, incomes and aspirations are rising. The country’s home-furnishings market expanded more than 90 Per cent over the past six years to $34.45 billion as of March, Indian retail consultancy Technopak estimated.
ALSO READ: Store launch delayed over construction issues, faulty fire alarms: IKEA
Among the retailer’s potential customers is Nitin Pai of Bangalore. Mr. Pai liked the Ikea bookcases he bought in Singapore so much that he looked for a local carpenter to copy the design. Until IKEA makes its debut in Bangalore, the 44-year-old hopes the company’s arrival in India will create better options. “Higher expectations will cause domestic competitors and those elusive carpenters to raise their game,” he said.
Getting India—the world’s second most populous country—right has never been more important for Ikea. Its global sales growth has slowed sharply in recent years, while its profit has been squeezed by heavy investments in e-commerce and new channels.
Ikea has considered doing business in India for years, having first established a presence in 2007 only to run into a raft of regulations limiting foreign investment in the country’s retail sector.
In the past month, the announced date of the company’s India opening has been delayed twice. A spokeswoman said Ikea still has more work to do on the store.
The Swedish retailer spent years studying India to understand what makes its residents tick. It set up a makeshift Ikea store near New Delhi and watched how invited families interacted with its products. Its employees have been on more than 1,000 home visits to figure out how Indians eat, sleep, relax and entertain. In preparation for its Hyderabad opening, Ikea flew 75 Indian employees to Sheffield last year to help open a store in the English city. It also opened a pop-up shop in a Hyderabad mall to start introducing its products to potential customers.
Many things in the 400,000-square-foot Hyderabad store will be the result of that research. Dining-room furniture will have a prominent role after home visits showed the dining table is “not only a place to eat but to discuss,” Mr. Maeztu said.
The new Ikea will have hundreds of items the average Indian can afford, including a $2.16 jewellery box, shoehorns for 70 cents each and doormats that say “welcome” in different Indian languages for about $5. Roughly 800 of the 7,500 products on sale in the Indian outlet will cost less than $3. It also will offer a sewing service so customers can buy fabric to have curtains made in the store.
Ikea spent weeks training its in-house team, which includes 75 women, to assemble its furniture. In addition to its full-time employees, the company has separately trained carpenters available on UrbanClap, a Bangalore-based online marketplace for freelance labour, to assemble its furniture.
Low labour costs mean many Indians are used to hiring carpenters to make furniture or even just hang pictures.
Elsewhere too, Ikea has been working to be more convenient. Last year it acquired Silicon Valley startup TaskRabbit—the online marketplace that connects people with freelancers willing to run errands and do odd jobs—saying it would use it to for furniture assembly.
ALSO READ: Ikea's new campaign targets buyers ahead of first store launch in Hyderabad
One of its biggest adaptations is a plan for smaller, city-centre stores. Indian cities are notoriously traffic-filled, making it unappealing to travel long distances. And consumers are used to shopping in much smaller stores than the sprawling big-box chains of the West.
When it opens in Mumbai next year, Ikea plans to set up small stores as well as a typical large outlet. Its online business will be up and running within the first year of operations, sooner than in other new markets.
“India is an opportunity to leapfrog,” Mr. Maeztu said. “We cannot penetrate Mumbai or Bangalore only with a blue box in the outskirts.”
Ikea’s main domestic competition will be the thousands of tiny furniture shops and roadside carpenters who build to order. There are only a few national furniture brands and websites.
A few miles from the Ikea in Hyderabad is Ashish Singh’s Furniture Point store. He knows Ikea is coming but said he isn’t worried. Although both venues will compete on price, Mr. Singh maintained that Ikea can’t match the quality of materials or customization his store allows.
“We deal with Indian teak; they deal with plywood,” he said.
Online furniture company Urban Ladder, a big local competitor, said Ikea’s cookie-cutter furnishings won’t work with most Indian consumers or conditions. Urban Ladder makes bookshelves with glass fronts to protect against India’s dust, and knotted rugs, which don’t require vacuum cleaners. It puts locks on some shoe cabinets for customers who store shoes outside their front door and worry about shoe thieves.
“India is one country, but it is super diverse,” so retailers need to be flexible, said Urban Ladder CEO Ashish Goel.
The India store, set to open next month in the southern city of Hyderabad, will feature Ikea’s first in-house furniture-assembly team, with 150 full-time employees. Ikea created the optional service after research indicated many Indians would be unlikely to buy bookshelves and tables they had to screw together.
The store will also have items tailored for Indian preferences, such as lunchbox sets to carry multiple-course meals, pans to cook Indian flatbread, and mattresses containing coconut fibres, which many Indians find cooling. The outlet’s 1,000-seat restaurant will be Ikea’s biggest to date, serving samosas and biryani as well as Swedish meatballs made with chicken or vegetables because most Indians don’t eat beef or pork.
