It took almost six years for the world’s largest furniture retailer to set up shop in India since it first announced its entry in 2012. Despite India’s diverse demography and consumer sensibilities, Ikea believes it has little to fear, as it has put to good use its learnings and research into understanding the Indian consumer’s mindset. The Swedish furniture maker opens its first Indian store, built over 400,000 sq. ft., in Hyderabad on July 19, which will house 7,500 products and employ over 800 people. The company has made an overall investment of more than Rs 800 crore in its first store, or as Peter Betzel, chief executive officer, Ikea India, describes it, a “hub of home furnishing inspiration”. In an interview with Fortune India, Betzel talks about Ikea’s India strategy, and how it aims to fulfil the needs of aspiring Indians. Edited excerpts:
In 2012, Ikea first announced its India plans with an initial investment of Rs 10,500 crore. Alongside the regulatory approval and the usual hiccups of setting up an operation, you have invested that time to understand the market. Could you share some insights into Ikea’s assessment of the Indian market?
We have a passion for people’s lives at home. Our vision at Ikea is to provide people with a better, brighter everyday. Everything we do is driven by this. The same is in India as well, especially with the many interesting challenges here: From different living situations to different income groups. India has [densely populated] cities with population [going up to] over 26 million people. Urban living is a core focus, and cities like Bengaluru, Delhi, and Mumbai are prime engines for our retail growth in India. We have looked at people’s lives in big cities and found key commonalities; the homes are small but house larger families, compared to cities in Europe.
Additionally, with over 500 million Indians below 30 years of age, India also displays a strong potential for extended stable growth. It is, maybe, the youngest country in the world. There are also young couples and singles, who don’t stay with large families and have different requirements.
We took the time to understand India because it is a very complex market in terms of societal structures, cultures, and economic backgrounds across its states. For us, it is important to understand the behaviour of people and life at home, and four-five years isn’t actually that long to deeply understand a market as complex as this. In addition, there is also the time taken for regulations—to get licences, finding land and the construction process, etc. It is a reasonable time to invest in a market like this.
How much of India will we see in Ikea?
For every market and every store, we have shown people that we understand how they live, their sensibilities, and needs. All Ikea products have to meet five stringent criteria— sustainability, affordability, aesthetics, functionality, and quality. For Ikea India, in some cases, we have come together with suppliers and our designers to collaborate on specific products and ranges. What you buy in our stores is not available anywhere else. We have local ranges across furnishings, and kitchen items such as tavas and rice cookers, among others. For example, we realised that Indians prefer sleeping on firm mattresses unlike the U.S., where they like softer mattresses. So, for India, we will have mattresses with a coconut layer [coconut fibre is commonly used as a filling for mattresses in India to give them a firm base]. We have tied up with a local mattress supplier who will be exclusively working with us. We are not buying the mattress from him, but we have developed the product together, according to both Ikea standards and Indian consumer preferences .
Food is another big area for Ikea. Could you elaborate on your plans for your restaurant in Hyderabad?
Our Hyderabad restaurant is a thousandseater one, and is going to be the biggest we have globally. We have localised our food and menus as well. We will keep a mix of Swedish and Indian food, such as samosa, dal makhani, etc. Our famous Swedish meatballs, a global bestseller, will be available, as well as Indian meatballs, made of chicken and vegetables with Indian spices added. We will not serve beef and pork across our restaurants. We will also serve salmon to suit Indian tastes. In desserts, we will have our famous Swedish cheesecake and chocolate cake. Overall, the menu is an affordable one.
Is the food business a separate entity from the Ikea furniture business?
It is a part of Ikea. It is our food range and is produced locally wherever we are based; we do not buy the food from the market and assemble it. It is part of Ikea’s identity. We control every aspect of the food preparation: from sustainability to freshness. When our suppliers are supplying the raw material to us, we want to be very sure about how it is produced, right up to the final taste of the dish. It is a long journey, but we control every stage of the food preparation. We will have 100 people in the kitchen, restaurant area, and the Swedish sweet shop, which will sell specialities like chocolate and lingonberry jam, among others. The restaurant format will exist across all our Ikea stores in India.
Ikea reaches out to many people, but is there any particular demography that you are looking at? Will there be any specific price point to cater to a larger audience, since India as a market is known to be price sensitive?
We are looking at all people. When we talk about ‘many people’, we don’t mean people who can afford to spend. We have in our range something for everybody, including about 500 products below Rs 100. Of course, you can’t offer a sofa for Rs 500, but there are a lot of articles that are useful for daily living. There are a lot of children’s products as well. The entire range is definitely an affordable one.
What are the key differences you find in India, compared to other markets?
India’s complexity lies in its diversity. The income gap is extremely diverse, from extremely modest means to staggering wealth. And this is very different from other countries. But as I said, we would like to be for ‘the many’, not only for the rich. There are also some similarities: Here, people live in smaller spaces with bigger families, something we discovered in Spain as well. For example, a bedroom also functions as a living room and a dining room as well, with people eating there. It also becomes a study room for children doing their homework. This is certainly challenging [from a product perspective], but we have learnt a lot. Also, in terms of affordability, we have learnt a lot; when it comes to price points, the market is very sensitive. And we’ve taken great care to maintain our key philosophy of affordability.
What is the Ikea India workforce like?
We are at the forefront, from a people perspective, in terms of diversity, inclusion, and equality. We give everybody the same possibilities to grow in Ikea. We have hired underprivileged women, about 200 in our Hyderabad store. We are putting efforts into training people who have never before been in retail. Each store will have between 800 and 1,000 co-workers. We are committed to having 50% women managers and co-workers in our organisation at all levels. For Ikea globally, 44% of our co-workers are women, and in the top management, 46% are women. In India, 37% of our co-workers are women.
What are the plans going forward for Ikea India?
We would like to expand to the big cities like Mumbai, Bengaluru, and Gurugram, and then go to the smaller cities. Besides the large-format stores, we are also looking at different small-format stores [500-15,000 square metres in area] within the city. Our larger stores are anything between 30,000 square metres and 40,000 square metres. Within the city, the size depends on what is available. For the smaller stores in the cities, we would lease those spaces. Real estate investment is a big part of the business, because we own the land and build our own stores [large formats]. This is an Ikea global strategy. Typically, we invest between Rs 800 crore and Rs 1,000 crore per store.
We are opening our first store in Hyderabad this month. Our next store will be in Mumbai— about 430,000 square feet in Turbhe, Navi Mumbai area—which is under construction and will open in the summer next year. We are also looking to open different smaller formats within Mumbai.
At the same time, we are also preparing the online business for the Mumbai market. We will have the full brand experience... offline online... in Mumbai first, followed by Delhi and Bengaluru for the smaller-format stores.
UPDATE: Ikea last week postponed the launch of its first India store at Hyderabad. “The opening date of the first Indian store in Hyderabad will be moved from 19th of July to 9th August, 2018,” the company said in a statement.
(The interview was originally published in July 2018 issue of the magazine.)