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Explained: IKEA And The Retail Market In India

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IKEA, world’s largest furniture brand opened its first store in India in Hyderabad on August 9. Initially scheduled for July 19, IKEA pushed back its date because it “needed more time to live up to its quality commitments” or maybe they were just afraid of how the Indian customer responded.

After six years of planning and policy approval, they’ve finally gotten to the stage where their success in India now depends on the Indian customer and not the business and policy officials. But this too will not be an easy feat.

In India, it’s almost like there is no such thing as an ‘average consumer’. With an extremely heterogeneous population in terms of socio-economics and culture, there is no one mold in which all Indian consumers can fit. Future Group CEO Kishore Biyani, while looking into Walmart’s entry into India talks about how challenging the grocery business in the country can be. In an interview with the Economic Times, he said that even after years of being in the consumer business, he was still decoding the Indian consumer.

This just goes to show that understanding India’s consumer sensibilities, especially for a foreign player, is a big challenge. Despite 100% FDI being allowed companies still prefer entering India through partnerships with local brands or franchising because local players understand the market better. And that’s why many brands have to alter and align themselves to Indians in order to succeed.

Here’s our guide on how this can be done.

Tip 1: Our Purchasing Is Low So Keep Things Affordable

The average income globally is around $2,920 a year. However, in India, it’s only $616 a year. This means that Indians have far less money to spend than most other people in the world. Our GDP, when adjusted by Purchasing Power Parity, is equivalent to 36% of the world’s average. Thanks to this low purchasing power, brands looking to enter the country must strategically price their products to suit the needs of the customer.

IKEA could trigger a price war in India’s $49.5 billion home furniture and furnishings market with its Hyderabad store, the first in the country, by offering about 500 products under Rs. 100 and another 1000 products at Rs. 200 or less. Walk into a Zara or H&M store in India and you can find products on sale for as little as Rs. 250 at H&M and at Rs. 390 in Zara. When they just entered the market, their lowest price points were around Rs. 1200-1400. However, they soon realized that in order to draw in more customers and build loyalty in India, both high-street clothing giants have reduced their prices by 25-30%.

This is true for McDonald too. In the United States, a McChicken burger along with medium fries and 6 piece nuggets costs around Rs. 454.86 whereas in India the same costs around or exactly Rs. 272.

Tip 2: When It Comes To Food, We Have Very Specific Demands

Indians as a collective can be very fussy eaters. Since the cow is considered to be holy by Hindus who make up nearly 80% of our population, only 7.69% of Indians eat beef. Cow meat is illegal to sell or consume in many states across the country. On the flip side, Muslims make up 14.23% of the Indian population, most of them don’t eat pork. This is very problematic because pork is the most widely consumed meat in the world and beef dominates the menus in western countries, which is where most international brands come from. This is especially challenging when keeping the prices low is a concern because pork and beef are also the cheapest meats. While creating a menu for their Indian customers, international food chains have to keep all these specifications in mind. Plus, since over a third of the population of India is vegetarian, companies also have to accommodate a range of vegetarian options.

Since 5% of IKEA’s income comes from their signature restaurant, they’ve had to customize their menu for the Indian market. Their traditionally beef meatballs will now be chicken, plus 50% of their menu will include Indian options like samosa, dal makhani, idli and biryani and in order to retain some of their ‘Swedish’ heritage without offending any Indians, IKEA’s signature salmon and shrimp dishes will make up the other 50%. Back when McDonald’s entered the Indian market in 1996, they had to make similar changes too. Since most of their burgers contain beef, they had to change 70% of their menu. The McAloo Tikki burger which is a first from the brand ended up being responsible for 25% of McDonald’s sales in India. Similarly, Dominoes, Burger King and KFC also altered their beef-dominated menus to make them more chicken-based, chicken being a somewhat neutral meat in India while also adding more vegetarian options.

Indians as a collective can be very fussy eaters. Since the cow is considered to be holy by Hindus who make up nearly 80% of our population, only 7.69% of Indians eat beef. Cow meat is illegal to sell or consume in many states across the country. On the flip side, Muslims make up 14.23% of the Indian population, most of them don’t eat pork. This is very problematic because pork is the most widely consumed meat in the world and beef dominates the menus in western countries, which is where most international brands come from. This is especially challenging when keeping the prices low is a concern because pork and beef are also the cheapest meats. While creating a menu for their Indian customers, international food chains have to keep all these specifications in mind. Plus, since over a third of the population of India is vegetarian, companies also have to accommodate a range of vegetarian options.

