admin
September 23, 2022
Sagar Malviya, The Economic Times
September 13, 2022
Uniqlo, Asia’s biggest clothing brand, has turned profitable in India in less than three years after it opened its first store in the country despite operating in a period marked by Covid-led lockdowns and restrictions.
The Japanese brand posted a net profit of ₹21.4 crore for 2021-22 compared to a loss of ₹36.1 crore in the previous year, according to business intelligence firm AltInfo. Its sales rose 63% year on year to ₹391.7 crore for the year to March 2022, a slower pace compared to FY21 when it clocked 86% sales growth on a low base.
Experts feel Uniqlo’s strategy of pricing its merchandise at least 20% higher than rivals Zara and H&M has helped it earn better margins despite inflationary pressures in terms of raw materials.
“The market is not easy and turning profitable at a time when most rivals are spending aggressively is a good indication of success. As an international brand, they (Uniqlo) are able to get good locations and are preferred tenants, which helps in generating sales, especially in top cities,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm. “However, the pricing is a bit premium and until they are able to source locally, selling products at a right value for the market will remain challenging.”
The Japanese brand opened its first door in the country in September 2019, but stringent lockdown measures announced in March 2020 to contain the Covid-19 outbreak delayed its store expansion plans, restricting its store count to about seven outlets so far.
Uniqlo has said India is one of the most priority markets where consumers are increasingly shifting from ‘fast-fashion’ to long-lasting essentials and functional wear. “India is an important and very big priority market,” Tomohiko Sei, CEO of Uniqlo India told ET in June.
(Published in The Economic Times)
admin
June 24, 2022
Written By Christina Moniz
Prashanth Aluru, a former Facebook and Bain hand, will be behind the steering wheel for this venture
The Aditya Birla Group has just announced the launch of its ‘house of brands’ business entity, TMRW, to support digital fashion and lifestyle brands. TMRW, which will operate as a wholly owned subsidiary of Aditya Birla Fashion & Retail (ABFRL), aims to build and buy over 30 brands in the next three years, the company said in a statement.
With this move, the company expects to make its entry into the D2C market, which is expected to be reach $100 billion by 2025. “What a brand like Shoppers’ Stop does in brick and mortar, ABFRL is doing online. While in the past, the company was known for certain brands, it is now pivoting itself towards a wider pitch with bigger variety of brands that could potentially appeal to a wider range of consumers,” said Ankur Bisen, senior partner and head, food and retail, Technopak Advisors. The launch could be ABFRL’s next step in positioning itself as a fashion major, he said.
Prashanth Aluru, a former Facebook and Bain hand, will be behind the steering wheel for this venture.
ABFRL will compete with start-ups like the Good Glamm Group and Mensa Brands, among others. The number of D2C brands and online sellers in the country have grown over the last couple of years, and experts believe that TMRW could be the company’s endeavour to become relevant to new-age consumers. Brands like Reliance Retail and Myntra are going down the same path, says Bisen.
The opportunity is immense; according to a report by IMARC Group, the Indian textile and apparel segment reached $151.2 billion in 2021 and is set to grow at a CAGR of 14.8% between 2022 and 2027.
ABFRL, which has a network of over 3,300 stores across India, is home to brands like Pantaloons, Van Heusen, Louis Philippe and Allen Solly, and has partnerships with labels like Forever 21, American Eagle and more recently, Reebok. The retail company has also forayed into the ethnic wear business and has forged strategic partnerships with designers such as Sabyasachi, Masaba and Shantanu & Nikhil.
Having reported losses for the last three years, the company narrowed its losses to `108.72 crore in FY22 on the back of revenues of `8,136.22 crore. The company reported a 55% surge in revenues during the last fiscal. While Madura Fashion & Lifestyle contributed 68.4% to the company’s FY22 revenue, the remainder 31.6% came from Pantaloons, according to Bloomberg data.
Ambi Parameswaran, author and founder of Brand-Building.com, said ABFRL has already built a good retail presence for the brands in its portfolio. “There must be significant synergies at the back end, but the brands are managed separately,” he said. “I suppose the new venture, TMRW, will offer all these brands as well as all the other ethnic brands that ABFRL has acquired in the last three years.”
