Musical Chairs: IKEA바카라�s India Debut Is Shaking Up Furniture Market

Is there a cinema hall here? It바카라�s a question the staff at the IKEA showroom in Hyderabad hears often, since the Swedish furniture retail giant launched its operations in India this August. It바카라�s entirely plausible to mistake the store for a mall because there바카라�s 400,000 square feet of shopping to get by바카라�not all in a day though, as the folks at the world바카라�s largest furniture retailer will warn you. A sofa set? They바카라�ve got them stacked up floor to rafter. Home layouts바카라�just follow the arrows, room after room. Or a cutlery set? You don바카라�t have to buy the knife that Indian homes rarely use. Yes, there is no cinema. But the show바카라�s on.

A million visitors have turned up so far at the showroom, says IKEA which is in a hurry to get to other cities바카라�its India debut has been  years in the making바카라�with investments of roughly Rs 1,000 crore each on a big store. With 423 stores worldwide and sales of euro 38 billion annually, IKEA has committed about Rs 12,800 crore in India. 바카라�We are looking at long-term investments because we strongly believe India is the most exciting market for the future,바카라� says Peter Betzel, CEO of IKEA India. The Mumbai store will open next summer and Bangalore, where construction formally began in mid-October, by 2020.

For IKEA, the mantras are Go Big바카라�casting its net for 200 million people in three years바카라�and Go Cubic, that is selling ideas for small space living. Patrik Antoni, deputy country manager, says it바카라�s important for the group 바카라�to be a little bit different바카라�. 바카라�We want to have thousands of people coming to the store every day, experiencing the furniture.바카라� How will they manage that? The nice thing about India, says Antoni, is that the home furniture market is under-stimulated. 바카라�People love their homes but they may not really know what to do with them or how to do it.바카라� There are few, if any, home furnishing shows on TV, for instance, he points out. 바카라�So we show all the solutions and ideas and tips; tell people it is possible to buy.바카라� Affordability is the other catchword for IKEA. 바카라�We want to make it all-inclusive, not to try to be seen as exclusive for those with money. We should be a company for everyone.바카라�

On a recent weekday, Nitin, a techie from Hyderabad, and his wife, were on their third visit to the store. They had spent about eight hours on their previous visits, checking out the furniture section before buying two chairs바카라�but only after comparing prices in the local market. 바카라�We are not really specifically looking at any competition in India. We are more into saying that we need to grow the market, we are not here to take your pie,바카라� says Antoni. In South Korea, he explains, the home furnishing market doubled when IKEA came in.

Actually, the competition agrees on that count. A fortnight before IKEA launched in Hyderabad, furniture brand Urban Ladder claims that its online sales in the city reduced. 바카라�Exactly a week later, sales went back above the normal levels,바카라� Rajiv Srivatsa, co-founder of Urban Ladder, tells Outlook. 바카라�It바카라�s extremely important that brands like IKEA come because now customers will start looking for brands in furniture,바카라� says Srivatsa.  Brands aren바카라�t yet competing against each other in the furniture segment because there바카라�s room for everyone, he says, adding that Urban Ladder competes head-on with IKEA on price in limited categories. 바카라�For us a two-seater sofa may start at, say Rs 10,000, and then there may be a two-seater at Rs 20,000 which is super-plush, super-comfortable. That바카라�s the audience we want,바카라� he says.

Generally, India바카라�s furniture market is estimated at $20 billion of which perhaps 10 per cent is in organised retail바카라�the rest still rely on local carpenters. There are chains like Home Centre and Home Town with large showrooms. Then, there are niche luxury stores바카라�at least 40 European brands are present in India, reports say. Besides, there are online sellers such as Amazon and Flipkart. By some accounts, the big furniture chains in India currently register about Rs 500 crore in annual sales. Many standalone furniture stores, too, are looking to exp­and to newer cities. Take modular kitchen fitments, for instance. 바카라�There are kitchens which sell for Rs 5 lakh and those that go for Rs 15 lakh,바카라� says a Bangalore retailer.

Srivatsa says Urban Ladder, which this year transformed from an online marketplace to a single-brand furniture store, is hoping to reach Rs 1,000 crore in sales in three years and, possibly, go public by then. 바카라�In a 15-year period, if 20 per cent of the industry is organised, we are still good because we can become billion-dollar companies that way,바카라� he says. Venture capitals are eyeing a piece of the action in the business, backing new entrants. But, unlike other businesses, furniture retailers have figured out that they need to invest in brick-and-mortar stores to grow and not rely on online sales alone.

But how often do people buy furniture? 바카라�As long as there is a sale, we keep buying clothes and shoes and keep filling up our cupboard. In furniture, once a customer buys something, that person is out of the market for five to 10 years,바카라� says Ajith Karimpana, founder of Furlenco, a Bangalore start-up that rents out furniture. Which is perhaps why IKEA focuses on families with children. 바카라�As soon as you have a child, things change...they grow up, you need a bigger chair, a table, there are new needs,바카라� says Antoni. Generally, half of the sales in IKEA stores comes from furniture.

Its Hyderabad store has 7,500 products of which 1,000 items are priced below Rs 200. And, it is counting on its global inventory of nifty, functional designs to woo Indians. 바카라�What we are good at is small-space living. Instead of putting things on the floor you put it on the wall, or on the ceiling,바카라� says Antoni. Indeed, its showroom displays reflect that functionality. 바카라�We have done a lot of research, so we know the size of rooms in India and the architectural elements of the big cities,바카라� he says. There are challenges too. IKEA is known globally for its do-it-yourself assembly approach but the Indian homemaker isn바카라�t familiar with that. Along with the large one-stop-shops, IKEA also plans to open up smaller store-formats in some cities.

Retailers are watchful of local preferences, particularly fabric, with colours and patterns, or even cutlery sets (a small spoon replaces the knife in India). Many IKEA products바카라�in the cooking range바카라�have been adapted for the local market, like idli and roti makers. So has the competition. 바카라�There바카라�s always that element of Indianness that we want, but we want clean lines too. All the gaudy stuff is out,바카라� says Urban Ladder바카라�s Srivatsa. A couple of years ago, its decor designs were largely geometric shapes and patterns. 바카라�But the market wanted flowers and embroidery.바카라�

By Ajay Sukumaran in Hyderabad