In its first interview after gaining approval to set up shop in India via the single-brand FDI route, IKEA tells CNBC-TV18 that they are led by long term decisions and its priority is to set up stores in big cities.
IKEA, which has been trying to open stores in India for the last six years, will focus on opening stores in big cities on a priority basis and will approach the Indian consumers with an affordable range, Juvencio Maeztu CEO, IKEA India told CNBC-TV18'S Shereen Bhan in an exclusive interview after gaining approval from government.
On May 2, Cabinet Committee on Economic Affairs (CCEA) cleared IKEA's Rs 10,500-crore foreign direct investment proposal after the company first filed the application in June 2012. This is considered to be the biggest FDI in retail sector under the single-brand route.
IKEA, the Swedish furniture major is in no hurry to open first of its stores in India after a long wait. “We need to find the right locations and on the other side we need to develop the suppliers’ capacity and we will not take any short cut for the sake of opening in a quick way an IKEA store,” Maeztu said. He further added that the company will strive to combine Scandinavian style with local tastes.
Below is the verbatim transcript of the interview
Q: Was there a point when you thought it is not worth the effort?
A: Generally, you want things to move quick as possible, but the good thing of being IKEA is that we are not led by the calendar we are always led by the long-term decisions and whatever is the right decision for us, is the right approach.
Q: When do we see your first retail store in India?
A: Now with approval we need to start a parallel process – on one side we need to find the right locations and on the other side we need to develop the suppliers’ capacity. When it comes to the location we need to find the right place and the way we look at is of course we will approach the big cities first where many people are because IKEA is for many people, and then in that sense we need to find at the city level whether it is right location when it comes to good access to the motorway and highway, when it comes to good connection to the public transport, mainly metro connections and on top of that land is too expensive. So, it is not an easy job that’s why we are very keen to talk with the local authorities, with the regional governments in the states in order to find at city level, which are the right places.
Q: In terms of customising the products for an Indian market what is the strategy really going to be?
A: The good thing of being in many countries (as IKEA Group is present in 26 countries) is that we always try to find the right balance in between the global range, the Scandinavian style range, which is our strength and identity. But at the same time to combine them with the local taste and the local needs, so in that sense the range is my expectation that IKEA range will work in India and then ofcourse we are in the process of finding two things, first one, which are the specifics in the range that we need to provide that is not existing, maybe things connected with cooking or eating that they are a specific needs and then we need to provide solution for their needs, but also in parallel is the range presentation, is the way we work with the range for you to satisfy your needs.
Q: The other big question is how you are actually going to price your products in India because world over the IKEA model or the IKEA brand is seen as mass market, low price brand, but in India the experience and again going back to your experience in China are you going to price it a little higher than that, are you going to go after the aspirational upwardly mobile middle class Indian or is IKEA going to be the low price brand that it is everywhere else in the world?
A: Our long-term approach is to fulfill the vision and the business idea, which is good product, good design with quality at affordable prices.
Q: But affordable in US and affordable in India could mean very different things?
A: Exactly. This will never be compromise. And now when it comes to India – we will not come to India from the top of the pyramid. We want to come to India from inside of the society and then we want to be affordable for the many people living in the cities.
Q: You have been sourcing in India for 25 years now. Will you need to find new suppliers or can you beef up sourcing requirements from the existing suppliers, also in terms of that 30 percent mandatory requirement will your global sourcing be counted as a 30 percent or whatever you need to source from India has to be sold in India, is that how the 30 percent works out?
A: We will develop both existing suppliers’ and new suppliers’. We have been sourcing for 25 years and we will keep doing that for the future and the way we do things – the good thing about IKEA is that we are a production-oriented retail company and that’s why at the IKEA that policy of single brand fits perfectly with our business (ends abruptly)…