Since 5% of IKEA’s income comes from their signature restaurant, they’ve had to customize their menu for the Indian market. Their traditionally beef meatballs will now be chicken, plus 50% of their menu will include Indian options like samosa, dal makhani, idli and biryani and in order to retain some of their ‘Swedish’ heritage without offending any Indians, IKEA’s signature salmon and shrimp dishes will make up the other 50%. Back when McDonald’s entered the Indian market in 1996, they had to make similar changes too. Since most of their burgers contain beef, they had to change 70% of their menu. The McAloo Tikki burger which is a first from the brand ended up being responsible for 25% of McDonald’s sales in India. Similarly, Dominoes, Burger King and KFC also altered their beef-dominated menus to make them more chicken-based, chicken being a somewhat neutral meat in India while also adding more vegetarian options.

Tip 3: We Only Buy Things That Fit Into Our Lifestyle

When it comes to culture and lifestyle, India is a dichotomy. This is because India’s biggest consumer market is it’s middle class, which is both aspirational yet traditional. They tend to be more brand conscious because they see brands as status symbols. They buy them not because they can afford them (often time they can’t), but because they represent success. This particularly poses a challenge for IKEA and their Do-It-Yourself format. While the Indian middle class may be inclined to buy IKEA’s affordable yet branded products, building the products themselves would take away the aspirational element of the purchase. It’s because of this that IKEA has hired its largest ‘assembly teams’ totaling 150 employees for its Indian market. This assembly service is unlike any other IKEA operations. They’ve also partnered with local customer services startup UrbanClap who has trained professionals for furniture assembly.

But the Indian middle class is also very traditional and conservative. Accordingly, international companies may have to carefully choose more conservative products to attract shoppers in India than they need to when selling elsewhere in the world. IKEA has done this by adding spice boxes, idli-makers, pressure cookers, and tawas to their collection and even though their bedsheets usually come in neutral creams, whites and greys, in India they will have more bright colors and patterns. Clothing brands like Marks & Spencer, GAP, and Massimo Dutti also tend to choose more conservative cuts and ethnic prints and embroidery for their Indian markets.

Having said that, India’s middle class is constantly evolving. As the country rapidly urbanizes, the average household consumption increases too. People become less traditional and more aspirational. 20 years ago, having home appliances like washing machines and microwaves was only for high-income households, but today with the expansion of the middle class, owning these appliances is commonplace. As 291 million people move from poverty to sustainable lifestyles, owning more of these international branded products will become commonplace. This presents a big opportunity for international brands.

As incomes triple over the next two decades to make India the world’s fifth–largest consumer market by 2025, brands will be able to expand their product range and increase their average price points.

Tip 4: ‘Made In India’ Gets You Tonnes Of Brownie Points

Before 2014, international retail brands hoping to enter the Indian market had to source 30% of their products (in terms of manufactured products or raw materials) locally. Even though this condition has since been relaxed by the Modi Government (by allowing 100% FDI for new single-brand retailers and giving existing brands 5 years to meet the 30% mark), international companies are looking to form sourcing partnerships in India. Patrik Antoni, Deputy Country Manager at IKEA India, says the firm is working hard to meet the 30% local sourcing norm before the 5-year mark. They are doing this mainly through our textile industry, making use of unique local handicraft and artisan techniques in their products for the India market as well as other markets abroad.

Most often seen with car manufacturing brands from overseas like BMW, Porsche and Fiat among many others. Mercedes in India just rolled out their 100,000th car out of their production line in India and this comes almost 25 years after the launch of the brand in 1994 when they completely imported all their units.

This manufacturing activity only got a boost after 2014, when the Indian Government launched the ‘Make in India’ initiative to encourage companies to invest and manufacture in India. Thanks to its low-cost labor and raw materials, India was already a good place for manufacturing, but under Make in India, manufacturing in India comes with many additional incentives. The bureaucratic and red-tape has been cut down, labor laws have been relaxed, land has been set aside for industrialization and tax reliefs have been put in place. No wonder, BMW has decided to increase its localization to 50% and Samsung just opened the world’s largest mobile phone manufacturing plant just outside of New Delhi.

All this brand tailoring sounds like a lot of work, but India’s market is lucrative enough to make it worth the effort. With a population of 1.3 billion and growing, India offers a large consumer base. Plus, it’s rapid urbanization and economic growth means that these custom solution may only be a short-term hurdle while the country assimilates to a global economy.