He said the synergies will probably lie at the back end with supply chain, logistics, finance and HR. However, the brands will most likely be given the space to build strong individual identities.
This is not the company’s first foray into the e-commerce space. ABFRL shut down its e-commerce venture, ABOF (All About Fashion) in 2017, though in August last year, it said the brand would be made available on Flipkart and Myntra.
A concept like ‘house of brands’ is potentially beneficial to both — the large conglomerates and also to the smaller, emerging brands that are acquired. In a D2C framework, niche brands that would otherwise find it difficult to navigate the established multi-layered distribution and retail channels see greater feasibility in connecting with their customers directly through digital channels.
According to Devangshu Dutta, CEO of retail consultancy Third Eyesight, this makes it viable to launch a product range, which would not be immediately entertained in established channels, and allows them to retain their distinctiveness. With the passage of time and with their growth, some of these brands could also expand into established modern retail and traditional retail formats and to a more mainstream audience.
“Large companies, on the other hand, can find it difficult to grow their existing brands beyond a certain pace, and often may not be able to break new ground in terms of product development and customer experience. At some point, inorganic growth by acquiring other businesses and brands becomes an important element of their strategy,” Dutta said.
The house of brands model, to be sure, comes with its fair share of challenges. Angshuman Bhattacharya, EY India partner and national leader – consumer products and retail, said the strategy must have clear synergies from an operations and distribution perspective. “Possible challenges could emanate out of the non-compatibility of categories with the distribution. Another potential challenge could be in supporting multiple brands with marketing investments, failing which the realisable value envisaged during acquisition could stay unfulfilled,” Bhattacharya said.
The other downside, as Dutta pointed out, is that over time there is consolidation of market power within a handful of companies. This has happened across the globe and across sectors, and can negatively impact consumer choice, supplier dynamics and pricing.
Source: financialexpress
admin
April 27, 2022
By Manu Balachandran, Forbes India
Apr 27, 2022
Sometime in 2002, in his mid-20s, Ravi Modi wanted to buy a Mercedes. Not because he was a petrol head or because he wanted to flaunt his newfound success in his hometown, Kolkata.
“My belief was that if you can afford it, buy it,” says Modi, who’s dressed in a blue kurta pyjama at his house in Newtown, Kolkata. His then-four-year-old business, Vedant Fashions, which made popular ethnic wear, Manyavar, was doing reasonably well and money was flowing smoothly. However, as he firmed up his plans to buy a Mercedes, his father, who had earlier inadvertently brought out the entrepreneur in Modi, asked his son a few questions. And then doled out some sound advice.
“He asked me whether I can afford it. I said I can,” the soft-spoken Marwari tells Forbes India. “He asked me if my business was sustainable. I said yes. He said you will require capital. I said yes. He asked me if my business has the potential to grow. And I said yes.” Modi adds: “Then he told me, ‘Thode din ke taklif zindagi bharka aaram, ya thode din ka aaram, zindagi bharki taklif (Pain for a few days, and you can have a lifetime of relaxation, or relax for a few days, and you could have pain for the rest of your life)’.”
That stuck with him forever. Modi skipped his plan to buy a Mercedes, and instead decided to plough back all the profits into the business to avoid falling into a debt trap as he expanded. He stuck with his Honda City for the next 15 years, until his son asked him to change it after a family friend met with an accident. “That’s when I bought my Mercedes in 2017,” Modi says. “All these things don’t matter to me. I am a simple man with no materialistic needs. I like the simple life.”
Modi indeed leads a simple life on the outskirts of Kolkata. Unlike many of his peers who relish the hustle and bustle of city life, he has moved out of his home of 36 years to a calm and greener township where he even grows vegetables. “Whatever vegetables we eat, they come from within the house,” Modi says. He prefers to meet people on the verandah of his house, which overlooks a neatly manicured lawn. The scorching Kolkata heat doesn’t bother him.
