Can IKEA turn mile-long queues into profitable sales?

Hit hard by the pandemic, IKEA's net loss in India went up to Rs 807.5 crore in the financial year ended March 2021 from Rs 720.7 crore in the previous year. (Illustration by Suneesh K.)

The long queues outside the newest IKEA store that opened in Bengaluru might hold out the promise of a rosy future for the Swedish furniture company. But as many multinational corporations have found over the last 30 years, the Indian consumer market can be highly deceptive. High footfalls don't always translate into commensurate sales.

Global auto majors as well as food giants have, over the years, discovered that, much to their chagrin. In the first flush of liberalisation, the annual Auto Expo in Delhi was a major milestone on the social calendar of Indians. Visitors planned trips to Delhi to check out the latest cars and bikes, and the crowds would be similarly unmanageable. Overwhelmed, organizers resorted to staggered hours for business and general visitors to manage the surge of humanity.

Yet, 30 years after the first of those expos, very few of the MNCs that rushed to exhibit their beauties have managed to eke out a significant share of a market that is dominated now, as it was then, by the homegrown Maruti Suzuki. The list of global auto giants whose eyes must have lit up when they first showcased their products in the country, only to see all projections fall flat when it came to purchases, is long and impressive. It comprises such well-known brands as Datsun, Subaru, Citroën, Peugeot, Renault, Ford, Mazda, Mitsubishi, Isuzu, FIAT, Daewoo, Daimler, GM, Opel and Chevrolet.

Maruti’s success vis-à-vis all these marquee names isn’t emblematic of any great anti-MNC sentiment or answer to the call of atma nirbharta. No. It is just that Indians are great value seekers. They look for value in everything. Going to the auto expo and looking at beautiful vehicles is a great experience in itself, worth the cost of the commute. Buying the car is a different thing altogether. So regardless of their budget, Indian buyers will check out everything that is available. It's a spirit brilliantly captured by the 2015 Amazon ad with its tagline “aur dikhao, aur dikhao”, roughly translating to “gimme more”.

Many other companies ranging from Timberland to Danone and Metro AG have discovered that seeing isn’t always buying in India. It also explains how online shopping took off in the country the moment the digital payment system was streamlined and made easy to use. The discounts and the cash backs that both the merchants and the payment processors offer have been exploited to the hilt by canny Indian customers. At the same time, startups that celebrated their early success through the Gross Merchandize Value (GMVs) metric, rather than looking closely at what they were making on each transaction, are doomed to the same fate as gullible brands that mistook window shopping for presales.

To be fair, IKEA knows a thing or two about value-for-money products. Its great success over the years stems from its image as a company that offers customers excellent products at affordable prices. So important is the price to the customer for the company that often it will work backwards from a price point and reverse-engineer the making of a piece of furniture to fit that number. But whether a two-seat modular sofa for Rs 48,000 or a set of two small side tables for Rs 17,990 qualifies as value-for-money in India, isn’t clear.

Hard numbers will also make the company wary of the long road ahead. On the same day as it had to ask overenthusiastic visitors to take a look at its online shopping options instead of enduring three-hour waits outside its store, it also released its latest financial numbers for India. Hit hard by the pandemic, its net loss went up to Rs 807.5 crore in the financial year ended March 2021 from Rs 720.7 crore in the previous year.

Sure, it is early days. But four years after it opened its first store in India, in Hyderabad, IKEA will be watching very closely the number of orders emanating from the vast crowds lining up to check out its wares.