Moneycontrol
Jun 02, 2013 09:07 PM IST | Source: CNBC-TV18

After long wait, IKEA in no rush for quick launch of stores

Juvencio Maeztu, head of IKEA's operations in India, says that no shortcuts will be taken in the process of launching its stores in India. With access to the largest number of people being the retail giant's credo, Maeztu adds that the company’s focus is on the cities with the largest populations.

It has been a long wait for IKEA to actually be able to get started in India. Though from a sourcing point of view, IKEA has been operating in India for 25 years, it has recently (May 2, 2013) got the official nod from the government of India to set up single brand retail operations in the country.

In an interview to The Forbes Show on CNBC-TV18, Juvencio Maeztu, head of IKEA's operations in India, says that no shortcuts will be taken in the process of launching its stores in India.

With access to the largest number of people being the retail giant's credo, Maeztu adds that the company’s focus is on the cities with the largest populations. Offering over 9,000 products for the entire family, Maeztu adds that at IKEA, "We don't sell products, we sell inspiration."

Below is the edited transcript of the interview on CNBC-TV18.

Q: Has trying to get a retail licence in India it tested your patience?

A: We are very determined but very patient at the same time. We started this journey six years ago. Things are finally moving and we are satisfied with the progress so far.

Q: Was there a point when you thought it was not worth the effort?

A: Generally, you want things to move quickly as possible. But at IKEA, we are not led by the calendar. We are led by the long-term decisions and taking the right decision and adopting the right approach that will further the implementation of those decisions.

Q: When will you open your first retail store in India?

A: Now that we have the approval, we will kickstart two parallel processes — finding the right locations and developing the capacity of our suppliers. In terms of locations, our focus is on the big cities with high population as that will aid us in our objective of reaching out as many people as possible because at IKEA, people come first.

When deciding on the location in the cities, factors such as access to roads and public transport are important. Usually such locations do not come cheap. To help us with this challenging task, we will initiate talks with the local authorities and regional governments. We will also make estimates of how the city will look like in 10 or 20 years’ time. The whole process requires time and we will not take any shortcuts for the sake of a quick launch of an IKEA store.

Q: Have you identified or is there a preferred city where you would like to launch your operations from? Have you hired consultants in India to help you get started? In what format will you launch your stores?

A: We are now exploring the market. The first level of priorities are the big cities with the largest populations..

I truly believe that the IKEA format is going to work. What is an IKEA store? An IKEA store has more than 9000 different articles for the entire family. We offer an experience for the whole family. Al so remember, at IKEA we don't sell products, we sell inspiration.

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Q: The other big question is how you are actually going to price your products in India because  the world over the IKEA model or the IKEA brand is seen as a mass market and low-price brand. But  in India will your prices be a little higher to target the aspirational. upwardly mobile middle-class Indian?

A: Our long-term approach is to fulfill the vision and the business idea of offering products of  high quality and at affordable prices.

Q: But 'affordable' in the US and 'affordable' in India could mean very different prices?

A: Exactly. But afforability will never be compromised. And now when it comes to India, we will not come to  from  the top of the pyramid. We want to be affordable for the people living in the cities.

Q: What are your rollout plans? In your application to the government you said that you  hope to launch 25 stores over a certain period of time. Have you started the process of finalising the cities and identifying the location for your stores? start operation?

A: We have not decided on that yet.

Q: How long would it take you for you launch you first store?

A: It could 4-5 years.

Q: Four-to-five years before you open your first store?

A: It all depends on the process and the ability to find the right location in the right  city at the right cost. But there will be no compromises. It is essental for us to win the support  and cooperation of the states and the local authorities.

Q: You have been sourcing from India for 25 years now. Will you need to find new suppliers or can you beef  up sourcing requirements from the existing suppliers?

A: We will develop both existing suppliers and new suppliers to follow our standards through our  programme called IWAY. We have been sourcing from India for the past 25 years and we will continue to do so. This will allow us to help Indian suppliers to connect it with our global supply chain and be more competitive.

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Q: What is the current value of the the products you source from India?

A: We source products worth USD 450 million.

Q: How much do you hope to increase that by?

A: We want to increase it by two times in the coming three years.

Q:This business of the one-size-fits-all model clearly cannot be the approach if you intend doing  business in new markets like India and China. Do you plan your DIY model to succeed in India?

A: We always start with focus on the consumer because we know the consumer is smart. The consumer wants to pay low prices for high value and this fits very well the IKEA concept.

At IKEA, a product is designed and then sent to the factory for large-scale production. The products are sold at the store  at a flat rate.  In the UK before, we offer delivery services- you just walk around and choose whatever  you want to buy and then IKEA takes care of delivering the product home.

Q: You have spent about a year in India. Do you believe the Indian consumer would go the DIY route or  would want IKEA to assemble and deliver?

A: I believe that Indian consumers will go to an IKEA store, fall in love with the inspiration and  solutions, have a fun day-out and at the end of the day take some products home- some of those products may be DIY while others may be assembled by IKEA. I believe that  different consumers will like to do what they want at the lowest possible price.

Q: But in terms of creating that ecosystem you will have to train people. When will you actually  start the hiring process and what kind of manpower will you hire?

A: This is the most fun part of our job - people. We have just startd to select a few people.  But as soon as we have the land to build our store, we will start to hire more people. We are looking for individuals who share IKEA's values and are ready to grow with the brand. I have high ambitions to position IKEA as a great place to work and be one of the best employers in the country.

Q: What are the specific areas that IKEA would like to  zero-in on?

A: I am extremely excited about the many aspects of India. Cooking and eating food is a major activity here.

Q: You mean cooking appliances?

A: I mean cookery or dinnerware. In India, life revolves around food. People come together at the  table and eat together. I also like the joint family system.  All these things give us a lot of inspiration to create a better life for everybody.

Q: You have a long a way to go before you open your store in India. When will you start the formal process  of  applying to various state governments for the licences required to open your store?

A: This is a process that we will kickstart over the coming months. We also need to have a good understanding  about details regarding the location of the store before applying for the requsite licences.

Q: What is your experience been in dealing with India's bureaucracy?

A: Life is not easy and you have to overcome different challengess. Our key strength is our popularity in India and the positive feedback from consumers. Another strong advantage is our business model that ensures a strong connection between the consumer, the factory and the retail store. But what allows us to stay ahead of the competition is our long-approach. We are not led by the calendar.

Q: So, you enjoy doing business in India?

A: I love India and the people.

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