“This is the moment of truth,” said Juvencio Maeztu, the company’s deputy chief executive, who spent the past six years preparing for the India launch. “India is an opportunity to make the next 75 years of Ikea.”
Ikea, like many big Western retailers, is betting that India’s mushrooming middle class and young population will spur demand for the company’s products. Roughly half of India’s 1.3 billion people are under the age of 25. While only a small minority can afford an Ikea bed or table set today, incomes and aspirations are rising. The country’s home-furnishings market expanded more than 90 Per cent over the past six years to $34.45 billion as of March, Indian retail consultancy Technopak estimated.
ALSO READ: Store launch delayed over construction issues, faulty fire alarms: IKEA
Among the retailer’s potential customers is Nitin Pai of Bangalore. Mr. Pai liked the Ikea bookcases he bought in Singapore so much that he looked for a local carpenter to copy the design. Until IKEA makes its debut in Bangalore, the 44-year-old hopes the company’s arrival in India will create better options. “Higher expectations will cause domestic competitors and those elusive carpenters to raise their game,” he said.
Getting India—the world’s second most populous country—right has never been more important for Ikea. Its global sales growth has slowed sharply in recent years, while its profit has been squeezed by heavy investments in e-commerce and new channels.
Ikea has considered doing business in India for years, having first established a presence in 2007 only to run into a raft of regulations limiting foreign investment in the country’s retail sector.
In the past month, the announced date of the company’s India opening has been delayed twice. A spokeswoman said Ikea still has more work to do on the store.
The Swedish retailer spent years studying India to understand what makes its residents tick. It set up a makeshift Ikea store near New Delhi and watched how invited families interacted with its products. Its employees have been on more than 1,000 home visits to figure out how Indians eat, sleep, relax and entertain. In preparation for its Hyderabad opening, Ikea flew 75 Indian employees to Sheffield last year to help open a store in the English city. It also opened a pop-up shop in a Hyderabad mall to start introducing its products to potential customers.
Many things in the 400,000-square-foot Hyderabad store will be the result of that research. Dining-room furniture will have a prominent role after home visits showed the dining table is “not only a place to eat but to discuss,” Mr. Maeztu said.
The new Ikea will have hundreds of items the average Indian can afford, including a $2.16 jewellery box, shoehorns for 70 cents each and doormats that say “welcome” in different Indian languages for about $5. Roughly 800 of the 7,500 products on sale in the Indian outlet will cost less than $3. It also will offer a sewing service so customers can buy fabric to have curtains made in the store.
Ikea spent weeks training its in-house team, which includes 75 women, to assemble its furniture. In addition to its full-time employees, the company has separately trained carpenters available on UrbanClap, a Bangalore-based online marketplace for freelance labour, to assemble its furniture.
Low labour costs mean many Indians are used to hiring carpenters to make furniture or even just hang pictures.
Elsewhere too, Ikea has been working to be more convenient. Last year it acquired Silicon Valley startup TaskRabbit—the online marketplace that connects people with freelancers willing to run errands and do odd jobs—saying it would use it to for furniture assembly.
ALSO READ: Ikea's new campaign targets buyers ahead of first store launch in Hyderabad
One of its biggest adaptations is a plan for smaller, city-centre stores. Indian cities are notoriously traffic-filled, making it unappealing to travel long distances. And consumers are used to shopping in much smaller stores than the sprawling big-box chains of the West.
When it opens in Mumbai next year, Ikea plans to set up small stores as well as a typical large outlet. Its online business will be up and running within the first year of operations, sooner than in other new markets.
“India is an opportunity to leapfrog,” Mr. Maeztu said. “We cannot penetrate Mumbai or Bangalore only with a blue box in the outskirts.”
Ikea’s main domestic competition will be the thousands of tiny furniture shops and roadside carpenters who build to order. There are only a few national furniture brands and websites.
A few miles from the Ikea in Hyderabad is Ashish Singh’s Furniture Point store. He knows Ikea is coming but said he isn’t worried. Although both venues will compete on price, Mr. Singh maintained that Ikea can’t match the quality of materials or customization his store allows.
“We deal with Indian teak; they deal with plywood,” he said.
Online furniture company Urban Ladder, a big local competitor, said Ikea’s cookie-cutter furnishings won’t work with most Indian consumers or conditions. Urban Ladder makes bookshelves with glass fronts to protect against India’s dust, and knotted rugs, which don’t require vacuum cleaners. It puts locks on some shoe cabinets for customers who store shoes outside their front door and worry about shoe thieves.
“India is one country, but it is super diverse,” so retailers need to be flexible, said Urban Ladder CEO Ashish Goel.
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