Ikea set to open in India

Ikea set to open in India
Photo by Kirakiraouji, CC BY

Come this spring, India—the largest democracy in the world—will be ready to entertain one of the largest and most successful lifestyle furnishing companies in the world: IKEA. The company already operates 310 stores in 41 countries worldwide, and India remains one of the last frontiers for the global Scandinavian empire. In just under four months from the time of this writing, the first store will open as a 400,000-square-foot location in Hyderabad, in the southern state of Telangana.
The man poised to lead the charge into the Indian market is German executive Peter Betzel, who formerly headed up operations in Germany and will take over for Juvencio Maeztu. The company is famed for its DIY furniture and will offer new alternatives in the largely-unorganized furniture market, where Indians are used to buying pre-assembled furniture from many different suppliers. It’s also important to note that IKEA has been sourcing materials from India for years so now it will turn the tables and localize the operation.

IKEA first signaled its intention to enter the Indian market back in 2012, aiming to spend $1.9 billion over the course of the next few decades. However, the last six years have not been easy for the Swedish giant, which has already experienced teething problems that include heavy levels of bureaucracy, land sourcing issues and setting up a robust supply chain. However, their plans remain ambitious, and they are looking to open an additional 25 stores over the next few years in states like Maharashtra and Karnataka.

Coming into India in 2018 couldn’t be better-timed. By industry analyst standards, the potential is enormous; by 2025-26 the number of middle-class households in India is likely to more than double from the 2015-16 levels to 113.8 million households, or 547 million individuals.

But you have to remember that India’s purchasing power is limited as compared to other countries, so price points have to be adjusted accordingly. India's per capita income was USD1,670 in 2016—ranked 112th out of 164 countries by the World Bank—while its per capita income on a purchasing power parity (PPP) basis was USD5,350 (ranked 106th).

The climate for Western franchises doing business in India is healthy right now, even though the government is wary of multi-brand conglomerates like Wal-Mart doing business here and has sometimes denied permits to operate. However, India has relaxed its laws for single-brand retailers like Uniqlo and IKEA. Franchises like Papa Johns, McDonalds and Subway are all there trading. Even well-known, European-based sites like PokerStars will be pivoting to India for business in 2018, where their influential ambassadors Kevin Hart and Usain Bolt will find a huge audience on the subcontinent.

And if you were wondering if you were going to get meatballs in the famous kitchen aisle, you might be wrong. India has been assured that it will have a Swedish/Indian-inspired menu, which will include samosas and chicken biryani. Its founder, Ingvar Kamprad, died earlier this year, but we think he would surely be proud to see his fledgling empire take on the biggest country in the world.

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