IKEA is present in China. Eventually it will have stores in India too.
In a mean time, there are plenty of other alternatives…
Last week IKEA has very publicly announced plans to enter India’s retail market. In fact, there is nothing really new about this announcement. IKEA has office in India for a quite some time now that is busy sourcing (last year IKEA sourced produce worth approximately 500 mln Euro), and actively researching as to when and how to start retail activities. IKEA still haven’t announced any precise plans when the first store will be opened, and the investment cycle estimated to reach 1,5 bn Euros in 20 years, will begin.
Although the news itself doesn’t reveal much of substance, it sends a signal of trust in India’s growth story. And I believe rightfully so. There is an acute shortage of IKEA-like all-in-one stores, that would offer affordable yet fashionable furniture and home accessories. The success for IKEA stores seems to be assured, having in mind flourishing industry of IKEA product replicas, manufactured based on catalogue pictures.
Despite seemingly bright future for IKEA in along term, in the nearest future success might come easier to more nimble and flexible furniture brands that are open for joint venture business model or sourcing to local retailers. Those producers might lack the brand power of financial muscle of IKEA but being less prominent might be to exactly what’s needed.
IKEA is famous for design, affordable prices and quality. However, IKEA itself is not a manufacturer and sources everything from independent vendors. Many of them happen to be located in Lithuania.
Advanced and efficient furniture industry, allows lithuanians to compete with other eastern European suppliers as well as low cost chinese vendors. Last year Lithuanian furniture industry has reached approximately $ 1 bn total sales volume. Vast majority of Lithuanian furniture industry’s output comes out labeled with IKEA brand. While working with multinational like IKEA has its pros and cons, overall this long lasting collaboration has helped Lithuanian industry to modernize, adopt advanced managerial practices and, as a result to become more competitive.
While sourcing to IKEA, Lithuanian companies not only learned how to achieve and sustain high quality but also sensibilities of scandinavian design. Idejos namams, one of the leading furniture retailers in Lithuania is a good example of that (Figure 1). To be fair, it is unlikely that any of Lithuanian furniture brands will become competitors to IKEA any time soon . But they have their own value proposition and could do well in India.
1. Here you may find enlightening analysis comparing IKEA to Apple retail. IKEA’s retail business, unlike Apple, took a long time to become global phenomenon. The future is unpredictable.