IKEA in India

India has helped IKEA become better!

A BEKTANT table, a PATRIK chair or a MICKE desk. Don’t be surprised if you find Indian consumers or suppliers conversing in IKEA jargon. The days are not far as the Swedish-giant made a roaring entry with its first store in Hyderabad opening doors to the ever-aspiring Indian consumers. Associated with Indian suppliers since late ’70s, IKEA takes pride in attributing key learnings in product development to Indians and Indian conditions. Mr. Sandeep Sanan, New Business Head, IKEA, (Purchasing & Logistics Area), South Asia spoke to Modern Woodwork on the past, present and future of IKEA India Purchasing.

In conversation with an IKEA steadfast and a seasoned business leader who helped several international companies enter India in the era of globalization.

Modern Woodwork: 2018 was really big for IKEA in India. You opened your first store in Hyderabad, while the second one in Navi Mumbai is slated to open in the first quarter of 2019. This was followed by ground-breaking of the Bengaluru store and MoU with UP Government. The store target was also revised to 40 from 25 as reported earlier. What is more in store?

Mr. Sandeep Sanan: We are now associated with India for more than 40+ years, having exported products to our several global markets. 2018 is when we got to finally start catering to consumers in India. With the first store launched in Hyderabad (Telangana), IKEA’s footprint in India is getting stronger. We are now gearing for our online presence, store and touch-points in Mumbai in 2019. This will be followed by Bengaluru, Gurugram in the following years. We are in rapid expansion pace in India. Apart from this, as you have rightly mentioned, we have also inked MoUs with Gujarat and UP and are in conversation with Government of West Bengal. We are looking forward to serving customers across India through our upcoming multi-channel experience in the next few years. We are working towards the launch of our e-commerce services within this year. Mumbai will be the first city as part of our e-commerce services roll-out plans, followed by Hyderabad, Bengaluru and other cities. Our plan is to reach 200 million Indians by 2020.

MW:From your initial consumer findings which began in 2013 in India, what kind of change have you witnessed in terms of choice and buying patterns? How do you look at Indian customers vis-à-vis European customers?

SS: We carried out extensive research of the Indian market to learn about how Indians live at home. This has helped us to create relevant solutions with our range. We have done more than 1,000 home visits in Mumbai, Hyderabad, Bengaluru and Delhi to understand what makes the Indian family life tick and know more about their challenges, needs, dreams and aspirations. We found that all over the world, people do roughly the same things; they eat, sleep, store things etc. but what really differs is where and how they do it. So, by localizing the home furnishing solutions in the Indian stores we will make this visible and demonstrate solutions that we will help solve those local challenges. For example, the 24-hour bedroom is an interesting challenge where people sleep, store things, do their make-up, watch TV and eat, all in the bedroom.

We have also gained useful insights which reflects in the products that you see in the store. We know that for Indians the ‘home’ holds a special place in their heart. We have also found that women are the ones who control the kitchen. Every decision about the house is a collective one. Indians love colour. The most important part of every Indian home is children. We have a big focus on that and it is a long-term priority for the company.

In terms of product offerings to customers, we have adapted some existing products to suit the weather and humidity conditions in India and overall this has positively impacted the quality of IKEA products. India has helped IKEA become better! Most of the products are a part of the global range with a 5% addition of local unique range such as Indian pans (tawa), masala boxes and idli-maker. Some products have been adapted to suit Indian preferences such as colourful bed linen. Another interesting example of localization is that Indians like firm mattresses, so we will develop a mattress with a coconut layer because it is cooler for the summer. In terms of pricing, we need to be affordable for the many people. We have around 1,000 products under INR 200 at our Hyderabad store.

MW: IKEA looks for four key aspects – sustainability, quality, availability and affordability while sourcing. Briefly explain each of these aspects for better understanding.

SS: The IKEA business model with a total value chain approach ensures lowest total cost from material to customers and products with the right quality, available when customers want them, produced and distributed under good conditions. This business model can only be successful with strong supplier partnerships.

IKEA works with mandatory requirements from our suppliers worldwide and sub-suppliers to comply with IKEA’s code of conduct (IWAY). These requirements mean that suppliers of IKEA need to secure good working conditions and health and safety for workers on the factory floor including minimum salaries, working hours in addition to providing for employees’ health, safety and insurance. IKEA has been sharing its global knowledge with our suppliers on sustainability to further strengthen and develop a global competitive advantage.