“Here, the trees talk to me,” says Modi, who tried 12 houses before shifting to the new one immediately after the first lockdown. He has built a clay tennis court there and is now learning to play the game. Modi has also renounced wearing western clothes, claiming not to have worn one in five years. “We must realise that clothes such as suits aren’t meant for the Indian climate,” he says.
He’s even reduced the time he spends in office, and now goes there only once a week. It hasn’t made any difference to his business. Modi makes his debut on the 2022 Forbes World’s Billionaires List—he’s ranked 1,238 with a net worth of $2.5 billion. As of April 15, Modi’s wealth stood at $3 billion and he is among the youngest billionaires in India.
His 23-year-old company, Vedant Fashions Limited, of which he is chairman and managing director, is worth ₹26,000 crore after it listed on the bourses in February. It has over 600 stores across India and 11 international stores, where it sells everything from men’s kurtas, sherwanis and jackets to women’s lehengas, sarees and gowns. They are sold under brands such as Manyavar, Mohey and Mebaz.
Last year, amid the pandemic, Vedant Fashions closed the year with a revenue of ₹564.81 crore, while net profit stood at ₹132.9 crore. A year before that, revenue was ₹915.54 crore and net profit ₹236.6 crore. Modi’s wife Shilpi has a board seat, while his only child, Vedant, after whom the company is named, is chief marketing officer.
“I am a firm believer in destiny,” says Modi. If it wasn’t for his destiny, the 45-year-old believes he would have perhaps been sitting at his nearly-50-year-old family-run shop in Kolkata’s AC Market, selling menswear, and at best opened one more store to expand the business.
Destined for Success
As a child, Modi, the only son of his parents, was good at mathematics. His father then ran a 140-sq-ft retail store inside AC Market in Kolkata—one of India’s first air-conditioned markets set up some 50 years ago.
“In Class 2, I got 100 in mathematics, and my mother threw a party,” says Modi. “In Class 3, when I got 100, my mother didn’t give a party. That’s when I realised that nobody celebrates the same achievement twice. I needed some kick and I started solving the paper faster.” By the time he appeared for his Class 12 exam, he finished his mathematics papers in 45 minutes, scoring a near cent. “Anybody who remembers me from school days would remember me for mathematics,” says the soft-spoken billionaire.
The untold story of how Ravi Modi built Vedant Fashions—the makers of Manyavar—into a .5 billion behemothThat meant, by the time he was 13, Modi joined his father at their retail store, which sold everything from shirts and pants to jeans, after school. “I found a lot of interest,” says Modi. “Somehow, I didn’t realise that my entire childhood from 13 years went in my store.” While he did contemplate doing an MBA after graduating in commerce from St Xavier’s college, Kolkata, his father suggested otherwise. “The real MBA happened in those nine years between 13 and 22,” says Modi.
At the store, Modi played salesman, often catering to buyers his staff didn’t want to deal with. “I would see that the salesmen would deal with some customers with a lot of attention, and some without,” says Modi. “When I probed them, they said the customers wouldn’t buy. I would ask them if they were astrologers, and used to take it on me to sell stuff to them. That was my kick.” Soon, Modi would end up selling over 20 clothes to a customer who would have come to buy one shirt. “It was the best time of my life,” Modi says. By the time he was 21, he was married, and by 22, Modi became a father.
As the business grew, Modi began to run the show and took decisions that would be a contrast to his father’s. He also introduced Indian wear, manufactured by them, in the store after realising a massive vacuum in the Indian wear category. It was Modi’s first tryst with manufacturing. “But one day, my father said something, and I got hurt,” Modi says. His father had questioned a decision that Modi had taken for ₹20,000. “He said ‘Humko barbad kardoge (Will you ruin us)? I might commit suicide one day.’ I said this is enough, I won’t come from tomorrow.”
He took ₹10,000 from his mother and turned to manufacturing Indian wear, selling the finished products in Uttar Pradesh, Odisha, Bihar, Madhya Pradesh and West Bengal, among others. “I started selling to multi-brand outlets (MBOs),” he says. The inability to hire a creative agency meant Modi had to come up with a name. “I thought what was the purpose of life… it was to earn some respect for oneself,” says Modi. “That’s how we came up with the name Manyavar.” He denies that the choice of the name had anything to with his father’s chiding. “He was someone who would never say something like that,” says Modi. “It’s all destiny. Because there was no plan, and I was happy at the store. We would, at best, have opened one more store.”
