Hyderabad: IKEA is trying to keep prices even lower in India than it typically does elsewhere in the world market when it opens its first store in the country on Thursday, overcoming high taxes on imported goods by the nations as it woos cost-conscious shoppers unaccustomed to DIY furniture.
More than a decade since floating the idea of expansion of business in India, the Swedish retailer will finally do that by its entry with a 400,000 square foot (37,160 square metre) store in Hyderabad, where it will sell 1,000 items including cutlery and stuffed toys for less than 200 rupees ($2.91).
IKEA is trying to establish itself in Asia and South America as growth slows in European continent and other traditional markets. It is attempting on India with its growing middle class, but mindful of the relatively high pricing that hit sales when entering countries like China and Australia.
The firm previously said that raising the proportion of locally sourced materials would greatly help it overcome import duties which would otherwise make it challenging to keep prices low.
Regulation makes IKEA must source at least 30 percent of materials locally within five years of starting operation. It already sources about a fifth of its global supplies from India.
Group Chief Executive Jesper Brodin, at a news conference on Wednesday, said India will very well become one of IKEA’s biggest sourcing markets in the future. At present, its top suppliers are China, Poland and Italy.
Brodin also said he wants IKEA to be more affordable and accessible to customers in India.
IKEA’s newly launched India website showed popular products at very low prices when compared to the United States, for instance. The white variation of its best-selling Billy bookcase is very much cheaper by a fifth and the dark-grey Ektorp sofa is priced 30 percent lower.
Nevertheless, analyst Sowmya Adiraju at researcher Euromonitor International said the target audience for many current IKEA products, especially big-ticket items, seemed to be much wealthier end of middle class
“It would be interesting to see how IKEA does justice to its vision of ‘furniture for all’,” she said.
IKEA will not only have to win over different tastes in India, but also change a culture. Driving to a shop for do-it-yourself (DIY) interior goods is a novel concept in a country like India, where made-to-order furniture is delivered to the customer fully assembled.
IKEA has therefore taken the unusual step of setting up a 150-member in-house task force to help with the assembly. Overall, the Hyderabad store will directly employ at least 950 people and another 1,500 indirectly for various services, it said on Wednesday.
The firm plans to open over 25 stores across India by 2025, with the possibility of some being smaller inner-city stores to complement larger suburban locations. It has already begun building a store in Mumbai, which it expects to open next summer.
So far, IKEA said on Wednesday that it has already spent half the 105 billion rupees ($1.53 billion) earmarked for India investment, and plans to spend 10 billion rupees setting up each store.
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