Hej, Hyderabad! Ikea is finally in India

8th Aug 2018
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Years after it started researching India, Swedish retail giant Ikea launches large format store in India; CEO says community is ‘priority’.

Swedish furniture giant Ikea threw open its doors to India on Wednesday with the launch of its premier store in Hyderabad. Spread over 400,000 square feet, the Hyderabad store - flaunting the trademark blue and yellow colours - is the €30 billion global retailer’s first step towards winning a huge customer base in India.

Ikea has currently invested Rs 10,500 crore in India and has spent half that amount - one of the single biggest investments in the country since Future Group, Reliance Retail, and Aditya Birla More announced similar investments in 2006. The Hyderabad store involved an investment of Rs 1,000 crore.

Jespersen Brodin, CEO, Ikea Group, said, “Ikea has partnered with local manufacturers and has a long-term commitment to India. Our products will be inspiring, affordable, and convenient for Indian customers.”

The Hyderabad store offers 7,500 products, employs 950 workers directly and 1,500 people indirectly. The furniture company aims to open similar outlets in Mumbai, Bengaluru and Delhi in the next two years. By 2025, the plan is to debut 25 stores in India, some in a newer small format. Ikea has an ambitious target of reaching 40 cities and 200 million people, but did not specify timelines.

Peter Betzel, CEO, Ikea India, said: “We have laid a strong foundation here in India. For us, the community is a very important priority.”

The furniture company aims to open similar outlets in Mumbai, Bengaluru and Delhi in the next two years.

Ikea, which reported revenues of $39 billion in 2017 globally, exports €350 million of product from India and has 50-plus suppliers.

The key highlights of Ikea in India:

  • Retail expansion in Maharashtra, Karnataka, NCR, Telangana.
  • Ahmedabad, Surat, Pune, Chennai, and Kolkata to have stores by 2025
  • Plot size of 8-11 acres for store to be set up.
  • 1,000 workers per store
  • 44 percent women workers in store
  • 1,000 SKUs under Rs 200
  • Full-service offer – in-house and outsourced assemblers, pick-up and delivery, home planning consultants.
  • 1,200 women artisans
  • 380,000 cotton farmers work on cotton production for Ikea products
  • Skilling of 1 million women in retail and entrepreneurship through the Disha Foundation

Global game-changer

According to E&Y, retail is a $650 billion-dollar industry with only 10 percent of it being organised. The opportunity exists for a global corporate to make huge inroads.

Devangshu Dutta, Chief Executive at Third Eyesight, a retail and consumer business consulting company, said: “Ikea has always planned its stores to be a day-long destination event for families. What is interesting is to study the pricing and how Indians will take to the format. Ikea is globally game-changing business.”

The company also plans to start online stores soon, which – when it happens - will put the heat on Indian VCs and the investments they have made in furniture retail. Pepperfry has raised $197 million while Urban Ladder has raised $106 million till now. These startups have also started brick-and-mortar stores.

But Ikea, which has been planning its India entry since 2013, surely brings in a global understanding and will want to quickly learn how to win Indian customers.

The Founders of Urban Ladder, meanwhile, told YourStory that they “welcome competition and it's good for the Indian economy”.

According to consulting firm Technopak, India has a burgeoning middle class and 1.3 billion people buy about $30 billion of furniture, lighting, and household items (bed linen and cookware) every year. The furniture market in India is $34 billion, of which only $5 billion is organised.

Ikea’s arrival in India is being watched by other international retailers with a hawk eye. And as the battle for the Indian consumer takes a new turn, analysts say pricing and experience will determine Ikea’s success. Ikea, synonymous with being value for money, appeals to the Indian buyer’s bargain-hunting nature. The consumer, it seems, is truly king!

 

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