INTRODUCTION TO IKEA

Swedish furniture giant IKEA was founded by entrepreneur Ingvar Kamprad in

1943. He began by selling pens, wallets and watches by going door to door to his
customers. When he started selling his low-priced furniture, his rivals did everything
to stop him. Local suppliers were banned from providing raw material and furniture
to IKEA, and the company was not allowed to showcase its furniture in industry
exhibitions. What did IKEA do? It innovated to stay in business. It learnt how to
design its own furniture, bought raw material from suppliers in Poland, and created
its own exhibitions. Today, IKEA is the world's largest furniture retail chain and has
more than 300 stores globally.
Swedish furniture giant Ikea has decided to build its own retail real estate for setting
up stores in key Indian metros after facing stiff challenges in finding adequate retail
space that fits its bill. The retailer is scouting for land parcels and currently in
discussions with land owners for possible acquisition.
Juvencio Maeztu, chief executive officer, Ikea India, said the company will look at
retail space between 350,000 square feet and 400,000 sq ft for its stores in India.
"These will be destination stores with good rail and road connectivity. Each store
will call for investments to the tune of Rs 500 crore," said Maeztu, speaking at the

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India Retail Forum (IRF) 2014 summit.

The space requirements for an Ikea store, the company will be looking at acquiring
at least 5-6 acre for each store to be able to provide the same shopping experience it
offers customers in the international markets.
Retail-marketing space is a best shopping zone for the consumers, it is quite
challenging to the businessman. It has to ensure not only product availability but
also make the shopping more creative and pleasurable. RM has to take care of
various areas like,
Store administration and management
Inventory and stock management
Managing of receipts
Theft management
Customer service
Sales promotion
Employee morale

Store administration and management- this involves cleanliness, discipline,

proper documentation, no objection certification for various products and skillful
management of products and personnel.

Inventory management- it becomes the duty of the retail manager to check day to
day and time to time the stock so as to ensure the product is made available at the
counters. Not only the expected product availability has to be maintained but also
the quality and shelf life has to be guaranteed. Inventory has to be evaluated correctly

taken a trendy and pleasurable affair. With all these changes customer service has

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and receipts have to be properly maintained. With retail marketing shopping has

become the most important service to be rendered in the marketing field. The
customer has to be given maximum possible choice with a blend of perfect sales
promotion from the side of the retailer. So the overall picture of retail stores
promotion has become a exclusive area of management.
Characteristics and trends in retailing
Interaction with the end consumers
It enhances the volume of sales but the monetary value is less
Customer service plays a vital role
There is a tendency for automatic sales promotion
With more outlets retail marketing creates visibility
Location and layout plays a vital role.
Creates employment opportunities to all age groups, gender, irrespective of
qualification and religion.
Generates job opportunities in flexi timings.
Retail marketing creates a place, time and possession utility for a product.
Trends in retailing: Retail Marketing is largely based on three Vs- Value, Volume
and Variety. Though the Retail marketing had the quantitative development across
the globe, the quality is no doubt being compromised with the Globalization.
International quality products are competing with indigenized products. This

growth. As the competition is between international and indigenized products, its

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variation in size, quality and competition has made Indian market face ridiculous

taking a great toll on both the sectors. With the big giants entering the market, there
is a grave competition in the Indian Economy.
IKEAS ENTRY INTO INDIA WILL MEET WITH FIVE IMPORTANT CUSTOMER NEEDS:

1. Fantastic value for money (design, function, quality at low prices)

2. Exclusive products (Scandinavian design sold only at Ikea, plenty of
options)
3. Inspiration and ideas (solutions for your home)
4. Ease of shopping (everything in one place, take home direct, big parking
space)
5. Fun (a day out, eat at the restaurant inside the store, leave children at the
children play ground etc.)
IKEA had faced similar problems previously when it entered the United States. The
company initially tried to replicate its existing business model and products in the
US. But it had to customize its products based on local needs. American
customers, for instance, demanded bigger beds and bigger closets. IKEA had to
make a number of changes to its marketing strategy in the US. The challenges it
faced in China, however, were far bigger than the ones in the US.
It will be difficult for IKEA to find the type of location (size, off a highway, with
great links to a major metropolis) that is crucial to the success of its business model.
The first store will take much longer to open than Indians expect and the rollout will
be painfully slow. Fortunately, as a privately held company with a long-term
orientation, IKEA will persevere where more impatient publicly held firms may have

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given up.

