Ikea’s Indian foray far from easy

Ikea is set to open its first Indian store in Hyderabad tomorrow. Winning customers in the country will be a challenge for the Swedish home furniture giant, but the move will accelerate a shift to organised space, according to GlobalData.

The retailer has reportedly spent INR10 billion (10% of its total investment proposal) on the approximately 400,000 square feet store. It is one of the biggest foreign investments in the Indian home market, which is largely dominated by unorganised players.

Sumit Chopra, Director of Consumer and Retail Research at GlobalData, says: “Ikea’s foray will impact the market share of branded players. The Indian home market is highly fragmented with the top five players accounting for just 2% market share. In addition, its strategy to build a strong offline presence and build a brand image among customers where they can see and feel products associated with the brand and use e-commerce as a supplement channel – will also provide new experience to the consumers. As a result, branded players will have to offer differentiated products and services.”

However, winning customers will not be easy for international players, as the majority of Indian consumers are value conscious and when it comes to big ticket products, they prefer purchasing from unorganised market offering acceptable quality products at affordable prices.

Meanwhile, leading Indian online players - Pepperfry and Urban Ladder - are expanding into the offline space and offering differentiated formats under omnichannel business models, which comprises both online marketplace and 'touch and feel' outlets, to compete with the planned entry of the world’s largest furniture retailer.

On the other hand, lack of infrastructure and poor supply chain, mainly in tier II and III cities, is going to be a major challenge for Ikea. Maintaining competitive pricing amongst those offering product differentiation and good quality will also be crucial.