Ikea Finally Opens First Store in What CEO Calls a 'More Open India'

Ikea has finally opened its first store in India on Thursday, targeting the country's growing middle-class in an environment that Chief Executive Jesper Brodin has described as "more committed to progress."

The expansion had been on the cards for over a decade. Speaking to CNBC's affiliate TV18, Brodin characterized the delay as being down to domestic "uncertainty some decades ago (whereas) today it's a super-strong commitment throughout India for progress."

"Today, it's a braver India and it's a more open India that is more committed to progress," he said, although Brodin warned that it could take years for the economics of scale to pay off in the company's new market.

The maiden 400,000 square foot (37,000 square meter) store is located on the outskirts of the southern city of Hyderabad.

The Swedish furniture retailer has already invested 4.5 billion euros ($5.2 billion) into India, Brodin said, adding that this would continue as the firm moves into new cities and e-commerce.

According to its website, Ikea currently has 48 suppliers with approximately 45,000 direct employees already in India. "The commitment that we make is not short term, it is long term," Brodin said.

Ikea's next store is planned to open in Mumbai in the summer of next year, followed by another in Bangalore in 2020. But, the firm has been shifting its strategy in more established markets towards city center showrooms to support the rise of online shopping a tactic that may also be brought to India.

Ikea aims to provide e-commerce to Indian consumers in 2019, Brodin told CNBC.

The firm has also lowered its prices to adapt to the Indian market. A thousand items will be priced at less than 200 rupees ($2.91), Reuters reported.

India presents businesses with one of the world's largest consumer markets. Its 1.3 billion citizens means that it is the world's second most populous country after China. But, gross domestic product (GDP) per capita remains less than a quarter that of its fellow Asian giant.

Nonetheless, India is expected by the International Monetary Fund (IMF) to be the world's fastest-growing major economy in 2018. The country's household furniture market is expected to be worth $2.7 billion by 2022, according to The Economist Intelligence Unit.

Indian consumers are unused to traveling to stores to buy self-assemble furniture, Reuters reported. Instead, furniture is usually delivered to customers fully built. To solve this problem, Ikea has set up a 150-strong in-house team to help customers put products together.

According to one analyst, Ikea's latest venture into India is likely to be a success and this is not just down to the country's economic fundamentals. "With high real estate prices forcing more and more Indians to live in small apartments, Ikea's minimalist and multi-purpose furniture will be expected to register strong demand," Barsali Bhattacharyya, deputy lead companies analyst at The Economist Intelligence Unit, told CNBC via email Thursday.

Chicken and vegetarian variations of Ikea's famous meatballs are sold in the Hyderabad store to account for India's prevailing religious beliefs.

Case Questions

1. What is the impact of Ikea in India?
2. Will Ikea be successful in India?
3. What marketing mix recommendations in terms of promotion would you recommend to Ikea?
4. What marketing mix recommendations in terms of menu would you recommend to Ikea?Should it make concessions to the Indian palate as other global restaurant chains operating in India have done?

References

Crabtree, Justina. "Ikea Finally Opens First Store in What CEO Calls a 'more Open India'."CNBC, 9Aug.2018,www.cnbc.com/2018/08/09/ikea-opens-first-india-store-in-hyderabad.html.