It’s been almost over a year that the Swedish furniture giant, IKEA hit the Indian shores with its first store in Hyderabad. At the time of the entry, many things were uncertain and still are. For starters, IKEA is famous for its DIY (Do it yourself) furniture but Indians inherently are too lazy to build their own. With the economy also slowing down considerably, there are a lot of questions as to if IKEA would be successful or not.

A leap of faith?

To tap into the $30 billion scattered lucrative Indian Furniture market, IKEA has had to reinvent itself. In an interview to Mint, Jasper Bodin, CEO of IKEA has conceded that India will be a test laboratory for stores globally. To woo the Indian customers, Ikea is willing to shed its Identity. The brand that is known for superstores like the one in Hyderabad, which has campus size of over 13 acres (25000 sq. metres), is currently exploring opportunities to build its 10,000, 5000 and even 1000 sq. meters small shops across the country. In a bid not to hurt the Indian sentiments, it sacrificed its mouth-watering meatballs, which is a favourite of every epicure out there. The meatballs that are made of pork and beef are liked so much across the world that it comprises 25% of all the food revenues IKEA earns globally. In India, the management has introduced Chicken meatballs in its place. It has also collaborated with Urban Clap to install furniture at home, something it is not known for.

An Aggressive Push?

Although the company registered itself in India way back in 2013, it started its operations in the second half of the last year. Since then, the company has been pushing aggressively to build a loyal consumer base. In its Hyderabad store alone, it has introduced over 1000 products under Rs.200 and over 500 products under Rs.100. It has also priced its food offering at its restaurants in the store quite aggressively with offers available such as unlimited coffee at Rs.35

By 2025, Ikea wants open over 25 stores in India. It is targeting both Tier 1 and Tier 2 cities with stores in Chennai, Bengaluru & Mumbai already in the works. Months before the launch of a full-fledged store in Mumbai, IKEA has started delivering its products online and has also installed two trucks named IKEA on wheels acting as pop up stores in the city.

An IKEA on Wheels truck in Mumbai

 The million-dollar Question- Is it Successful?

Globally, IKEA’s profit has been on a constant decline. This can be attributed to the fact that it faces steep competition against its online counterparts.

 

In India, IKEA is expected to face heavy competition from the online furniture upstart Pepperfry. What puts IKEA in grave disadvantage is that its superstores require humongous investments both in terms of time and money. For its Hyderabad store alone, IKEA spent over 2 years in building it. This is one of the reasons why it has been unable to expand into other cities. This gives a lot of breathing space to its online counterparts. IKEA hasn’t been investing heavily in its online platform and this why it currently ships products only in Mumbai.

According to Economic Times, Ikea has crossed Rs 400 crore mark in sales in one year of its operations, a record for any brand having just one store in its debut year. The company posted a loss of Rs.368 crore in FY18 and a loss of Rs.685 crore in FY19 mainly due to investments costs. On the hindsight, the 400 crore mark might look good, it has been affected severely by the slowdown of the Indian economy. It had set a target of having 6 million visitors at its Hyderabad store but the number is currently standing at 4 million right now.

Will it become yet another Toys R Us?

Ikea has been sourcing its products for its global market for over 30 years, which has made the transition into the Indian market smoother. Supply Chain and Distribution networks form a vital component in the success of a company which reflects in record-breaking sales but its insistence on having a strong offline presence rather than an online could mean a reappearance of the Toy’s R Us saga. It is already witnessing a global decline in gross profits and the strategies that made it a household name might be the perfect recipe of disaster.

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