Will IKEA click in India?

The opening of much-awaited, much-publicised IKEA Hyderabad Store began on an inauspicious note. The store was originally scheduled to be opened on July 19. The Swedish furniture made a grand announcement to that effect, but hurriedly changed the plans a few days before the D-Day. For some inexplicable reasons, it rescheduled the inaugural to August 9. 

And a day before the rescheduled inaugural date, it held a preview meeting for the media and others, which went horribly wrong, with mikes failing to function properly and sound system making awful noise. For a global brand like IKEA which operates 403 stores across 49 countries, putting together a proper inaugural event appeared like a Herculean task! That too the event is related to the Hyderabad store, its maiden outlet in India in which it invested a whopping Rs 1,000 crore. That's the reason why I said IKEA began its Indian journey on an inauspicious note.

However, it's true that India is not a lucky ground for multinational companies (MNCs). Global auto majors like General Motors, Volkswagen, Ford and Toyota failed to make a legible mark in the country. So are also Walmart, the retail giant from the US, and Norway's telecom major Telenor.  And the list goes on. 

General Motors, the American auto giant that ruled the global automotive landscape singlehandedly for over 75 years before ceding the global sales leadership crown to Toyota in 2008, forayed into India with much fanfare and lots of fond hopes in 1995. Nearly 21 years later, it threw up hands and pulled out of the Indian market in 2017. In between, it built two manufacturing plants, a nationwide dealer network and rolled out a series of car models. Interestingly, it pulled plug on Indian operations a couple of years after it announced mega plans to make $1 billion additional investment in the country. The story of Telenor is no different.

The Norwegian telecom major invested heavily in Indian market but caught in a corruption web called 2G scam. And it never recovered. The global recently claimed that it had sunk a whopping Rs 27,500 crore on Indian investments.  Walmart established wholesale stores in India as multi-brand retailing is still no-go area for outsiders, but it's yet to make mark in India. Though Ford, Volkswagen and Toyota still have presence in India, their market presence is minimal compared their clout in other markets.   

But many cite the presence of global IT majors in India and say like them, MNCs in other segments will also succeed here. But the stark reality is that IT companies have come here in search of Indian talent pool which is available at throwaway salaries thanks to the ever-weakening Indian currency. As this writer has pointed out in one of the earlier BizyLife columns, average salary for IT employees in India is less than a third of their counterparts get in the US, the UK, Europe, Australia and near home Singapore.

If we compare apple to apple, multinational companies in retail space have to play a different ball game. They need to sell their products to consumers in a country where the per capita income has just increased to -hold your breath - Rs 1,12,835 ($1,633) in FY18. That means Rs 9,402 ($136) per month and Rs 313 ($4.5) a day.  For companies which are accustomed to the US and European customers, selling their wares in India is not an easy task. That's the bottom line.

If IKEA, buoyed by the boisterous crowds in the first few days, starts dreaming about rosy future in India, it will land in a soup. Indians are known for their notoriety in bargain hunting. They disappear into thin air once meaty discount offers are done with. The real challenge for IKEA begins after the initial euphoria evaporates and novelty factor erodes. That is when it needs to evolve strategies that could lure customers back into its store, again and again.   But the fact of the matter is that home furnishing is alien to majority of Indians and it's the last priority for over 90 per cent of Indians who lack a decent home that require furnishings. 

For a large store like IKEA to succeed, it should attract customers in droves. Perhaps that's the reason why it has set an ambitious task of attracting 70 lakh footfalls into Hyderabad store every year. That means 5.8 lakh customers a month, nearly 20,000 customers a day and about 2,000 customers an hour. That's a tall order indeed. On the opening day when traffic came to a standstill around it, the store could attract 40,000 people! Therefore, it has its task cut out. 

IKEA stands for Ingvar Kamprad Elmtaryd Agunnaryd. I can't make anything out of the full form though I know IKEA for more than 15 years. I got enlightened on this at the recent media purview of IKEA Hyderabad store, the haphazardly organised event. The first two letters I, K stand for Ingvar Kamprad, the name of the founder. E stands for Elmtaryd, the agriculture farm where he grew up. A stands for Agunnaryd, his hometown in Småland, southern Sweden. The Indian market is as complex as IKEA's full form. Cracking it is not an easy task even for the global furniture giant. But it's great that IKEA chose Hyderabad as location for its first store in India. Hopefully, it will not go the way some MNCs did!