With Manyavar, Modi started by selling 20 percent of his stock to Kolkata-based Vishal Mega Mart, to raise enough working capital to sustain his business. He sold the rest of the stock to other outlets. “Vishal Maga Mart was the only place that used to buy on cash,” says Modi. “So initially, for about eight months, the working capital came from them.”
Modi sold kurtas which cost ₹200 at a loss of ₹10 to ensure he was paid in cash. “Just because I was strong in math, I thought I will sell 20 percent of my production to him to get working capital, and from the remaining 80 percent production, I will get revenue. That is how we generated revenue in the first year,” Modi says.
Among others, Manyavar’s clothes were sold at outlets such as the Kashmir Vastralaya collection and Kala Mandir in the early days.
Turning point
By 2005-06, Modi had begun selling his products to large format stores (LFS)—from Future Group to Shoppers Stop and Westside—building a pan-India presence. Heeding his father’s advice, he ensured he did not take on debt, and instead channelled most of the money into the business.
In 2006, to take care of his ailing father, Modi stepped away from work for some six months. “I used to work like a typical entrepreneur, managing everything. Life was very busy. Then I realised we were unnecessarily involving ourselves in operations. The business was running well without me for six months. From that day I understood, that instead of ROI (return on investment), it should be return on time invested (ROTI). I realised I should not waste time on things where I don’t add any value,” he says.
That took him back to the drawing board—to focus on strategy for the next phase of growth. By 2008, Manyavar set up its first exclusive brand outlet (EBO). “That’s when the real journey began,” says Modi. “Until then, we used to sell for ₹20-25 crore every year.” The company’s first store opened in Bhubaneswar, and over the next year, opened 12 stores. The early ones were opened by the company before it moved to a franchise-led model. “By that time, I was clear that the way forward for any fashion apparel business in India is EBO,” says Modi.
Modi believed multi-brand outlets were becoming more of a hindrance than being facilitators. “They never used to work on data,” he says. “It was difficult to make them understand anything. And because I had spent nine years with consumers, we used to always think of the customers first.”
That means an obsession with data, and efficiency, something Modi spends a considerable amount of time on. “Anything and everything we do, we want to bring efficiency,” he says. “We have one of the highest productivities in retail. We haven’t sold a single garment at discount. Even then, the dead stock in Manyavar is less than 3 percent. We make 30 percent PAT (profit after tax). We don’t make that by charging more to the consumer. That’s an outcome of efficiency. We keep pricing reasonable and despite that, we have the highest margin. Efficiency is a key pillar in our entire organisation.”
Today, the company operates mostly on a franchise-owned-franchise-operated model. “When we started, we had a COCO (company-owned-company-operated), COFO (company-owned-franchise operated), FOFO (franchise-owned-franchise-operated), and all kinds of models. By 2016-17, we converted all our stores into the FOFO model. People were doing backward integration, and we felt doing forward integration was the way to go. We will do the marketing, designing and supply chain, and not do anything else.” Over the past few years, Modi claims several young customers have become franchise owners, including doctors and consultants, who see massive potential in the brand.
In 2016, the company pulled a coup of sorts by landing then Indian cricket captain Virat Kohli as brand ambassador. “He had just become captain It was the best time of his life,” says Modi. Over the next few years, Kohli led the brand campaign and Modi even roped in his girlfriend Anushka Sharma for a commercial prior to their marriage. Today, the brand has actors Amitabh Bachchan, Alia Bhatt, Ranveer Singh and Kartik Aaryan as brand ambassadors.
The success
Today, Manyavar operates some 1.3 million sq ft of retail stores in the country, choosing not to chase the number of stores. Every year, Modi wants to add between 1.5 lakh sq ft and 2 lakh sq ft of retail space. “The whole business is on a variable, asset-light model,” he says. “There is no capex, there is no fixed expense other than corporate head office salary. Every rupee of working capital can generate an equal rupee of PAT, with 90-95 percent free cash flow. Only Unilever will have a ROCE (return on capital employed) of 100 percent, and we might be the second, and within a year or two, we will be at more than 100 percent.”