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  1. Prashsnt K

    What I really liked about the ikea story in India was how a Hydrabad politician invited Ikea India leader to check out Hydrabad. This was when ikea was looking for a location like Delhi. Hydrabad secured land, property and worked with Ikea.
    Second Ikea like any foreign entity has to understand the market they are going into. Language, cultures, income, lifestyle, affordability……
    Any foreign investor coming into India understand s that India has multiple languages, cultures, religions. Every region is different.

    Indian government must continue to relax it’s red tape and it’s complicated laws and really work with foreign investors.

    Hopefully ikeas landing success in India will further encourage the Indian government to push further expansion into India.

    ITS A WIN WIN WIN SITUATION.

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An ambassador and trained facilitator under Eco Femme (a social enterprise working towards menstrual health in south India), Sanjina is also an active member of the MHM Collective- India and Menstrual Health Alliance- India. She has conducted Menstrual Health sessions in multiple government schools adopted by Rotary District 3240 as part of their WinS project in rural Bengal. She has also delivered training of trainers on SRHR, gender, sexuality and Menstruation for Tomorrow’s Foundation, Vikramshila Education Resource Society, Nirdhan trust and Micro Finance, Tollygunj Women In Need, Paint It Red in Kolkata.

Now as an MH Fellow with YKA, she’s expanding her impressive scope of work further by launching a campaign to facilitate the process of ensuring better menstrual health and SRH services for women residing in correctional homes in West Bengal. The campaign will entail an independent study to take stalk of the present conditions of MHM in correctional homes across the state and use its findings to build public support and political will to take the necessary action.

Saurabh has been associated with YKA as a user and has consistently been writing on the issue MHM and its intersectionality with other issues in the society. Now as an MHM Fellow with YKA, he’s launched the Right to Period campaign, which aims to ensure proper execution of MHM guidelines in Delhi’s schools.

The long-term aim of the campaign is to develop an open culture where menstruation is not treated as a taboo. The campaign also seeks to hold the schools accountable for their responsibilities as an important component in the implementation of MHM policies by making adequate sanitation infrastructure and knowledge of MHM available in school premises.

Read more about his campaign.

Harshita is a psychologist and works to support people with mental health issues, particularly adolescents who are survivors of violence. Associated with the Azadi Foundation in UP, Harshita became an MHM Fellow with YKA, with the aim of promoting better menstrual health.

Her campaign #MeriMarzi aims to promote menstrual health and wellness, hygiene and facilities for female sex workers in UP. She says, “Knowledge about natural body processes is a very basic human right. And for individuals whose occupation is providing sexual services, it becomes even more important.”

Meri Marzi aims to ensure sensitised, non-discriminatory health workers for the needs of female sex workers in the Suraksha Clinics under the UPSACS (Uttar Pradesh State AIDS Control Society) program by creating more dialogues and garnering public support for the cause of sex workers’ menstrual rights. The campaign will also ensure interventions with sex workers to clear misconceptions around overall hygiene management to ensure that results flow both ways.

Read more about her campaign.

MH Fellow Sabna comes with significant experience working with a range of development issues. A co-founder of Project Sakhi Saheli, which aims to combat period poverty and break menstrual taboos, Sabna has, in the past, worked on the issue of menstruation in urban slums of Delhi with women and adolescent girls. She and her team also released MenstraBook, with menstrastories and organised Menstra Tlk in the Delhi School of Social Work to create more conversations on menstruation.

With YKA MHM Fellow Vineet, Sabna launched Menstratalk, a campaign that aims to put an end to period poverty and smash menstrual taboos in society. As a start, the campaign aims to begin conversations on menstrual health with five hundred adolescents and youth in Delhi through offline platforms, and through this community mobilise support to create Period Friendly Institutions out of educational institutes in the city.

Read more about her campaign. 

A student from Delhi School of Social work, Vineet is a part of Project Sakhi Saheli, an initiative by the students of Delhi school of Social Work to create awareness on Menstrual Health and combat Period Poverty. Along with MHM Action Fellow Sabna, Vineet launched Menstratalk, a campaign that aims to put an end to period poverty and smash menstrual taboos in society.

As a start, the campaign aims to begin conversations on menstrual health with five hundred adolescents and youth in Delhi through offline platforms, and through this community mobilise support to create Period Friendly Institutions out of educational institutes in the city.

