IKEA opens first store in India but here are five challenges (2024)

• News>
• Business News >
• Companies

Companies

New Delhi: Swedish retail and furniture giant IKEA on Thursday opened its first shop in India. The 4 lakh square feet store in the heart of Hyderabad’s HITEC City is being touted as the next big thing with regards to India’s furniture market. IKEA’s entry in the country will be a like a splash-of-water moment for the public as the DIY furniture and other innovative concepts are almost unknown to the average Indian.

The company has shared its roadmap and said it would eventually open 25 theme-based stores across several cities in India with Mumbai being the next stop. While there are high expectations from the company known for its innovative DIY furniture and interior designs, there are some rocks that it would have to dodge along the way to become popular in the country. Having said that, here are some of the challenges for the Swedish giant:

Returns on investment: According to an AFP report, the company has spent 1.5 billion dollars to set up the shop in Hyderabad but analysts fear that the entity, which has its presence in 49 countries, will take several years to start making significant returns on investment. It may be noted that the furniture retailer had earlier spent $50 million on procuring Indian sites for stores in addition to the 1.5 billion dollars for setting up its first shop.

Cheaper products: IKEA said it will be selling at least 1,000 products at less than Rs 200 but again, analysts fear that the result of the balancing act may not render the expected result. The analysts suggest that pricing would be a key issue that IKEA needs to focus on for setting up a concrete base in India. Speaking to AFP, Sowmya Adiraju, an analyst at research firm Euromonitor "It needs to get its brand image and product pricing right lest the growing Indian middle-class steers away from the brand.”

The family furniture shop conundrum: As mentioned earlier, IKEA’s new furniture will be a splash-of-water moment for many average Indians who still trust the small, family-run shops who build the furniture from scratch. While India’s furniture market is a tad expensive, the quality of furniture has been top-notch – something the IKEA would have to maintain in order to attract customers. However, IKEA’s has done its homework by visiting more than 1,000 households in India to study the kind of furniture used. While some of the products IKEA will sell like idli makers are expected to create demand instantly, it would be hard to sway people from their trusted family furniture maker.

DIY vs readymade: A wide range of IKEA’s products will be ready-to-assemble DIY products, which has become a revolutionary trait in the West. However, in India, the availability of cheap labour has ensured that customers receive ready-to-use products. While DIY furniture is available on online marketplaces, physical furniture stores in India hardly sell any such DIY furniture. Analysts feel it would be hard for IKEA to change the mood of the country which is so used to getting readymade furniture. But it is too early to say as the new concept could become a huge hit as well.

Online rivals: With most retail businesses migrating online, there are millions of furniture and home-related products available on the internet and Indians, too, are using online shopping places like Amazon and Flipkart to buy a large share of furniture, especially during offer periods such as the Independence Sale or the Big Billion Sale. Forrester has valued India’s home goods market at $40 billion. In addition, Walmart’s recent deal to buy a majority stake in Flipkart is an indication that the US giant would also be pushing its products through Flipkart in India. Moreover, stores like Pepperfry and Urban Ladder are also popular Indian online furniture stores that IKEA has to overshadow for tasting success in India.

Acquiring land in India: Last but not the least, one of IKEA’s biggest challenge in India would be a land acquisition for setting up shops. Considering the process involved for foreign businesses to acquire land in the country, it seems IKEA would go through a tough time finding the spot for its trademark large stores in the congested cities of the country. While the store in Hyderabad is humongous, it remains to be seen if it manages to find such big areas in cities like Mumbai, Bangalore, New Delhi.

IKEA also plans to open stores in Pune, Chennai, Ahmedabad, Surat and Kolkata, according to the AFP report. If the report is to be believed, IKEA may even consider opening smaller trial stores to give customers a taste of their products.