The untold story of how Ravi Modi built Vedant Fashions—the makers of Manyavar—into a .5 billion behemothThe company operates in 230 cities, and is busy firming up plans to open stores in 150 new cities. A significant portion of its customers are spread across Southern India, with Bengaluru and Hyderabad emerging as the two big centres. “We have a cluster approach where we believe in 50 or 60 markets, where we have numerous stores,” Modi says. “This is just the beginning of a multi-decade growth opportunity for the category.”
Along the way, in 2017, as business expanded rapidly, Modi decided to turn to private equity, not because he needed money for expanding the business. “We always thought that there is a limit for wisdom and knowledge,” says Modi. “We had been meeting private equity players since 2008 and we thought why not get a good partner. We liked Kedaara Capital and its approach. Money was not the intent, but to have a wise board and to understand whether we were missing on anything.” Kedaara Capital acquired 7.5 percent stake in the company.
“They’ve ridden well on the sector’s growth and consolidation into modern trade, as the desire for brands has grown among buyers of Indian traditional clothing,” says Devangshu Dutta, chief executive of Third Eyesight, a management consulting firm, and managing partner of PVC Partners, an early-stage investment & advisory firm. “Also, the wedding market is more recession-proof than many other segments, which has been a favourable factor during the pandemic.”
Last year, despite the pandemic, Modi says Vedant Fashions closed the year with better profit margins, despite most states putting a ban on weddings and other social gatherings. “The beauty of our business is that while business had reduced, our margins were 30 percent PAT,” Modi says. “The entire business is on the variable model and even franchises didn’t lose money.”
In India, the men’s wedding and celebration wear market was estimated to be worth approximately ₹13,300 crore as of FY20, according to brokerage firm HDFC Securities. It is projected to increase to between ₹17,000 crore and ₹18,000 crore by 2025. In comparison, the women’s wedding and celebration wear market is significantly larger, estimated to be worth approximately ₹7,500 crore as of 2020. It is expected to grow to ₹95,000 crore and ₹100,000 crore by 2025.
“Seventy-three percent of Vedant Fashions Limited’s (VFL) franchisees have operated its stores for three or more years and 65 percent of the sales of its customers from its franchisee-owned EBOs are derived from franchisees having two or more stores is testament to the success of EBO distribution model,” HDFC Securities said in a report in February. “Through a network of over 300 franchisees as of September 2021, VFL has demonstrated a track record of commanding a high initial capital commitment and, in return, providing all necessary support in connection with identifying potential locations for new stores, managing multi-channel advertising on a national and regional basis, assisting in-store development and inventory management, directly managing the supply chain and providing detailed training programmes for store staff and franchisees.”
Today, 90 percent of the company’s business comes from EBO with about 8 percent from online models, a segment that Modi’s son, Vedant, and his team are extensively looking to build. “We might be the only brand with such a high percentage from EBOs,” Modi says. “The segment is unorganised, fragmented, and understanding this is a journey. Because we were data-focussed, we could work it out.” Along the way, Modi says his biggest advantage has been in reducing the inconvenience of wedding purchases.
“Pre-Manyavar, the wedding shopping experience was a problem,” Modi says. “You had to go a few times to the store for measurements or alterations. Now people don’t have the time. We are a one-stop solution where work can be done in one hour.”
Now, as the company looks at avenues for its next phase of growth, Modi has forayed into categories within the wedding market that can drive sales. The company recently launched Twamev, a premium collection of men’s wedding wear, and Manthan, a cheaper option to its popular Manyavar wear. “When you look at the Indian pyramid, there are five consumer layers. Manyavar and Mohey are in the third layer which is the sweet spot, comprising the typical aspirational middle class,” Modi says. “In India, one crore weddings take place, and 30 lakh to 35 lakh marriages happen in that category, which is about 50 percent in terms of value. We believe that is the largest segment, but now we have a strategy where we are going one level up and down.”
