Posted: February 1, 2017 |  AUTHOR: KEN FOX | CONTACT ME

 

As many large retailers announce store closings and layoffs some global chains are thriving. These include Sephora, (France), Zara (Spain) and IKEA (Sweden). IKEA, the large Swedish furniture company, has been waiting to open in India for years. Until recently, Indian government laws prevented large scale multi-chains such as Walmart, Carrefour and TESCO from opening in India. IKEA is the first chain to receive government permission to to enter India and they are jumping at the opportunity.

IKEA went through a similar challenge and opportunity in China, where it already operates 21 retail stores and has adapted to the Chinese culture, shopping behavior and habits of these homemakers and families. (See the Global Galaxy blog post from January 1, 2012 titled Global Retailer Surprises in China to learn how IKEA adopted to Chinese shoppers sleeping on their in-store furniture, measuring floor samples for carpenters to copy and other interesting in-store habits.) The IKEA China operation has gained loyal and repeat customers who appreciate the service, attention and

satisfying products offered.

Similarly, IKEA’s Indian management has been studying the Indian market to maximize their understanding of the Indian shopper. These studies includes 500 home visits, observing cleaning practices, tracking humidity conditions and determining how potential IKEA products can be used. The company will also bring different consumer groups together throughout India to discuss their buyer preferences, attitudes and needs, which will help IKEA understand how to become a trusted brand and employer. Indian homes are typically small and crowded, with several generations often living in the same space. One challenge is learning how to convert shoppers from buying ready-made furniture to  do-it-yourself assembly furniture.

IKEA India CEO Juvencio Maeztu at a press conference in Hyderabad

The first IKEA India retail store will open in Hyderabad in late summer 2017. IKEA will open “IKEA experience centers” in Hyderabad to display its products prior to the store opening. These centers will help build IKEA brand awareness, which is generally low, unless people have traveled out of the country and overseas. The centers will also entice shoppers to visit the future store by making a trip from outside the city center. An advertising and publicity campaign is also planned for later this year to also help build IKEA awareness and imagery.

The cosmopolitan city of Hyderabad, with a population of 9.5 million people, is located in south central India, in the state of Telangana.

   

The Hyderabad IKEA store will be 400,000 square feet with an extra large, 1,000 seat capacity restaurant offering Swedish, Indian and other foods. It will also have a play area  and day care center for children of its employees. Unlike other global IKEA restaurants the India units will replace traditional Swedish meatballs with chicken and vegetable balls, served with mashed potatoes, cream sauce an lingonberries. Other Swedish dishes will include: salmon, cinnamon buns, croissants, blueberry jam and cloudberry. The menu will also be localized for India, offering dishes such as Hyderabadi Biryani, Dal Makhani and Indian bread, among other items. The restaurant plans to serve breakfast, lunch, dinner and snacks, along with beer at “affordable prices.”

Why India?

IKEA is familiar with India from a sourcing standpoint. It has been sourcing carpets, bamboo and other products from Indian suppliers for almost 30 years. It has also been working on social projects in the carpet belt* of India for almost 15 years through its IKEA Foundation, which:

works with strategic partners applying innovative approaches to achieve larger scale results in four areas of a child’s life: a place to call home, a healthy start in life, a quality education and a sustainable family home.

The country’s population is 1.1 billion people, with a growing young and affluent segment. India had a higher GDP growth rate last year than China, although both show strength. 

India……………7.6% (2015-2016)

China…………. 6.9% (2015) 7.3% (2014)

          Source: Wikipedia

India represents its own challenges to IKEA, such as an existing caste system, multiple religious groups and 16 official languages and dialects spoken.

IKEA India  has a unique approach to learning about children by using a “Children’s School” comprised of professors, physicians and experts on child development which they use to learn about children, and translate this learning to appealing new product ideas.

Indian Prime Minister Narenda Modi, elected in May 2014, is pro business and wants to attract foreign direct investment (FDI). IKEA received government approval in 2013 for its proposal to open 25 retail stores under 100% FDI in nine Indian cities by 2025. After Hyderabad, the next group of IKEA stores are planned for Delhi, Mumbai and Bangalore. Additional stores are planned for Lucknow, Agra and Noida. These plans include opening three stores a year.

IKEA operates about 360 stores globally working with a network of 50 suppliers. IKEA’s Indian group’s priorities include finding the right locations for their future stores, increasing their supplier base and establishing long-term relationships with the authorities and other important partners.

*carpet belt= There are thousands of carpet looms concentrated in this region, which in Northern India spreads west from the city of Allahabad east through Bhadohi, over to Varansai and along the banks of the Ganges River

Commentary

IKEA has successfully made shopping in their stores an adventure, often inspiring shoppers with new ideas for living, eating and bringing families together.  The past year focused on food, making their food offerings in their restaurants healthier and from more sustainable sources. IKEA’s vision is to create a better everyday (life) for all people touched by their business.

IKEA’s approach to the pre-opening of their new store in India is a lesson for any retailer entering a new market. Understanding their target market’s expectations, living and social standards will help attract and gain loyal customers.

The new IKEA store in Hyderabad represents a test market for entering a new international market. Learning from this store can be used to implement, customize and improve communication and business opportunities in the other 24 new stores planned for India. People in Hyderabad speak multiple languages: English, Hindi, Urdu and Teluga.  One challenge will be to optimize the use of language in advertising, social media and signage. 

Resources:

1. Meeting the Many People of India, 2016 IKEA Annual Report

2. IKEA to Open 1,000 Seater Restaurant in Hyderabad Store, Charu Lamba, Food Service India, November 22, 2016

3. IKEA Aims to Launch Experience Centres in Hyderabad, LiveMint, September 21, 2016

4. IKEA Appoints Patrik Antoni as Deputy Country Manager, India, The Economic Times, September 6, 2016

5. IKEA, Quartz India, Suneera Tandon, August 11, 2016

6. IKEA to Lay Foundation for First Indian Store in Hyderabad on August 11, 2016, The Economic Times, July 16, 2016

7. IKEA to Open 1st India Store at Hyderabad in 2017, Business Standard, March 6, 2016

8. IKEA Begins Hiring in India; Gears Up for Launch in 2017, Press Trust of India, September 9, 2015

9. IKEA to Open 25 Stores in India, Business Standard, Virendra Singh Rawat, October, 8, 2015

10. IKEA’s First India Store To Open in Hyderabad, India Today, September 24, 2014

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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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