How Ikea's online-first strategy worked in the Indian market

Online contributes over 20 percent of their revenue, as opposed to the industry average of 11 percent, says the Sweden-based global home furnishing brand

By Naini Thaker Forbes India Staff

Published: Sep 18, 2024 05:32:11 PM IST

Updated: Sep 23, 2024 11:03:48 AM IST

Full Bio

Susanne Pulverer, CEO and chief sustainability officer, Ikea India; Image: Neha Mithbawkar for Forbes India

Global home furnishing brand Ikea has recently launched an AI-powered mixed-reality tool called Kreativ. This allows people to turn into an interior designer, get creative and visualise how furnishings will look, and fit in their homes. “Users can dive into a seamless mixed-reality adventure where they get to play interior designer with just a drag-and-drop interface and cutting-edge AI,” says Susanne Pulverer, CEO and chief sustainability officer, Ikea India. Additionally, users can download the design or co-create with family and friends. This helped Ikea transform its online channel from being transactional to experiential. On Monday, the company also announced the introduction of a 365-day exchange and return policy for its consumers, making its shopping experience even more convenient and flexible.

The brand has come a long way—from a tiny business in Älmhult, Sweden—to touching global sales of Є47.6 billion (FY23). Ingvar Kamprad founded Ikea in 1943 at the age of 17, selling household goods like pens, wallets and picture frames. Älmhult, the town where Ikea was founded, is in a remote area of Sweden, and was difficult to reach potential customers in the bigger cities. Due to this, the Ikea catalogue was born in 1951. Kamprad had decided Ikea should sell good furniture at low prices. “Why are beautiful products only made for a few buyers? It must be possible to offer good design and function at low prices,” he said. Close to 80 years later, this core value of affordability remains.

The India story

Ikea has been sourcing for various product categories from India for over four decades now. But, on the retail front, the Sweden-based company opened its first store in Hyderabad, in 2018. Currently, in addition to its online presence, it has a total of four offline stores. The next large format stores are likely to open in Gurugram and Noida. Earlier this year, Ikea India tied up with logistics provider Rhenus Group in India, to support the company’s ecommerce expansion in Delhi. “We are prioritising the metro cities first for offline stores, and catering to the smaller towns via online,” says Pulverer. After Delhi, Ikea is looking at opening stores in Chennai and Pune.

Ikea’s online business is growing strong, along with its offline stores. “Online contributes over 20 percent to the total revenue. This is much better as compared to the industry average, which is 11 percent,” notes Adosh Sharma, country commercial manager, Ikea India. Going forward, the company will continue focussing on the omnichannel front. India has seen close to 180 million people so far in their stores, and 2.5 million loyal IKEA family members, over the six years. “Over the last six years, we've taken a lot of learnings. We've understood that India is a market where access and reach is very important,” he adds.

Hence, omnichannel is key for Ikea, where online becomes our first point of entry. “We want Ikea to be either 30 minutes or one click away,” says Bhavana Jaiswal, head of ecommerce, Ikea India. Interestingly, in most markets, Jaiswal explains, “Ikea enters with a physical store first, and then moves into ecommerce. But given how tech-savvy India is, we decided to go digital first—and it has worked well.”

In terms of sales, India isn’t as big for Ikea globally, explains Pulverer, “because we are in an early phase of building up the brand. But, in terms of long-term potential, it is an extremely important market for us. We are getting a lot of support from the global team to develop India. We see that if we do things right here, build affordability for India, that will help so many other markets as well.”

About 30 percent of products sold in Ikea India stores are locally sourced—especially for categories like textiles, rugs, carpets, comfort products, metals, plastics, glass, home décor, mattresses, and more. Ikea’s supply company—Supply Area South Asia (SASA)—works with 45 home furnishing supply partners from across India, with some relationships spanning on an average of more than 11 years.

In addition, it engages with 48,000+ direct co-workers and two social entrepreneurship partners that involve 3,000 artisans. The organisation also works with more than 90,500 farmers involved in better cotton production, ensuring responsible sourcing of raw materials for textile products.

IKEA’s competitive edge

Home furnishing in India is still quite unorganised barring a few large players. “Awareness of the idea that it is worth investing in your home, because it has a value to your life, is still lacking,” says Pulverer. Hence, having multiple players helps generate this awareness. “We are building on our strengths, not focusing as much on competition.”

Another competitive edge for Ikea is affordability. “But it’s not just about the prices for us, it’s about the value for money that we want to create for the consumer. We try to ensure there is something for everyone in our offering,” she adds. Of the 6,500 SKUs, Ikea India has about 1,000 products that cost less than Rs 200 and 60 food items that costs under Rs 100 too.

While Ikea has a very global approach to most of its designs, there are some gaps that need to be filled. Pulverer explains, “Our sleep solutions—one of the key focus areas for the coming fiscal year—vary from country to country. Indians’ requirements for their beds are very different from Europeans. For instance, the need for more storage around the bed, as compared to most other countries.” So, while 90 percent of Ikea’s products cater to consumer needs, there are always some gaps that need to be addressed. During their recent IKONIC event in Mumbai, Pulverer also announced the launch of their new pet collection, its festive collection and the introduction of hot dogs for the India menu.

Sustainability is also a key part of Ikea’s extended services. For instance, 80 percent of deliveries across the country are done via electric vehicles; a collection of bedspreads with 50 percent recycled cotton; using solar power for stores and more. “Sustainability sits at every touch point with us. For instance, Ikea’s taps and showers help save 25 percent more water—the product design is developed that way,” reckons Sharma.

Pulverer is happy with India’s success, but she says there’s a long way to go. To succeed further, Pulverer feels Ikea needs to become more relevant for the Indian market—“from how we communicate in terms of marketing and how we make our product range more relevant, to how we price products and understand more on who our consumer is”.