Find out more about the campaign here.

A native of Bhagalpur district – Bihar, Shalini Jha believes in equal rights for all genders and wants to work for a gender-equal and just society. In the past she’s had a year-long association as a community leader with Haiyya: Organise for Action’s Health Over Stigma campaign. She’s pursuing a Master’s in Literature with Ambedkar University, Delhi and as an MHM Fellow with YKA, recently launched ‘Project अल्हड़ (Alharh)’.

She says, “Bihar is ranked the lowest in India’s SDG Index 2019 for India. Hygienic and comfortable menstruation is a basic human right and sustainable development cannot be ensured if menstruators are deprived of their basic rights.” Project अल्हड़ (Alharh) aims to create a robust sensitised community in Bhagalpur to collectively spread awareness, break the taboo, debunk myths and initiate fearless conversations around menstruation. The campaign aims to reach at least 6000 adolescent girls from government and private schools in Baghalpur district in 2020.

Read more about the campaign here.

A psychologist and co-founder of a mental health NGO called Customize Cognition, Ritika forayed into the space of menstrual health and hygiene, sexual and reproductive healthcare and rights and gender equality as an MHM Fellow with YKA. She says, “The experience of working on MHM/SRHR and gender equality has been an enriching and eye-opening experience. I have learned what’s beneath the surface of the issue, be it awareness, lack of resources or disregard for trans men, who also menstruate.”

The Transmen-ses campaign aims to tackle the issue of silence and disregard for trans men’s menstruation needs, by mobilising gender sensitive health professionals and gender neutral restrooms in Lucknow.

Read more about the campaign here.

A Computer Science engineer by education, Nitisha started her career in the corporate sector, before realising she wanted to work in the development and social justice space. Since then, she has worked with Teach For India and Care India and is from the founding batch of Indian School of Development Management (ISDM), a one of its kind organisation creating leaders for the development sector through its experiential learning post graduate program.

As a Youth Ki Awaaz Menstrual Health Fellow, Nitisha has started Let’s Talk Period, a campaign to mobilise young people to switch to sustainable period products. She says, “80 lakh women in Delhi use non-biodegradable sanitary products, generate 3000 tonnes of menstrual waste, that takes 500-800 years to decompose; which in turn contributes to the health issues of all menstruators, increased burden of waste management on the city and harmful living environment for all citizens.

Let’s Talk Period aims to change this by

Find out more about her campaign here.

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A former Assistant Secretary with the Ministry of Women and Child Development in West Bengal for three months, Lakshmi Bhavya has been championing the cause of menstrual hygiene in her district. By associating herself with the Lalana Campaign, a holistic menstrual hygiene awareness campaign which is conducted by the Anahat NGO, Lakshmi has been slowly breaking taboos when it comes to periods and menstrual hygiene.

A Gender Rights Activist working with the tribal and marginalized communities in india, Srilekha is a PhD scholar working on understanding body and sexuality among tribal girls, to fill the gaps in research around indigenous women and their stories. Srilekha has worked extensively at the grassroots level with community based organisations, through several advocacy initiatives around Gender, Mental Health, Menstrual Hygiene and Sexual and Reproductive Health Rights (SRHR) for the indigenous in Jharkhand, over the last 6 years.

Srilekha has also contributed to sustainable livelihood projects and legal aid programs for survivors of sex trafficking. She has been conducting research based programs on maternal health, mental health, gender based violence, sex and sexuality. Her interest lies in conducting workshops for young people on life skills, feminism, gender and sexuality, trauma, resilience and interpersonal relationships.

A Guwahati-based college student pursuing her Masters in Tata Institute of Social Sciences, Bidisha started the #BleedwithDignity campaign on the technology platform Change.org, demanding that the Government of Assam install
biodegradable sanitary pad vending machines in all government schools across the state. Her petition on Change.org has already gathered support from over 90000 people and continues to grow.

Bidisha was selected in Change.org’s flagship program ‘She Creates Change’ having run successful online advocacy
campaigns, which were widely recognised. Through the #BleedwithDignity campaign; she organised and celebrated World Menstrual Hygiene Day, 2019 in Guwahati, Assam by hosting a wall mural by collaborating with local organisations. The initiative was widely covered by national and local media, and the mural was later inaugurated by the event’s chief guest Commissioner of Guwahati Municipal Corporation (GMC) Debeswar Malakar, IAS.

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