Planning to renovate your home or office? You may want to wait for a while. With the government on Thursday approving Swedish home store giant IKEA’s $1.95-billion plan to open stores across the country as part of India’s decision to allow 100 per cent FDI in single-brand retail, interior decor consumers should prepare themselves not just for more variety in furniture and furnishings, but also to get more for less.
With IKEA’s decision to set up 25 stores in India through a 100-per cent owned unit called Ingka Holding, homegrown players like the K Raheja Group’s Home Stop (part of Shoppers Stop), the Tata Group-promoted Westside Home furnishings, Micky Jagtiani-led Lifestyle Store’s Home Centre, the Kishore Biyani-run Future Group’s HomeTown and Nilkamal Ltd’s @home are busy charting out strategies to counter competition, if not in the short-term at least in the long run.
“It (IKEA’s foray into the Indian retail market) will open up a new category of business. That’s good. But having said that, there will always be a market for all of us to co-exist. We will expand as per the market potential,” says Kishore Biyani, chairman, Future Group, whose large-format stores sell home and office furniture and other products. The stores are currently limited to the metros and major cities but are slated to open up in tier I and II cities soon.
The Landmark Group’s Home Centre, which operates about 15 home furnishing outlets, has plans to scale up to 25 by 2014. According to Mahesh Shah, president, Home Centre, the idea is to ramp up to 25 stores and target a turnover of `650-700 crore by 2014. In 2012-13, its turnover target stood at `450 crore.
According to a research report by Milagrow Venture Catalysts, the Indian home furnishing market was worth more than $7 billion in 2012. This includes the urban textile home furnishing market ($5 billion), institutional home furnishing market ($250 million), bed and bath ($1.5 billion) and upholstery market ($500 million). Only about 10 per cent of this market is currently organized; the curtain and upholstery market continues to be dominated by regional players like Jagdish Store, Bharat Furnishing and Pride in the north and Vijaya Textiles in the south.
But it’s the huge market potential that seems to have attracted IKEA to India. With more than 330 stores and close to 154,000 workers in 40 countries, IKEA will arrive in India with furniture, blankets, kitchen utensils, bathroom fittings, electrical equipment, tableware, cooking range, toys, leather articles, cosmetics, lifestyle items, consumer electronics and gadgets. After an initial hitch, it has also got the government’s approval to set up restaurants, food mart, nursing home and publications under its brand name in India.
Still, one wonders, how much can a foreign player like IKEA do to change the home furnishings retail market scenario in India?
For one, in the developed world, IKEA’s products are built primarily to suit limited budgets and limited spaces. Two, they are designed to be transported in flat packs, which minimize (or do away with) transportation costs. Three, customers are encouraged to assemble the products themselves, thereby reducing installation costs following purchase.
Experts say these factors may just change the name of the game in India. For one, the local chains may launch ‘ready-to-assemble’ furniture too in order to keep up with IKEA. Two, with the Swedish company expected to offer products suiting limited budgets, the local players will be forced to re-look at their own pricing policy.
For now, the local chains are playing it cautious. “We will continue to remain cautious in this fiscal mainly due to the inflation which is affecting consumer spends. We are not expecting any dramatic change this year, but are confident of growing at a higher pace than the industry rate,” explains Govind Shrikhande, managing director, Shoppers Stop, which operates HomeStop. Currently, there are 13 HomeStop stores across the country and the chain intends to add two more this year. “The two new stores should contribute significantly contribute to our revenue,” says Shrikhande.
The local players are also working on out-of-the-box approaches to get to the customer. For instance, Nilakamal’s @home, which has 20 large format stores in the major cities with an average size of 16,000 sq ft per store, has introduced a 3D design and imaging service for prospective customers, free of cost. Here, designers help customers to plan their interior decor on the computer using its products before making their purchase. The brand also offers clients professional guidance to select products and avail of loan options.
Besides the large retail chains, individual players like FabIndia, Atmosphere, Welhome and Seasons and unorganized local players are also expected to buckle up in the quarters to come, according to industry analysts. Everything really depends on how IKEA plays it. Watch this space.