A Blockbuster Opening. IKEA opened its first store in India on August 9, 2018 and saw over 40,000 customers visit the Hyderabad store on Day 1. The average customer traffic since then is reported to be over 28,000 each day. Images of crowds, long ques, and traffic jams on its launch day dominated social media and local news. Founded in 1943 by Ingvar Kamprad, who became a legend among entrepreneurs in the 20th century, IKEA made its way from a one-man company transporting his goods to customers with milk trucks to a billion-dollar multi-national enterprise. IKEA introduced flat pack furniture, bought in separate pieces, and assembled by consumers at home. India is a prime target for the company’s global expansion. It expects 6 million customers to visit its maiden store in India in the first year. However, in a country that isn’t used to a Do-It-Yourself (DIY) culture, can IKEA make a winning proposition to the Indian consumer? Will the teeming crowds translate into sales and profit?
The Power of Advertising to Generate Buzz. The hype that IKEA generated for its store opening was largely driven by good old-fashioned advertising. As Quartz reports, front page ads in major newspapers and billboards across the city carried IKEA’s launch message for months, elevating its brand awareness from 5% when the store was being built to 85% at the time of launch. Newspaper ads, you say? Did you know that India’s newspaper industry is thriving with double digit growth whereas in most countries it is an industry in decline?
Meaningful Adaptation is Key to an International Launch. The Hyderabad IKEA store features a 150-person in-house furniture assembly team, a first for the company, which will build purchased furniture if consumers choose that service. It was the result of a consumer insight that IKEA uncovered in a country where DIY is not common. The Wall Street Journal reports on the extensive market research that IKEA undertook, including over 1,000 home visits, to understand the Indian consumer. The research led to their largest store restaurant yet – with a capacity of 1,000 – which serves Indian delicacies and the famed Swedish meatballs in two options – veggie or chicken. Their most meaningful adaptation, informed by the market research, is their product assortment – products that have distinct features tailored to Indian tastes (base materials, design, size, and price).
Will this Grand Opening Translate to Sales? IKEA knows that launch excitement and huge foot traffic doesn’t necessarily translate into sales. Stories of Chinese consumers who visited IKEA stores and relaxed on the couches and beds for hours made headlines years ago. BBC News even dubbed IKEA a furniture theme park in China. Despite many adaptations to suit Chinese consumers, IKEA’s journey to success in China wasn’t a smooth one. It took years to realize steady profits. Let’s see if India will take as long to warm up to IKEA.
Competition is Everywhere. IKEA’s expansion in India will include addressing competition in various forms and tackling (changing) policies and regulations which differ across states. It will certainly face competition from local carpenters and vendors who account for an overwhelming share of furniture producers in India, retailers like Pepperfry and Urban Ladder that have a strong online presence and existing distribution networks, and even Walmart which recently acquired a 77% stake in the Indian e-tailing giant Flipkart (yes, Flipkart also sells home furnishings). IKEA’s launch could also inspire local competitors that imitate its products, similar to what it experienced in China.
Can IKEA Influence Consumer Behavior? An interesting question is whether IKEA can usher in an interest in DIY among Indian consumers. Even if it influences a tiny fraction of its consumers to take an interest in DIY, it could unleash opportunities for many other retailers and product categories.
What can IKEA Learn from India? In navigating the complex Indian market, IKEA will surely learn some valuable lessons. Take store traffic management for starters. On August 15, six days after its launch, IKEA introduced a live ticker on its Hyderabad store website that tells consumers how long it would take to get inside the store at that time, so they can better plan their visit and avoid waiting for long. This was another first for IKEA. Its own way of saying, calm down Hyderabad, we’re here to stay.
Sources: The Wall Street Journal, World Economic Forum, Quartz India, BBC News, The Economic Times, Indian Mirror, Sweden.se, IKEA India
Image Sources: IKEA India, Instagram (@sayesekhar)