While Manyavar caters to the ₹5 lakh to ₹50 lakh wedding market, the ₹50 lakh to ₹5 crore market is being catered to by Twamev, while the less than ₹5 lakh is being addressed by the Manthan range. “We believe once the category grows, we should be there in all these three layers. So, there is clear demarcation and no overlap,” Modi says.
All that means that the reclusive billionaire, who started out two decades ago after his tryst with destiny, is getting ready for a long period of growth. It also helps that he has more time to plot his strategy for it. “People talk about wealth, I believe the real wealth I have earned is time for myself,” Modi says. “The mission is to be a dominant player in the celebration space. We have cracked an unorganised market and we’ve been able to organise it and scale it. Now, the vision is to instill pride in Indian wear.”
Modi seems determined to do that. And he is certain to walk that talk, if the two decades are anything to go by.
(This article was published in Forbes India.)
admin
March 24, 2022
Written By Christina Moniz
D2C brands take the offline route to widen reach
Direct-to-consumer (D2C) brands are fluffing up the Indian mattress category with promises of lower prices, mattress-in-a-box convenience, 10-year warranty and 100-day trials. In a market that is predominantly unorganised, startups such as Wakefit, The Sleep Company, SleepyCat and Flo are aspiring to establish themselves as better alternatives to legacy brands such as Kurlon and Sleepwell, with most of them looking at the offline retail route too, to boost sales.
According to a Research and Markets report, while India’s overall mattress market has grown at a CAGR of over 11% in the last five years, the organised industry has grown at 17%. The mattress category in India is worth `12,000-13,000 crore; of this the organised segment commands 40% share.
New-age mattress brands are able to deliver products at lower price points by taking control of the entire consumer journey – from product discovery to post-sales support. Therefore, these D2C brands save big on distributor and retail margins, says Devangshu Dutta, CEO, Third Eyesight. These savings go towards compensating for higher customer acquisition costs and logistics, he observes. The elimination of the middlemen means that customers get their products at 30-35% less than what traditional players offer.
However, these digital-native companies are aware that they operate in a touch-and-feel category, which is why many offer a 100-day trial period. Priyanka Salot, co-founder, The Sleep Company, says that the product return rate is only 2-3%, and the returned mattresses are donated to charities but never resold. The Sleep Company, which entered the market a little over two years ago, is eyeing a turnover of `1,000 crore in the next five years, and has plans to launch its first offline store in a few months.
Online players also save on logistics, says Chaitanya Ramalingegowda, co-founder and director at Wakefit. “We implemented the roll-pack technology that allows the mattress to fit into a compact box. This lets us ship more products at a time,” he says. Wakefit has only two factories—one in north India and the other in south India—as opposed to older players with 10-12 factories across the country, he points out. The company hopes to close FY22 with a turnover of 630 crore, up from197 crore in FY20. It has one offline experience centre in Bengaluru, with plans to launch 10 more across five cities soon; these centres will not only be experiential, but also double up as booking/ retail sales outlets.
Offline boost
Rajat Wahi, partner, Deloitte India, points out that these new-age mattress brands must establish deeper offline distribution to expand reach. “After all, more than 90% of retail is offline in India,” he notes.
This is why D2C brands are not only taking the offline route, but also foraying into other segments like furniture and sleepwear. Kabir Siddiq, founder and CEO of SleepyCat, says the brand has plans to launch around four experience centres, and aims to become a one-stop shop for all sleep and comfort solutions, offering comforters, pillows and even bedding for pets.
Is the proliferation of D2C players giving legacy brands sleepless nights? Mohanraj J, CEO, Duroflex, says it has been akin to a “wake-up call”. He says the company has poured in investments into the D2C segment in the past few years, and now even has a completely online brand called Sleepyhead, catering to the millennial consumers. “Until recently, about 10% of our company’s growth was from online sales, but we expect that number to change to 30-35% this year,” he adds.
Despite the influx of new-age players, he maintains that Duroflex has doubled its growth in the past two years, with traditional retail registering 25-30% annual growth.
