Business

Ikea and the Art of Thinking Local

Page 1 of 1

An indefatigable retailer enters incredible India

ANYONE WHO HAS visited an Ikea megastore is entitled to think it would be the last enterprise on earth to be daunted by the Escheresque marvel of a spatial maze that India’s retail policy framework has long been. To its credit, the Swedish retailer has persisted past hidden trapdoors and endless staircases for decades to prove as much. Of late, things have reportedly eased enough for its business to finally get going. Not only has the Swedish retailer announced the opening next spring of its first Indian outlet, a 400,000-sq-ft ‘family outing destination’ in Hyderabad that’ll sell everything a home can be stuffed with after installing the kitchen sink, but also outlined what its in-house eatery will have on the menu. About 24 other stores are to sprout across the country as part of a Rs 10,500-crore plan, assuring yuppies access at long last to the minimalist elegance of Scandinavian comfort at affordable prices. For this and other ironies, this is a moment to celebrate.

Ikea had been sourcing local products when India opened its economy to foreign investment, but foreigners were not allowed to literally set up shop. They were barred from taking up market floorspace, except for single-brand showrooms under the control of a local partner. It was only in late 2011 that they were permitted full ownership of a chain selling products under a common label, but the policy’s fineprint left Ikea foxed: it would have to source products worth 30 per cent of the purchase value of its total domestic sales from local suppliers. No sooner had the company reconciled itself to a rule that suspiciously looked taken from another bhool bhulaiyya (that of multi-brand retail accountancy) and got its FDI project approval (in 2013), than it found that its fast-food counters needed another complex set of okays. Shelving this idea was not an option because while food accounts for only a fraction of its global revenues ($1.8 billion of $36.5 billion notched up in 2016), it’s an integral part of Ikea’s customer appeal. Cheap, nutritious and yum, its Swedish fare at 360 outlets across 28 countries has been observed to help keep shoppers captive for entire weekends.

The company’s initial challenge in India was quality control, according to a Wall Street Journal report, what with the tinshed craftsmanship of most furniture, a sample of tabletops detected with ‘unsafe levels of formaldehyde’ and other such horrors. All this has been taken care of now, and Ikea India Pvt Ltd’s CEO Juvencio Maeztu has declared the country its next global hub for the manufacture of furniture. It was already selling half a billion dollars’ worth of Indian rugs and textiles worldwide every year and it now intends to use local jute, bamboo, banana fibre and coconut husk for a variety of novel products.

As for the actual business of selling its wares, market research shall duly guide how the ‘store experience’ engages customers. Since Indians exhibit a love of colour, there’ll be lots of it. Since family life is sofa-centric, special designs will aim to enhance it. And since people here are not easily persuaded to ‘Do It Yourself’, Ikea will offer a delivery-cum- assembly service for only a few bucks extra. Nobody will have to fret looking for a chaklaa-belan and there won’t be anything made of leather.

Ah, the inevitable deference to religious sensitivities.

But where, pray, does that leave the monster hit of its restaurants, its signature meatballs that get divine ratings from Ikea fans around the world? Off the menu. “We respect the faiths in India,” John Achillea, store manager of the Hyderabad outlet, has been quoted as saying, “and our meatballs have pork and beef, so we won’t bring that to India.” What Ikea will have instead are idli, dosa and a range of biryanis, apart from the cuddlier bits of the original menu. Its stores in the north will presumably serve chhola bhatura and the like, though no such statement has been made so far. And if Ikea is to follow McDonald’s entry mantra—an indigenous interpretation of the American ‘Sell the sizzle, not the steak’— then it wouldn’t surprise me to find it selling its kitchen’s division of labour, so to speak, by keeping its veg and non-veg zones apart in plain sight.

It’s a pragmatic approach, no doubt, and maybe MNCs need to be particularly careful about local taboos of edibility. Unsavoury memories of the East India Company still appear to inflect attitudes towards them. Moreover, the alleged monstrosity—or divinity, for that matter—of meatballs has provoked a hot controversy even in far freer markets (such as the US). Why risk it? Success, after all, needs no unnecessary hypotheses.

disqus