IKEA’s Digital-First Strategy is Opening New Markets

The plan enables Ikea to go to market faster, while simultaneously gleaning market data and prime customers for their iconic physical experiences.

Thanks for subscribing!

Need to Know

  • IKEA is launching an online store in Pune, India, before constructing their large-format physical location.
  • This is modeled after the successful pilot of the same strategy in Mumbai
  • By using a multi-pronged approach with a mix of shopping formats for India’s diverse population, IKEA plans to phase in their presence before the 18-24 month-long build-outs of the large-format stores.
  • Deloitte expects India’s e-commerce market to grow from $24 billion in 2017 to $84 billion in 2021.
  • Pune is 9th largest city in India by population, but one of the fastest-growing, with a booming automotive and IT industry and a GDP of $48 billion USD. 
  • India’s 1.3 billion people buy about $30 billion per year of furniture and household items, according to Technopak, an Indian consulting firm, but 95% of those are bought from small shops.

Analysis

IKEA is not letting the lengthy build-out process (18-24 months) of their large-format locations prevent them from entering India by storm via online shopping and smaller-format shops.

Following a successful launch of their online store in Mumbai and overwhelming success in their large-format store in Hyderabad in 2019, IKEA is opening a variety of small locations and pop-ups before another eCommerce launch in Pune, India.

“(The) ambition is to enter the top Indian cities as quickly as possible with a combination of big IKEA stores, smaller city-centre stores, pick-up points, digital touchpoints and e-commerce,” the company said.

Initially, IKEA was nervous to enter the Indian market. But with loosening regulations and a booming eCommerce market penetration opportunity, they started their engines and are testing out several different approaches to find the right fit for the highly diverse Indian market. 

Their 13-acre large-format store in population-dense Hyderabad was a hit from the beginning, causing a 40,000 strong traffic jam on opening day. 

But IKEA’s $1.5 billion investment in India is nothing short of calculated.

IKEA’s researchers visited more than 1,000 Indian homes to help tailor the offerings both online and in their stores to the cost, value and space-conscious Indian consumers. 

“Globally, we are going through a transformation of our business direction and organizational structures to be geared up for the future. This is all in line with IKEA wanting to meet its customers at their point of convenience, wherever and whenever possible,” said Per Hornell, market and expansion manager, Pune market, IKEA India.

Indian online shoppers are expected to reach 220 million by 2025, according to IBEF. But Statista states that current active eCommerce penetration in India is only 28%, which leaves a huge untapped market rampant for IKEA’s Swedish-style takeover.

IKEA has stated that they will open 25 large-format stores in India by 2025, but with many more smaller-format and digital options available beforehand to promote the brand and eCommerce orders.

Thanks for subscribing!

Thanks for subscribing!