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I discovered last week that Ikea is due to open its first store in India in the spring of 2018. It appears to have taken the company quite a long time to establish a presence in the country, particularly when you consider that Ikea started its retail operations in China nearly twenty years ago.
Clearly there are a number of issues that a retailer like Ikea needs to consider when entering a market that offers such high potential. A critical question is pricing. In the West, Ikea is considered a low price provider of furniture and other
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household items and has a mass market appeal. In emerging markets it is a more aspirational brand and a low pricing message is a recipe for confusion among consumers. That’s why the company decided to target the young middle class demographic in China who have higher disposable incomes and are more attuned to the design style of Ikea’s products. It’s likely that they will replicate this strategy in India.
Another major issue is the extent to which the company is able to set up a local supply chain. This is doubly important in India where high land, transport and customs costs make it difficult to keep prices low. Ikea appears to have spent a good deal of time ensuring increased local sourcing in the longer term. Then there are the more localized cultural and taste issues that mean offering a different range of products to suit the Indian home or being able to provide an alternative to the self-assembly method that is loved and loathed in equal measure by Western consumers.
Ikea will undoubtedly have learned a great deal from its experiences in China and will be well prepared to hit the ground running in India. From an Indian consumer perspective, their weekends may never be the same again.
Guy Dunn
P.S. Here are some related articles I found on EMIS recently
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VIETNAM PART OF IKEA'S GLOBAL EXPANSION
Vietnam and the Philippines will be the next Southeast Asian countries to welcome IKEA. Swedish home furnishings giant IKEA has included Vietnam in its five-year global expansion plan, according to the company's CEO.
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CHINA CEMENT SECTOR REPORT 2017/2018
China is the largest cement producer in the world, accounting for 57.4% of the global cement output in 2015, according to estimates from the US Geological Survey’s National Minerals Information Center (USGS). The cement sector in China is characterised by overcapacity, large number of enterprises and fierce competition.
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CEIC DATA POINT OF THE WEEK
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CEIC Data is a sister company of EMIS and part of the Euromoney Data Division
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CHINA’S MANUFACTURING PMI ABOVE EXPECTATIONS
China's manufacturing and non-manufacturing PMI increased by 0.2 ppt and 0.5 ppt to 51.8% and 54.8%, respectively in Nov 2017, as both indices remained in expansionary territory (>50%).
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Below are the most read articles in the past week on EMIS Perspectives, our daily blog of emerging market news and insights.
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AZERBAIJAN AIMS AT THE DEVELOPMENT OF BEEKEEPING
The Azerbaijani Ministry of Agriculture has prepared new proposals for the development of beekeeping in the effort of ensuring of food security, the employment level and income increase of rural residents, at a joint event with BP in Baku, dedicated to the support for the development of beekeeping in Azerbaijan.
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ABOUT EMIS
EMIS operates in and reports on countries where high reward goes hand-in-hand with high risk. We bring you time-sensitive, hard-to-get, relevant news, research and analytical data, peer comparisons and more for over 120 emerging markets.
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EMIS CHARTS uses selected data points from the subscription-based EMIS service, to provide you with an interactive overview of sectors, key players and macroeconomic trends across 120+ emerging markets and allows you to create your own charts.
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