Patience has kept IKEA, the euro 27-billion Swedish retailer, going despite entry hurdles. So says Juvencio Maeztu, its chief executive officer for India.
The showpiece for foreign investment in single-brand retailing, it plans to invest what it takes in the India market but will wait to find the right location for its stores, the first of which might not come up before 2015, he tells Business Standard.
Edited excerpts:
Did the company want to give up any time because of the hurdles while entering the India market?
We at IKEA are very determined and patient.
We are oriented for the long term.
We tried to open retail (into India) five-six years ago and the conditions were not right.
We never give up; when the conditions are right, we move on.
Will the euro 1.5-bn investment that IKEA has proposed be spread over the long term?
Yes, this is investment connected with establishing retail stores for around 15 years.
But, it could be more money.
We will invest as much as we need to in India. It’s not that we have got a budget to follow.
When will we see the first store and where?
I don’t know myself.
Our business model is to offer good and quality products at affordable prices.
Our entry plan must support that.
Also, we need to be in the big cities first.
IKEA stores must be big and these need to be located close to the motorway and metro connectivity.
Land prices here are very expensive.
An IKEA store will have to be located in an affordable piece of land, as we offer affordable solutions at our stores.
Are you likely to go to the outskirts of cities, where the land price is lower?
Across the world, our stores are usually located around big cities. We might do the same here. Then, we need to have highway and metro connections.
In some parts of the world, you’ve got stores in the malls. Can that be an option in India?
Our first priority will be to establish the IKEA concept in full, which is to have standalone stores with good connectivity.
But, any indication when the first store would come up?
I don’t know because we are yet to find the right location. Once we do, we will take two years to build the store.
Wouldn’t that mean your first store could come up only by the middle of 2015, at the earliest?
Yes, you could say that.
But if we take longer to find the right piece of land, the first store could take five years or even more. . .
We are planning 10 first and then another 15 in the long term, perhaps in 15 years.
In many ways, it’s a victory for IKEA as you were able to make the government understand on the sourcing norms, etc. How did you manage to convince the government?
I don’t like the words 'convincing' or 'victory'.
It’s more about working together. There’s no secret in this. It’s a very transparent process.
How big is the e-commerce operation for IKEA worldwide? Is it a worry that India does not permit FDI (foreign direct investment) in e-commerce?
We are offering e-commerce in many IKEA locations in Europe, the UK, US.
In India, it’s not a concern now, as our priority is to establish stores and business in India. But in future, it will be good to have e-commerce.
Most foreign retailers are keen to go with partners or have a franchisee operation as they (latter) know the Indian market. But IKEA thinks differently. Why?
We are led by the long-term approach.
To ensure the long-term success of IKEA stores, we don’t go in for partnerships.
Many international multi-brand retail chains like Walmart, Tesco and Carrefour are facing policy hurdles now. Any advice for them?
We can say what we have done and then it’s up to each one to decide.
Like I said before, we have been patient, and we have understood each other’s needs, India’s and IKEA’s.
India is among the low-income countries for IKEA. Is that a challenge for you?
It’s both a challenge and an opportunity.
The same challenge and opportunity is true for South European countries, too.
Do you see competition from the strong local furniture market?
We will learn from them about the local needs. IKEA doesn’t produce furniture but solutions for a better life at home.
Image: Juvencio Maeztu | Photograph, courtesy: Business Standard
