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ECONOMY-INDIA-SWEDEN-RETAIL-IKEA
DI-why? Five challenges for Ikea in India
MUMBAI, Aug 9, 2018 (BSS/AFP) – As Ikea opens its first store in India on
Thursday following years of delays, AFP picks five challenges the Swedish
furniture giant will face while trying to navigate a difficult local market.
– Making money –
Ikea is spending $1.5 billion in India but analysts reckon it is going to
be several years before the company with a presence in 49 countries starts
seeing significant returns on that investment.
The home goods retailer has already spent close to $750 million procuring
Indian sites for four stores, including the massive, new 37,160-square-metre
(400,000-square-feet) outlet in Hyderabad.
Ikea will offer more than 1,000 products under 200 rupees ($2.91) but
experts say it faces a difficult balancing act between setting prices low
enough to attract cost-sensitive consumers but high enough to reel in the
status-conscious rich.
“It needs to get its brand image and product pricing right lest the
growing Indian middle class steers away from the brand,” Sowmya Adiraju, an
analyst at research firm Euromonitor, told AFP.
– Family favourites –
Prising Indians away from local furniture makers that they trust is going
to be difficult for Ikea, according to retail experts.
Indian towns and cities are not short of small, family run shops whose
owners will visit your home and then build furniture from scratch based
entirely on your specific furnishing needs.
Patrik Antoni, Ikea’s deputy country manager for India, told AFP in a
recent interview that the Swedish retailer had visited more than one thousand
houses to try to understand exactly what Indian consumers want.
Ikea will sell products tailored for India’s market, such as kitchen
appliances for making traditional rice cakes, but experts warn that getting
consumers to abandon their trusted woodworker for larger items will be tricky
and take time.
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ECONOMY-INDIA-SWEDEN-RETAIL-IKEA 2 LAST MUMBAI
– DI-why? –
Ikea revolutionised furniture buying in the West with its wide range of
ready-to-assemble products at affordable prices but many Indians would be
forgiven for wondering why they have to do it themselves.
India’s abundant supply of cheap labour means it is not known for its
“DIY” culture. Ikea is aware that this may put people off so has teamed up
with UrbanClap, an online platform that helps connect handymen with
consumers.
But analysts say the absence of UrbanClap in lower tier cities could pose
a problem.
– Walmart & Co. –
Ikea is not the only multinational seeking a large share of India’s
growing home goods market, which research firm Forrester currently values at
$40 billion.
US retail giant Walmart is betting big on the rise of India’s middle class
too. The world’s largest retailer recently agreed to buy a majority stake in
Indian e-tailer Flipkart, which sells a wide range of home furnishings.
Ikea will have to contend with popular Indian online furniture retailers
Pepperfry and Urban Ladder as well in a fragmented and competitive market
which also includes a smattering of home goods options on Amazon’s local
website.
Ikea hopes that its walk-in stores and famed restaurants, selling a
mixture of Indian favourites like biryani and samosas along with vegetarian
versions of its famous meatballs, will give it an edge over its rivals.
– Space constraints –
Land acquisition is rarely straightforward or cheap in India though with
buyers regularly having to jump through bureaucratic hoops and facing long
delays.
Finding space big enough for Ikea’s trademark large stores in India’s
notoriously congested cities also poses a challenge.
The Hyderabad outlet is comparable in size to a typical Indian shopping
mall but sites procured in Mumbai, Bangalore and the capital New Delhi are
reported to be smaller.
Ikea is yet to put a timeframe on when they might open. Afterwards they
will look at opening in Pune, Chennai, Ahmedabad, Surat and Kolkata,
according to Antoni.
Ikea has said it is considering opening small stores which will just give
a sample of what they sell. They will contain screens where people can flick
through catalogues before ordering.
BSS/AFP/HR/09221