IKEA’s key goals of long-lasting value at low prices, quality at every touchpoint and quality through transparency are achieved by good collaboration and long-term partnerships with suppliers in India. Working together with a quality mind-set is the key. We are committed to provide global quality standards to Indian consumers and we believe that high quality products and low prices are possible to achieve.

Products that are manufactured in India are of international quality standard and are shipped to all IKEA global stores. In addition, we test all our products to make sure that the products we have developed or improved are safe and heathy to use for our customers. External laboratories and institutes complement the work done in our own test labs.

For IKEA, quality is defined as related to the product itself as well as to the environmental and social impact of the production in the whole value chain.

MW: Tell us more about your typical sourcing methodology. As far as we know, it usually starts with seminars like ‘Make More in India’. Readers would like to know the next steps.

SS: We are meeting potential partners at different touch-points including ‘Make More in India’ seminars, workshops along with State governments, trade organizations etc. We are always open to meet potential partners who share our values and business model. All companies interested to partner us are welcome to visit our website and register themselves through the supplier portal (supplierportal.ikea.com).

MW: According to latest figures, you have some 50-odd Indian suppliers in various categories. Our readers are eager to know for which categories you are sourcing locally at the moment and which ones you plan to source locally in near future.

SS: Currently, IKEA purchasing in India works with more than 55 suppliers and sources a range of products such as textiles, rugs and mattresses, lighting and metal products for our stores worldwide. Already, today, there are 45,000 direct employees working at our suppliers making IKEA products. We are working on developing new categories with India as manufacturing hub and have started mattresses, sofas, furniture, appliances etc. We are exploring use of locally available sustainable materials such as bamboo, rubber wood, banana barks, coir, water grass among others for our home furnishing offer.

MW: What kind of furniture manufacturers are you looking for? What are the pre-requisites to become an IKEA supplier? Modern Woodwork would like to spread the word about IKEA’s sourcing needs and help a large base of furniture manufacturers from India to connect with you via this exclusive article. Please feel free to share finer details.

SS: At IKEA, we believe in long-term and interdependent partnership with our suppliers built on a strategic fit, meaning shared business model and values. The IKEA business model is based on large volumes and low costs with over a million people involved. IKEA cares about the people and the environment and expect that IKEA suppliers live up to the same principles. We are working closely with stakeholders in the furniture industry on the following two key areas and actively seek partnership to secure these areas:

a) IKEA has defined its requirement of formaldehyde compliance in the form of specifications to be followed by suppliers every day. IKEA requirements are based on legal demands and IKEA experiences and judgements of various industry standards. They account for the latest industrial developments, in line with our vision to reduce formaldehyde emission from our products. IKEA extends restrictions to all production steps through various process control and testing in order to secure the product as a whole. We are closely working with Indian suppliers to be able to produce formaldehyde-compliant products locally through knowledge sharing.

b) Going forward we are working to create a sustainable forestry industry that supports broader government initiatives, such as ‘Make in India’ and ‘Ease of Doing Business’, to attract international investments and grow business sectors. We are working closely with government and forestry department to create an enabling environment to develop wood manufacturing for the IKEA range in India. We are looking for support in the implementation of internationally recognized forestry certification system, such as the Forestry Stewardship Council (FSC).

MW: In China and Russia, you look forward to work on synthetic material, while in India you are looking at expanding to categories like bamboo, wood and natural fiber such as waste grass. How can our readers contribute for your specific needs? Are there any geographies (like Assam for bamboo) that you are looking at?

SS: Currently, the focus is to start globally competitive supplier landscape for woodbased products (including bamboo and natural fiber) and on circularity projects (recycled plastic and textile waste) for manufacturing home furnishing articles in India. We are positively looking at natural fibers like water hyacinth. To develop a water hyacinth raw material supply chain, integrated with weaving hubs is a huge sourcing business opportunity for IKEA from India, generating employment for 3,000+ coworkers in the supply chain (farmers, weavers, factory workers, logistics etc.). We are also looking for government support in FSC to help large scale availability of good quality planting material through setting up scientific propagation methods such as Tissue Culture and focus on fast-growing tree species, including bamboo.