Deconstructing Ikea's India Strategy

Deconstructing Ikea's India Strategy
Presented by – Group 12,
1. B Jyothi Hari Prasad

2. Diya Clara Lal
3. Ankita Singh
4. Sandipan Maji
5. B. Mughunthan
India’s Furniture Industry
 CAGR of 12.91% during the forecast period of 2016-2023.

 5th largest furniture producer at the global level.
 4th largest consumer of furniture at the global level.
 The furniture and appliances market in India reached INR 33,500 crores
during FY21.
 The market is expected to garner $61.09 billion by the end of 2023.
Factors contributing to the growth of the
furniture market in India
 2.5x Increase in income per capita from 2016 to 2027.

 The rate of growth of wages is lower.
 Rate of growth of productivity - higher than China and Vietnam.
 Consumption expenditures will reach 4 trillion by 2025.
 Urban areas - 40% of India’s population by 2025.
 Proportion of nuclear households - 74% by 2025. They spend 30% more than joint
families.
 “Eee-KEH-Yah” “AYE-kee-yah”
 I K - Ingvar Kamprad - founder’s name,

 E – Elmtaryd - name of his family farm,
 A - Agunnaryd – location of that farm.
IKEA in India
 September 2018 - IKEA's $1.9 billion investment - India's biggest single-

brand FDI.
 For the first time ever - omni-channel retailing strategy starting from
Mumbai in 2019.
 IKEA's biggest restaurant in Hyderabad - 1000-seater with customized
Nordic - Indian menu.
 DIY replaced with LUHY (Let Us Help You) with home-delivery (using e-
vehicles) and assembling services (tie-up with UrbanClap).
The IKEA franchise system
 Potential IKEA franchisees are evaluated by Inter IKEA Systems B.V.

 If chosen, an agreement is signed that grants the franchisee the right to operate an IKEA store.
 IKEA franchisees pay Inter IKEA Group an annual fee of 3% over their net sales.
 In return, they get access to the IKEA trademarks.
 They are also authorized to market and sell the IKEA product range and operate IKEA stores
and other sales channels.
 Today, all the IKEA stores (except the IKEA Delft store in the Netherlands) operate under
franchise agreements.
Spoken needs Unspoken needs
 Design  Reliability
 Price  Durability
 Lightweight products  After sales service
SWOT analysis to analyze IKEA in India
 $1.9 billion investment.  Not so popular DIY culture.
 Affordable modern furniture.  Inability to reach low tier cities.
 Unmatched product Quality.  Inability to find space big enough for Ikea’s
 Constant innovation. trademark large stores.
 Growing urbanization.  Low-cost furniture product offerings by

 High demand for low cost plastic furniture. unorganized players.
 Rising trend for modular and state of the art  High cost of wood and leather.
furniture in urban cities.  Possibility of competition from international
 Rising trend of online and mobile shopping. players like H&M.
Porter’s 5 Forces framework
Threat of new entrants
• High as there are many new

small scale furniture
manufacturers.
Bargaining powers of
Bargaining powers of buyer Level of competitive rivalry supplier
• High competition from local &
• High as there are several • High as they can sell their
multi-national brands.
players in this industry. raw materials to different
furniture manufacturers.
Threat from substitute
product
• There is no substitute for

furniture.
Differentiation strategy
 IKEA’s approach of designing affordable, modular, ready to

assemble furniture sets the brand apart from its opponents.
 IKEA markets store trips as a day out for the whole family.
 IKEA aims to incorporate the customer’s personal way of doing
things by operating a dominantly self-service system.
Segmentation
Geographical Demographic Behavioral Psychographic

Age Degree of Loyalty Social class
Region Hard Core Loyal
22 and older Soft Core Loyal Middle class
Hyderabad Switchers Working class
Mumbai Life-cycle Stage
Bengaluru Families Benefits Personality
Delhi Bachelors Quality
Cost effectiveness Experiencers
Occupation Strivers
Density
Student User status
Employees non-users
Urban Professionals potential users
first-time users
Identify the target customers IKEA aims to serve
 IKEA’s target consumer is urban

middle-class people between the ages
of 20 and 34.
 They are most concerned with buying
stylish, contemporary, quality furniture
at the best price possible, which is
precisely the type of furniture IKEA
sells.
 Families
IKEA for business
• This B2B offering includes,
1. Interior design planning,

2. delivery and
• Café and restaurants • Office spaces • Hospitality 3. installation.
1. Start-ups 1. Hostel
Positioning
Adaptive Positioning
Mono-Segment
Positioning
What channels are the most effective to reach
IKEA’s target consumers
 Twitter, Instagram, and Facebook are used to engage with a broader audience.
 IKEA’s YouTube has various videos with themes such as,
 Assembly instructions
 Revealed tips and tricks
 Cultural values
 Real-life stories
 Video content effectively builds a positive relationship with consumers.
IKEA Pinterest catalog
 IKEA on Pinterest, where rooms are showcased with tagged

products to help the customer achieve the look.
IKEA app
 Virtual reality version of IKEA from the comfort of your home, where you
can,
- shop for goods,
- check stock availability,
- enjoy special deals with your Family Card.
 Before purchasing, use your camera to digitally place products in your own
room to see how they work with the rest of your space.
IKEA stores
Large format stores City stores

 Located in Navi Mumbai and  Mumbai’s Worli area, Bengaluru
Hyderabad. and Delhi-NCR.
 These stores are roughly 500,000  50,000-100,000 sq. ft range.
sq. ft in area.
 Located mostly in the outskirts of  Located in the city.
large cities.
Pricing
 Price their products lower to compete with the organized competitors and
also to reach a wide range of customers.
 1,000 products selling below ₹200.
 Referent pricing - customers could see the previous price and the benefit
they gain from the purchase.
Conclusion

Deconstructing Ikea's India Strategy

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Deconstructing Ikea's India Strategy

Presented by – Group 12,

1. B Jyothi Hari Prasad

 CAGR of 12.91% during the forecast period of 2016-2023.

 2.5x Increase in income per capita from 2016 to 2027.

 I K - Ingvar Kamprad - founder’s name,

 September 2018 - IKEA's $1.9 billion investment - India's biggest single-

 Potential IKEA franchisees are evaluated by Inter IKEA Systems B.V.

 Growing urbanization.  Low-cost furniture product offerings by

Threat of new entrants

• High as there are many new

• There is no substitute for

 IKEA’s approach of designing affordable, modular, ready to

Geographical Demographic Behavioral Psychographic

 IKEA’s target consumer is urban

• This B2B offering includes,

1. Interior design planning,

 IKEA on Pinterest, where rooms are showcased with tagged

Large format stores City stores

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