#146 From Meatballs to Gulab Jamun

Almost unnoticed to the global media, Swedish furniture giant IKEA opened its first store in India this month. With the 400,000 sq ft store, the global multinational is hoping to open the path to expansion in a market of 1.3 billion consumers that includes a growing and affluent middle class. More stores are planned for Mumbai, Bangalore and New Delhi over the next two years, and by 2025, IKEA plans to have around 25 stores on the subcontinent. Opening in Hyderabad wasn’t an easy endeavor for the company by any means. After having learned many lessons from its entry into another emerging market – China – the world’s largest furniture retailer has been working hard for the lat six years on making the first Indian store a reality. Traditionally focused on markets that would accept IKEA’s standardized, Scandinavian approach, the company had learned from their experience in China that certain adaptations are necessary. While the design of the store in Hyderabad is identical to IKEA stores elsewhere on the globe, the range of products differs.  Given lower average incomes, the portfolio includes hundreds of new products priced at less than 100 rupees, or about $1.45. This might be a nice offset of higher prices customers will have to pay for imported items thanks to customs tariffs that range from thirty to forty percent. Many of the more affordable items are sourced locally, not only for price, but also in order to meet a government requirement requiring the company to “buy Indian”. IKEA also added items such as kitchen equipment that is typical for Indian households. In the process of getting their product portfolio right, they sent out employees to visit about 1,000 homes across India to better understand how people lived. This triggered adaptations such as offering more flexible furniture, smaller beds, and lower heights for cabinets and kitchen countertops. Other products, such as cutlery packs, were cut because Indians use knives far less often than people elsewhere. IKEA is also offering affordable installation services – very important for a market that is used to having a vast service sector and ready access to domestic help. And, of course, the restaurant adapted its menu, too. Instead of meatballs and princess cake, it’s now samosas and gulab jamun. It appears that the company that is infamous for its opaque global organizational structure has worked hard and done everything by the book to ensure success in India. It is to be expected, however, that challenges will come as IKEA expands further. Whether their entry into India will be a success or a failure, it’ll certainly make for a great case study.

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