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Ikea to follow three-step retail strategy in India: CEO Juvencio Maeztu

LiveMint logoLiveMint 23-05-2017 Deepti Govind

Bengaluru: Swedish furniture retailer Ikea will follow a three-step retail strategy in India, Ikea India Pvt. Ltd chief executive Juvencio Maeztu said.

The first priority is to build the brand in India through large-format stores, said Maeztu, adding that this is important for companies that place a huge emphasis on the so-called touch-and-feel aspect of retailing.

The next step will be e-commerce, but “always over the base of an Ikea store,” he added.

The third step will be to experiment with new formats. “In other parts of the world, you have smaller sized stores, a pop-up store, or different concepts that we are exploring and trying,” said Maeztu on the sidelines of a workshop organized by the company in Bengaluru.

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The company has identified 49 Indian cities where it wants to set up physical stores. Its first store in Hyderabad will open in December according to material provided by the company during the conference. Last week, Ikea started work on its store in Navi Mumbai.

Experts say the growth in destination shopping in India and the wide variety of products available at an Ikea store will lure shoppers.

“The growth of destination shopping in India where the family steps out to spend 4-6 hours (shopping) over the weekend—people today travel even 10 km to go to a mall of their choice. Second is being a global brand, they could bring in significant product variety which is not common in India as well as have products that focus on space and storage needs,” said Sreedhar Prasad, a partner at KPMG in India.

In India, Ikea will look to sell what it thinks the local market needs, offering pressure cookers alongside its iconic Billy bookcases. It is also thinking about tailoring stores to cities. The one in Hyderabad, for instance, could present products differently (and also offer different products) from the one in Mumbai because average home sizes in the two cities are vastly different.

Ikea says it has conducted extensive research on how its products will be received in India, with its executives visiting over 500 homes across the country. According to the company, it has tested products ranging from couches and mattresses to kitchens and bathroom accessories to see how they withstand the weather, especially humidity.

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“It really is about making sure that the dampness and the humidity can’t get into the natural fibre. So it’s about sealing edges, putting feet on the bottom of furniture, putting stronger braces and stronger shelves on bookcases so they don’t bend when it gets very humid and damp,” said Karen Hopkinson Pflug, the company’s quality manager.

The home furnishings market in India grew at a compound annual growth rate of 10.9% between 2011 and 2016, according to Euromonitor data. Euromonitor includes furniture in the home furnishings category. Growth will be faster between 2016 and 2021, Euromonitor said—11.2%.

Ikea is also hoping its restaurants (attached to its stores) will be a draw in India. The company’s popular meatballs will be on the menu, but contain only chicken. The 1,000-seater restaurant at the Hyderabad store will offer a mix of Swedish and local cuisines (Biryani and samosas are on the menu). “There will be something for everyone and the focus is on healthy and sustainable food and beverages,” said Henrik Osterstrom, country food manager for India.

Ikea’s stores in India are located towards the edges of cities, but the company doesn’t think that will be a problem.

“Ikea is the biggest playground in the world. So people will come; they will absolutely come. And the restaurant will have an important role to play,” Maetzu said.

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