IKEA has always been known for large, sprawling stores sized 300,000 to 400,000 sq ft. The Swedish furniture major is now changing tactics, by going small and launching stores that are one-fourth the size or even lesser. On December 9, IKEA India is opening its first such, sized 80,000 sq ft, in Mumbai. It signals a change in the furniture companies’ game plan for the country, as it tries out an omnichannel approach. It will be launching a mix of small and large-format outlets across the country, along with city-centric e-commerce apps. In a conversation with Moneycontrol, Per Hornell, country expansion manager and area manager, IKEA India, talks about their India strategy and the curiosity this country inspires.
Which are the other cities in which you will be launching small-format city stores?
We are already working on a few more city stores in Mumbai and a city store in Bengaluru. We are actively looking at Delhi, and have bought two land parcels there for large-format stores and would like to find good locations for city stores as well. Now we have started to look at Tier-II cities as well. However, we are not sure in which order these stores will be opened, since that depends on finding the right location.
How much do you invest in setting up a small-format store?
It depends on the condition of the building that we find. If it is good, then the investment needed will be less. If it is not, then we will need to spend more to create the IKEA environment, even double of what we would have on the former. The investment range is broad. It’s a little bit difficult to give an exact number.
Let me rephrase. How much will you save with a small-format store, when compared to a large-format store?
If we are located further away from the city, then the land comes at a lower price, so we can spend more on the building. If it is in the centre of the city, then land becomes more expensive and the building has to be a little less expensive. For us, it is always about how much we can afford to spend, to keep prices affordable for our customers. This is not so much about saving money as much as it is about being closer to the customer.
What will be the size of an average small-format store?
It will be around 80,000 to 100,000 sq ft. And, regular stores will be around 300,000 to 400,000 sq ft.
In earlier interviews, IKEA had given the size of these stores at 200,000 square feet. Has the company reduced the size further?
It will depend on the feedback we get from customers. The Mumbai city store is roughly 100,000 sq ft. If our customers are happy with the way that we are present here, we will discuss if that is a good size for other stores too. If the feedback is that they would prefer a larger size, then we will have to re-evaluate.
What about the plan to open extra, small stores and planning centres? Is that still on?
It is. We have decided we want to reach 200 million people. In cities such as Bengaluru, Mumbai and Delhi, we will have our 400,000-sq-ft stores, 100,000-sq-ft stores and an online presence. And once we are done with these formats, we will look at opening planning centres. But like we said in the beginning, we don’t want to sell a part of the IKEA range. We would like to sell the full IKEA range.
What kind of timeline are we looking for these even, smaller stores?
We might open them in two years in cities such as Mumbai and Bengaluru, and build a customer base. Then, the customers in these cities will know IKEA and IKEA will know the customers.
You started by launching a large-format store in Hyderabad, then changed your plans in Mumbai to launch online instead of a large format store, and now you have introduced small-format stores. Is IKEA still figuring out its India strategy?
We want to be curious and India is the right place for that. It is a society that has a large percentage of young people who are digitally advanced in shopping as well. We would like to listen and learn, and be part of this developing market. If we say that the customers have to fit into this (what IKEA is offering), then many may not choose to stick with IKEA. So we would like to do it the other way around. Our stores will always have something to offer, because we can have both a range of products and meet the customer in person. In addition to that, we will also be present online. The app has seen 2.5 million downloads already. Then, we are launching a remote-planning service. We are figuring it out and we are curious.
You recently launched e-commerce operations in a few cities in Gujarat. Which other cities will you take this to, next?
We would like to assess customer reaction from the cities that have this service, gain experience and then take it to the next state.
DIY is one of IKEA’s bestselling products outside of India, but not here. With people staying home during the pandemic, did you see a shift in consumer behaviour towards DIY?
When we opened in Hyderabad in 2019, our little tool kit was among the top ten products in terms of sales. During the pandemic, its sales went up even further. That is the shift in consumer behaviour we have witnessed. Indians are willing to assemble things when they have time on their hands and they are good at it.
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