Expanding internationally invariably requires some adjustments, so when IKEA began strategizing to enter the Indian market, it knew it would need to alter a few things. For example, instead of Swedish meatballs, the company knew that the restaurant in its store in Hyderabad would serve samosas to appeal to local consumers, many of whom avoid beef. Those sorts of shifts were easy to predict and implement, but others have been more expansive and challenging—including a reconsideration of its very foundational idea of selling disassembled furniture that customers would put together at home.
Years of market research showed IKEA that Indian consumers were unlikely to want to build the furniture themselves, so its first store features 150 full-time employees, responsible for building the shelving units, tables, and beds for people to take out of the store. The low cost of labor in India makes it illogical for consumers to devote their own time to building the products, so IKEA has adjusted its approach accordingly.
It also is revising the product lines it offers. Again using extensive market research, IKEA designed a new dining room table that supports Indian consumers’ tendency to use these pieces of furniture not just as places to eat dinner but also as central gathering places for social interactions. New lunchbox sets provide spaces to store and carry multiple-course meals, as are common in that country, and only the Hyderabad store stocks pans for cooking naan.
Such adjustments seem like reasonable concessions, considering the potential of the Indian market. In the home furnishings sector, this market has grown by an estimated 90 percent in just the past six years. Furthermore, the extremely young, increasingly prosperous market of Indian consumers may not be able to afford an IKEA bed quite yet, but they likely will in the future. In the meantime, IKEA seeks to spark their loyalty now by enticing them with inexpensive jewelry boxes and welcome mats, each priced at less than $5.
The process has not been without hurdles though. To institute all these changes and alternative approaches, the retailer has had to conduct extensive, expensive market research. In turn, the planned opening of the first store in the country has been delayed several times. But with a slow-and-steady approach, IKEA hopes that it will establish a model that will work well in India, now and in the future, in Hyderabad and throughout the nation.
Discussion Questions:
- What growth strategy is IKEA employing in India? Explain your answer.
- How is IKEA adjusting its merchandise assortment to meet the needs of Indian consumers?
Source: Saabira Chaudhuri and Corinne Abrams, The Walls Street Journal, July 23, 2018