Swedish home furnishings retail giant IKEA has already entered India and is all set to open its first store in Hyderabad in early 2018 with an investment of Rs.1,000 crores. The global leader in home retail, with a presence in 27 countries, will be setting up its India contact centre operations with a capacity of 250 people in Hyderabad and its centralized distribution hub in Maharashtra soon. Will this grand entry have any impact on Indian players in the segment?
Impact of International Invasion
Subodh Mehta, Head - Home Furniture Business, Godrej Interio, asserts, “IKEA is one of the first companies in India to get approval for setting up 100 percent FDI in single brand retail. We surely see IKEA entering the Indian market as an important event. It will have a big impact for every Indian player.” On the flip side, Mehta also points out that 85 percent of the home retail market is unorganized in India and hence “there is enough space for everyone to stretch by organizing the unorganized part”.
Apart from Hyderabad, IKEA has recently also acquired land in Mumbai and Bengaluru, and are scouting for land in Delhi-NCR, Pune, Ahmedabad, Surat and Kolkata. According to a source, while the Hyderabad store will be ready by Spring next year, work on the Mumbai project will commence in November.” The furniture and home decor retailer, which operates on a low-cost model, will replicate its affordability and accessibility positioning in India as well, company officials said. However, Tanay Agarwal, Director Skipper Furnishings, maintains, “Being an international brand with product of global standards, the concept of IKEA is still very new to the middle-class sector. IKEA should be now focusing on understanding Indian people’s way of living which differs from state-to-state. This will help them not only in assessing living situations but also in understanding frustrations, needs and aspirations.”
Talking about the effects it will have on home brands, Subodh Mehta says, “With IKEA in the scenario, the overall competitiveness of the market will increase which will lead to better offerings by every organized player, in order to stay relevant. With this, the users will truly benefit. Given the size of the market and the format in which different players are working, IKEA entering India will have a different effect on different players.” Agarwal from Skipper Furnishings, too feels that the entry of this retail giant will help further improve the market. He asserts, “The home brands will have to buck up with better and premium quality of product and services, in order to compete with this Swedish international brand. The entry would entail the mark of better quality of product and honest services in the industry, and at the same time with a lot of investment in the marketing it will definitely induce the consumer to spend more on homes, thus increasing the overall size of the market.”
Consumer Preference in India
Beautifully designed home furnishings are usually not affordable and most people can just dream about them. IKEA’s business idea is to offer a broad array of innovatively designed, stylish home furnishings at prices so low that as many people as possible will be able to afford them. Also, India has now become more open to spending on quality products. Deepikka Jindal, Executive Creative Director and MD, Arttd'inox, affirms, “Today, the Indian customer is design conscious and they are willing to pay for a piece that they like, keeping no hindrance for the price.” Subodh Mehta from Godrej Interio also agrees, “With increase in exposure to international brands and design, consumer preferences are shifting to better quality and intelligent designs. We see the price sensitivity for this segment decreasing over time and people willing to spend on brands. Also, people are open to try experimental designs and products which is a good thing for the whole industry. The average ticket size for us is around Rs.45,000 which has increased over the past 5 years.” IKEA has also geared up to tap this opportunity coming from changing consumer spending behaviour. The retail giant’s product assortment is extensive in several ways – with no dearth of stylish and quality options, it caters to the romantic at heart and also those who like to keep it minimal. Tanay Agarwal from Skipper Furnishings maintained that the consumers of today are well versed with what they want and how much they should be paying for it. “With high standard of living and justified disposable incomes, families today are willing to purchase high-end and premium products. Having said that, we are still way behind the more developed countries where design and quality is the king,” he says.
Though IKEA is yet to start its retail operations in India, it is not new to the country. It has been sourcing from India for 30 years for its stores around the world. It works with 50 suppliers in India, engaging 45,000+ direct co-workers and approximately 4,00,000 co-workers in its extended supply chain. Also, with rise of awareness for home fashion among Indian consumers and also frequent demands for theme based furnishing and décor products, a player like IKEA committed to offer quality and innovative products, is here to stay. And this will, according to the home grown brands, ultimately attract more people to home furniture, furnishings and decor as well as boost up the organized sector.