In Hyderabad, India, the Nampally furniture market bustles with customers. They explore a crowded, dusty labyrinth of shops, haggle over prices, and work with carpenters on made-to-order housewares. It’s been the way of life for generations in the world’s second-most populated country.
This is the competition Swedish giant Ikea faces. Ikea is tackling the $40 billion Indian furniture market, which is growing quickly along with the country’s consumer class.
Ikea is prevalent in Europe and the United States. It has reached saturation there. To grow, it must expand. To expand, it must appeal to many people with purchasing resources.
“India is an extremely important market,” says Ikea’s Mumbai-based marketing manager Per Hornell. The Indian market will inform Ikea’s overall expansion plans into areas such as China and Latin America, he says.
Six months after Ikea opened its first store in Hyderabad, the 400,000-square-foot cornucopia of furniture, linens, kitchenware, and other goodies was drawing between 10,000 and 30,000 visitors per day.
The store is well-positioned. It sits within Hyderabad’s Hitec City, home to a cluster of global tech companies including Amazon, Google, and Microsoft. Hundreds of thousands of people in the city of 6.7 million find jobs there. But just 12 miles away, Nampally still buzzes. Demand for India’s traditional custom-built furniture remains high.
Haggling for the best price is an expected part of doing business in Nampally’s market. Mohammed Naoman bargained hard for a better deal on a dining table—and got it. He agreed to the sale only after securing 15 percent off the original price. Retail stores like Ikea don’t negotiate prices. Will Indian consumers accept buying big-ticket items right off the shelf, no questions asked?
Ikea is asking the same question. Foot traffic in-store is good. But it hasn’t translated directly into sales. Younger buyers find the vast showrooms of modern furnishings appealing. Some are buying Ikea’s lower-priced furnishings—such as bookshelves and dining sets. But in general, it’s because they aren’t yet ready to invest in India’s traditional heavy wood furniture. The hottest sellers in the store are the 1,000 or so “impulse buys”—items priced at about $4 each.
“They are here more for entertainment than shopping for furniture,” says Ranjitha Kumari, a software techie with two children.
Ikea could raise standards for customer service in India. But it struggles with India’s cultural expectations. Bantia Furniture is one of Hyderabad’s own companies. Director Surinder Bantia argues that local is best.
“Local players know the pulse of the local customer and will be willing to go extra mile to meet their needs,” he says.