There is no formula for success that fits all marketing strategies when a global brand
decides to try a new market, except perhaps unconditional acceptance and
responsiveness to changes. The greatest challenge is to adapt constantly. It's essential
for successful marketing campaigns to take into consideration the local approach
versus the global/regional desire for standardisation. A onesize-fits-all approach is
a rare reality. A consistent global brand promise is a desirable asset but what makes
a real difference is to be brave and ready to change the target audience and build a
differentiating promise.
IKEA, famous for its flat-pack furniture which consumers have to assemble
themselves, realised that understanding the local culture is important - Chinese
people hate the do-it-yourself concept and Indians likely do so even more.
IKEA was expanding its services for delivery, assembly and installation, as well as
offering IKEA staff to get goods off the shelves for customers, very rare in mature
markets. That is likely to be important for catching on in Asia.
"DIY (do it yourself) works very well in Europe and the United States; they are used
to it. If you look at markets like China and India, people are not used to DIY. That
is a reason why Home Depot has failed in China," said Kantar Retail analyst
Himanshu Pal."Indians have been used to local furniture shop owners making entire
furniture units and delivering it to your house."
IKEA plans to open its globalized stores ranging about 300,000 sq ft. That would
make it the largest store by size in India. The company generally stocks about 9,500

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different home and office furnishing products in its stores.

IKEA plans to invest around Rs 500 crore per store in India with up to 800 staff each
including carpenters and other skilled people who can go to consumers' home to fit

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IKEA products.

IKEA distinguishes itself from the rest of the competitors with the way it organizes
its stores. Shopping in IKEA is an experience. IKEA stores double as warehouses.
They are built for browsing - the furniture was laid out and showcased in the stores
as it would be in a home setting. Shoppers are used to seeing everything under one
roof - from the kitchen sink to the soup bowl. In that way, IKEA shoppers become
Pro-sumers - half producers, and half consumers -because most products have to
self-assemble.

Employees are available for questions but the customers could choose, order, pick
up, transport and assemble their own selections. IKEA is using a different operation
strategy from their competitors. The operation of IKEA has to cope with large
volume because their products are highly repeatability and specialization.

The degree of customer contact is low. Hence the operation strategy of IKEA is
focused to low cost, while the traditional furnishings position to high cost due to low
volume, high variety (some order-to-make), low variation but high customer contact
.IKEA is targeting at two groups of customers. The first target group is the young
adults from low to middle income family who may have or have no children. The
other target group is business customers and they are normally running small to
medium size of offices. The characteristics of their target segments are composed of
young, highly educated, liberal in their cultural values and hence they can accept a
totally different buying behavior from the traditional furnishings. They are in
different lifestyles and trust their own judgment to mix and match their furniture
from the stores. They view the modular and self-assembly as an extension of self.

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As the target groups are within the low to middle income class or small to medium

size of offices, they are more price conscious and demand different information,
support and services.
As IKEA stores are located away from the urban areas, it can be pretty inaccessible
to customers who do not drive. There may be fewer customers during rainy
seasons as customers may not feel that it is feasible to drive all the way out of town
to buy furniture, especially more so if they have to transport and re-assemble them
themselves.
For the same reason that IKEA is located in the sub-urban areas, many customers
may only patronize the stores during the weekends. Hence, the store may be
relatively quiet during the weekdays and highly packed with shoppers over the
weekends. One problem in this is that customers who really want to shop at IKEA
may be turned off by the thought of crowding into a packed showroom with
hundred other frenzied weekend shoppers.
The visibility dimension means how much of the operations activities its customers
experience, or how much the operation is exposed to its customers. In short, it refers
to the amount of customer contact that the operation has. In the case of IKEA,
though it adopts the self-service concept in their stores, it actually maintains a high
level of contact with their customers. To facilitate shopping, IKEA provides
catalogs, tape measures, shopping lists and pencils for writing notes and
measurements. Information and assistance to customers was offered through the free
catalogue which highlights the available range of the stores products, with related
illustrations and dimensions. In addition, IKEA stores are designed to have a family
shopping experience with customer services and facilities such as a restaurant, day

area, or keep their children with them in pushchairs while they are pushing. Car roof

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care facilities and a Swedish shop. Parents can leave their kids in a supervised play

racks are available for purchase at cost and IKEA pick-up vans/mini trucks are
available for rental. Large car parks and loading areas were a feature of their huge
store sites, allowing customers to load purchases easily.

