India is a long-term bet for us: IKEA CEO

Swedish furniture retailing giant IKEA – which announced its India foray in 2012 – is yet to see its first store to start operations. In an exclusive interaction with Payal Gulati, IKEA India's CEO Juvencio Maeztu shared his long-term vision and plans for the country.

It’s been five years since you announced your plans to enter India, and your first store is yet to take off. What caused this delay?
IKEA is led by the long-term approach. And long-term for us is not 10 years but 100 years’ horizon or even more. For us, it’s important to do things right than to do them fast.

IKEA is a production-oriented retailing company. A normal retailing company can go fast in expansion, rent locations in shopping malls, and you buy and sell. For IKEA, this is the last point. The first point is ensuring right preconditions from the legal frame point of view, securing the supply chain, scout for right location etc. Also, long-term partnerships with suppliers are extremely important for us, this take time since they have to do investments and we have to support them. Then we buy the land and begin the construction.

We are here for the next 100, 200 or 300 years and when you plan for that, 4-5 years look very small. Now, after spending time on legal framework and land acquisition in Hyderabad and Mumbai, we are in the process of hiring people for operations.

What are the constraints for global retailers like IKEA in India?
I would like to talk about the opportunities first. India is a very promising market with a progressive government, ready to make positive changes. I'd like to talk about two types of policies — one to establish a business and the other is to operate the business. India has made big progress in the last few years on establishing businesses. It is easier to start a business in India when it comes to foreign direct investment rules and permitting process with fast-track approval process. This doesn't happen anywhere outside India.

Coming back to your question, I would like to say that the positive movement with the Goods and Services Tax (GST) is a massive thing. The biggest benefit of GST is sending a strong signal about creating confidence. We need to have a more simplified process when it comes to costing, moving goods within the country and labelling - everything related to the movement of goods between the states and from the ports to the consumers.
 

Home solution as a category in organised retail hasn't been so successful in India. What is going to be your approach?
We do several home visits to understand life at home in every new market. In India, through our life at home study, we have understood that home is the most important place from people but they are less motivated to decorate it. IKEA will bring the great home furnishing inspiration for Indian families. We will bring a unique shopping experience through our inspiring stores offering affordable home furnishing products.

India is amongst the low-income countries for a brand like IKEA. Is this a challenge for you?
IKEA is for the many people. There is an appeal to the brand both in terms of price and functionality. I guess this will be appreciated in India as well. We are targeting prices to reach normal income people and that is why it is important for us to have sourced locally. We produce where we distribute. So we need to pair up with Indian entrepreneurs. IKEA will bring a number of new and innovative products at affordable prices.

Low income in not a challenge for us, it’s rather an opportunity. Low prices are the cornerstone of the IKEA vision, business idea and concept. The basic thinking behind all IKEA products is that low prices make well-designed, functional home furnishings available to everyone.

Is booming e-commerce an opportunity?
We will adopt an Omni-channel retail approach to reach out to the many customers alongside front-end retailing. Today’s modern consumers expect to interact with their favourite brand when they want and where they want – physically in a store or virtually online. We, being a modern retailer, would, of course, allow our customers to have the option of buying online – not as the core channel but as a compliment.

We are looking at e-commerce and there is an opportunity to create a strong supply chain and logistics infrastructure. It’s the first time that we will be able to integrate e-commerce retailing with our traditional stores in a new market. We are excited about opening up in India.