Source: financialexpress
admin
December 20, 2021
Written By Vaishnavi Gupta
The furniture brand’s retail roadmap includes city stores in Delhi, Mumbai and Bengaluru, followed by tier I and II towns
For the Ikea model to succeed, adequate demand-concentration is crucial, which is being currently provided by the bigger cities in India.
After launching two large-format stores in India in a span of three years — one each in Hyderabad and Navi Mumbai — Ikea opened its first small-format store in Worli, Mumbai, to become “more accessible and convenient”. About 90,000 sq ft in size, these ‘city’ stores are already present in markets such as New York, London, Paris, Moscow and Shanghai.
The furniture market in India stood at $17.77 billion in 2020, and is expected to reach $37.72 billion by 2026, growing at a CAGR of 13.37%, according to a Research and Markets report. Godrej Interio, UrbanLadder and Pepperfry are among the big players in this space, all with a significant online presence, too. Godrej Interio has 300 exclusive stores in India, while Pepperfry has more than 110 Studios.
Spread across three floors, Ikea’s first city store has 9,000 products in focus, of which 2,200 are available for takeaway and the rest for home delivery. “We have observed that it is not easy to find large retail locations in cities like Mumbai and Bengaluru. The small store offers convenience and accessibility for consumers to experience Ikea products,” says Per Hornell, area manager and country expansion manager, Ikea India. This launch is in line with the company’s aim to become accessible to 200 million homes in India by 2025, and 500 million homes by 2030.
More launches are being planned: another city store in Mumbai in the spring of 2022 and a large-format store as well as a city store in Bengaluru by the end of 2022. For its retail expansion in Maharashtra, the company plans to invest Rs 6,000 crore by 2030. “We are on track to exceed the investment commitment of Rs 10,500 crore made for India in December last year,” adds Hornell. Delhi, Mumbai and Bengaluru are the three cities on its radar at the moment, which will be followed by tier I and II towns.
Furthermore, Ingka Centres, part of Ingka Group that includes Ikea Retail, is coming up with its first shopping centre in Gurugram (followed by Noida), which will be integrated with an Ikea store.
In India, unlike its organised furniture market competitors, Ikea doesn’t have a pan-India online presence yet. It has been following a “cluster-based expansion strategy” for its online offering, but the company insists this is not a limitation. “At present, 30% of our overall India sales come from online channels,” Hornell informs. Through its e-commerce website and mobile shopping app, the company currently operates in Hyderabad, Mumbai, Pune, Bengaluru, Surat, Ahmedabad and Vadodara.
On the other hand, players like Godrej Interio and Pepperfry have big plans to tap new markets. The former aims to add 50 exclusive stores each year, while Pepperfry aims to achieve the 200 Studios mark by March 2022. In September this year, Pepperfry forayed into the customised furniture segment with the Pepperfry Modular offering, which focusses on modular kitchens, wardrobes and entertainment units.
Good start?
This is a good time for Ikea to establish its presence in the Indian market, says Alagu Balaraman, CEO, Augmented SCM. “Earlier, people used to rely on carpenters for furnishing their homes; now, they prefer to buy ready-made furniture. The market is moving towards acceptability, making plenty of headroom for growth for these companies,” he says.
Ikea’s cautious expansion approach in a market like India where several local dynamics are at play, is tactful, analysts say. Devangshu Dutta, founder, Third Eyesight, says, “In the past, Western businesses have made the mistake of simply copy-pasting formats and strategies in emerging markets from their more developed markets.” He believes there is “nothing wrong” in being incremental while growing footprint. “There’s no sense in carpet-bombing the market with stores, when many may end up being loss-making or sub-optimal,” he adds.
Getting the product mix and pricing right would be key in realising the full potential of this market. Balaraman says Ikea will have to balance its global portfolio with what it is doing locally, and make sure it is profitable.
For the Ikea model to succeed, adequate demand-concentration is crucial, which is being currently provided by the bigger cities in India. Given its global popularity, the furniture giant, analysts say, is poised to see traction in the metros and tier I cities.
Source: financialexpress