DO IT YOURSELF CULTURE:
In addition to blurring high and mass/low culture with its democratic design
principle, IKEA also operates as a metaphor for, and plays its own role in, other
social-cultural transformations. Through its self-assembly furniture, IKEA operates
as a very visible manifestation of the "DIYization" of society, which is essentially a
combinatory process of privatization and individualization, a society which demands
self-production and self-sufficiency. IKEA's self-assembly furniture is emblematic
of a neo-liberal society which sees the public realm, which includes both state and
corporate institutions, as merely providing raw materials for the individual to piece
together in order to produce one's life. Individualism becomes ever more important
in a world, which is based less on notions of community and more on jungle and
evolutionary metaphors about survival of the fittest. The worth of citizens has been
reconfigured into forms of activity, which are undertaken on the basis of selfsufficiency, such as the ability to solve their own problems, be they problems of
shelter, food or entertainment. With the privatization of government institutions, a
public collectively has been de-materialized, reduced to the pure symbol of the
nation, or it has been re-materialized into a consumer public realm. Such processes
of privatization have resulted in a physical, but more importantly a symbolic, retreat
to the domestic realm. Subsequently, the home itself has become the central icon of
contemporary Australian culture. IKEA's self-assembly furniture constitutes two
forms of domestic production. First it is consumed to add to the domestic. Secondly

directly experienced sense of physical home construction. Whilst small in scale, and

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and more importantly, the self-assembly furniture offers the opportunity for a

reasonably uncomplicated, it allows for a sense that someone has helped "build" his
or her home (not their house). Whilst the production of such furnishings often only
requires the famed "allen-key" or a screwdriver, it offers the opportunity to
physically construct with the hands a piece of "home." It is an embodied experience
of home making. Consumer goods carry a variety of signs, and may be used in
manners different from those intended by manufacturers. The self-assembly process
can transform the meanings of an IKEA mass-consumer object. It becomes inscribed
with personalized meaning, giving it an additional narrative, which exists outside of
its status as a commodity. It becomes domesticated in both senses of the term.
IKEA's self-assembly furniture is an integral element of its "democratic design." The
democratization occurs through the individual becoming more intimately connected
to the designer furniture, because they are involved in the production process. This
does not occur with more elite, designer furniture firms. Thus it is democratizing in
the sense that design as an elite function and object, becomes available to all through
the individualisation process of the self-assembly. The democratic design allows for
this individualisation. IKEA's self-assembly furniture allows for individuality to
develop in relation to the mass commodity culture of which IKEA itself is a major
representative. Yet the IKEA mass commodity object is individualised through the
self-productive work of the individuals who simultaneously and paradoxically carve
their selves into, and separate from, the global consumer society.
Many people have humorous anecdotes regarding the self-assembly nature of IKEA
furniture. What with the missing screws, the splintering particleboard or the sections,
which just don't seem to match. This self-assembly can too easily be passed-off as a
labour-saving device on behalf of the producers/suppliers, and as a money saving

would appear on the surface to be a pragmatic cost saving provision. Yet I believe

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process for the consumer, happy to expend their labour in lieu of higher prices. It

that a lot more significance should be placed upon self-assembly furniture. For it is
both a producer and consequence of numerous highly significant social and cultural
processes, which are occurring today, and in recent memory.

As the IKEA brand becomes more established and is seen as a family shopping
experience, there may be the temptation to increase the level of services available to
the customers, continually improving on the Swedish shop and restaurant concepts.
However, these value-added services may add to operating costs. The opportunity
costs of using the resources for such added value services may be re-deployed in
providing lower priced goods or increasing the image of the IKEA brand through
advertising and marketing.
Acceptance of the Ikea model by Indian middle-class households will also prove
key to success, but is by no means a given. Big-box home retailers have generally
steered clear of the Indian market, partly because there is a tradition of wealthier
Indian households having products made to order by local craftsmen, generally

training staff not only to deliver products but also to assemble them on site.

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at very competitive prices. Overcoming this problem may involve Ikea hiring and

Because of Indias poor infrastructure and low car ownership levels, Ikea is likely to
have to locate its stores as near as possible to central urban areas, as it has done in
China. No doubt local planning permissions will come attached with demands to
improve local infrastructure such as utilities and access roads, as has been the case
in Russia and other markets. All of which could add delays and cost. Such issues are
not, of course, insurmountable. The experiences and extraordinary patience the
retailer has demonstrated in Russia and China should stand Ikea in good stead.

CHALLENGES IKEA MAY FACE IN THE INDIAN MARKET:

The company plans to enter India in a big way with big ticket investments
aggregating to about USD 2 billion (more than Rs.11000 crores) and it is awaiting
the FIPB (Foreign Investment Promotion Board) nod for a take-off of its operation
in India. The India-Coming of the company is going to be a challenging experience
to IKEA, because Indian environs and Indian customers are truly heterogeneous in
every way. For Indian customers shopping at IKEA is going to be a totally different
experience.
Land acquisition will be a major hurdle for Swedish furniture retailer IKEA to set
up its stores in India and it may have to even depend on public auction by
government, according to real estate consultants.( as of now)
The company, which has received nod from the government for its plans to invest
Rs. 10,500 crore earlier this month, may also have to tweak their business model for
India considering the constraints for right space, consultants added.

may acquire land in two ways - through public auction by the government or directly
purchasing it from owners,"

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"Land acquisition is a difficult and challenging proposition in India... The company

Store Format- Low % of car ownership

Competitors with Low Pricing
Low Home and Garden expenditure
Scandinavian design too plain
No Brand Awareness
a. The store format is completely different and hence it will be a long on-going
daunting task for Indians to get used to it. As IKEA stores are very large it would
easily take many hours or even a day to scan through the whole store to find
what they exactly need. It requires a lot of patience, time and effort just to
understand this very new and different store format.

b. To enjoy the true shopping experience of IKEA your approach to shopping has
to be disciplined you need to follow the arrows painted on the floor and also
take guidance of Sign marks which gives you directions to navigate around the
store.

help you navigate the byzantine multi-storey shopping arena. The good news is

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c. There is little human assistance and it is arrows and glow signs all around that

that you can touch, feel and explore the furniture and related accessories required
for every room, nook or corner of the house
d. IKEA is not only a self-help store it is also a self-fix store. Note that whatever
furniture products/items you pick you will have to assemble them at home.
Though this per se this may not be a discouraging factor since assembling is
clearly not a rocket science. But our psyche makes this task seem daunting.
Because of IKEAs "anti-service" approach, it may give rise to many customerrelated problems. As customers are responsible for selecting, transporting and
assembling the furniture themselves, they may feel a great sense of
frustration and dissatisfaction should they fail to assemble the furniture
correctly? IKEA is compromising on the customers who want end to end
solutions.
e. Customers will have to lug all their purchases in carts (some of them could be
huge in dimensions completely knocked down parts very well packed in
cardboard boxes) till their car / taxi.
f. Not many store attendants to come to your aid one they are in the store. They
have to do a lot themselves, which might seem to be too much for Indians to
handle.
g. Even at the exit they need to pack the things that you have bought for which a
designated corner with papers, scissors, and tapes are readily provided. This is all
a do-it yourself corner. The flat-pack furniture, fortunately, comes in cardboard
boxes. Indians are used to their large shopping bags being reached to their
cars by helpful shop assistants. Even the furniture makers home deliver beds,
book cases and sofas.

clean and functional, they are easy to assemble, screw and ready to use,

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h. Indians like buying one time long lasting purchases and IKEA furnitures are

contemporary in design with good and affordable pricing, but do not obviously
last a life-time. This might seem little unattractive to the Indian mind-set.
i. The other worry is the lack of self-regulation or sense of discipline among
Indian consumers, especially those who go shopping with little children. The
scale of the shopping space, in case Ikea plans to replicate its model in India,
could be a quiet consumers worst nightmare come true with rowdy children
jumping over display furniture and running across corridors. Hope the retailer
will ensure a safe and peaceful shopping experience for its customers with the
help of support staff who will enforce order.
j. Competition with local retailers with very low prices can also be a challenge.
k. Low percentage of car owners in India and transportation of the items might be
a difficult task for a lot of people.
l. Low expenditure on home and garden items.
US: $2000
China: $300

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India: <$50

m. Lack of brand awareness can also be a major issue for IKEA in India.

TRADE OFFS FOR IKEAs RETAIL OPERATIONS

IKEA compromised on that in order to achieve the vision of providing wide range
of well-designed, functional home furnishing products at prices so low that as many
people as possible.

In a market where consumers view expensive goods as of a higher quality, IKEAs

low-cost operation strategy would backfire. If IKEA goods are seen as cheaper
than other furniture retailers, they may be seen as inferior quality. So here IKEA
is compromising on not serving the premium furniture buyers.

To prevent their stock from becoming obsolete and to reduce costs, IKEA only
order items when they are low in stock. Such a lean buffering capacity and may
lead to IKEA encountering stock-outs where popular items have sold out quickly.
The distribution of products from a warehouse may also lead to increased
difficulty supplying the demand for more popular items. So it reduces the price
for customer by compromising on waiting time/lead time for customer.
Customers who visit the shop based on what they have seen in the catalogue may
be disappointed if they have driven all the way to the IKEA store, only to realize
that it is out of stock.

WHAT SOLUTION IKEA CAN IMPLEMENT IN INDIA

a. A broad spectrum of customers who will be noisy and nosy with children
moving confidently without any chaperone often inspecting the items or pulling

b. Indians swear by VFM (value for money), so sales of IKEA products should not
be an issue at all.

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or pushing them.

c. Business would be very good only if the company provides additional help. Most
Indians are averse to DIY (Do-it- yourself). So IKEA needs to provide
assemblers, technicians who would do the assembling of the furniture for the
customers at their residence. And this ancillary department itself could be a
money-spinner.
d. A good number of customer care persons need to move within the precincts of
the store, since one in every three customer entering the showroom would be
more comfortable asking for directions and taking help from the customer service
rather than take the trouble of reading instructions however clearly written or well
placed such instructions are.
e. DIY has never been Indian peoples forte, so you (Company) need to provide a
team for packing the wares that the customers have bought. A separate packaging
department would be scorer.
f. You need to have a separate cloakroom facility so that after the purchase the
customer could lodge all his wares in a cloakroom and relax at the food court (for
which you need to dedicate an entire floor). The food court again will be a
money-spinner.
g. Cleaning in the Indian households is done every day without fail almost like a
ritual. Hence furniture sold needs to be sturdier to withstand the frequent shifts

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and pushes made at the time of cleaning by the maidservants.

BIBLIOGRAPHY

1. http://businesstoday.intoday.in/story/how-ikea-adapted-its-strategies-toexpand-in-china/1/196322.html
2. http://www.eurobrandsindia.com/blog/2012/07/01/ikea-in-india-finally/
3. http://articles.economictimes.indiatimes.com/2013-0516/news/39310450_1_juvencio-maeztu-ikea-foreign-investment-promotionboard
4. http://www.retail-week.com/topics/international/international-analysisikeas-plans-to-enter-india-win-cabinet-approval/5048899.article
5. http://businesstoday.intoday.in/story/how-ikea-adapted-its-strategies-toexpand-in-china/1/196322.html
6. http://www.business-standard.com/article/economy-policy/india-to-get-firstikea-store-in-some-years-112071202012_1.html
7. http://www.rediff.com/business/interview/interview-weve-tried-to-

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understand-indias-needs-ikea-india-chief/20130516.htm

TABLE OF CONTENTS
INTRODUCTION TO IKEA ............................................................. 1
IKEAS ENTRY INTO INDIA WILL MEET WITH FIVE IMPORTANT
CUSTOMER NEEDS: .................................................................. 4
DO IT YOURSELF CULTURE: ......................................................... 9
CHALLENGES IKEA MAY FACE IN THE INDIAN MARKET: ........... 12
TRADE OFFS FOR IKEAs RETAIL OPERATIONS ........................... 16

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BIBLIOGRAPHY .......................................................................... 18