Ikea likely to show Indian furniture retailers how to play the game

At the recently concluded IRF (India Retail Forum), Juvencio Maeztu, CEO , Ikea India, described his company as a production-driven retail firm with a long-term vision that included local sourcing to ensure value-for-money prices for the Indian consumer. The speciality retailer has got FDI approval from the Government but it will take at least another two years before the first Ikea store can open in India.

Furniture retail is not easy in India. Local retailers like Future Group (Home Town), Landmark (Home Centre), and Shoppers Stop (Home Stop) are still struggling to get the format right while a Reliance Retail’s Reliance Living has already exited the business.

“General retailers started by experimenting with furniture retail but did not get it right as real estate, capital deployment and a heterogeneous market made it a difficult market to crack. Furniture retail is no longer a priority for most of these big players today,” says Ankur Bisen, Vice-President, Consumer Products and Retail Practice, Technopak.

In fact, today, even the largest listed retailer Future Group does not mind shedding a stake in its furniture format to raise funds to diversify into new businesses like e-commerce, Kishore Biyani, CEO of Future Group, disclosed recently. Future Group’s Home Town has been losing money and was merged with its electronics format eZone to help improve margins.

There was a time when there were bundled offers from both formats to offer better prices for consumers. So if a consumer were to buy a television from eZone, the store would offer a discount on furniture from Hometown and vice versa.

“Retailers have to think like Ikea and look at all parts of the value chain. It is not just buying and selling that will help in making a success of furniture retailing. They should take lessons from a speciality retailer like Ikea who have done adequate due diligence before entering India, where a mere four per cent of the ₹72,000-crore furniture category is organised. (The sector) is still very fragmented,” added Bisen.

But even a specialty furniture mall like Ishanya in Pune has also been in the red since its launch six years ago. “We are also struggling like other furniture retailers to get profitable and are seeking revenues from F&B outlets, which have fixed rentals unlike stores in the home and interior segment.

The purpose is to attract IT professionals to such specialty destinations and increase footfalls for the mall,” says Mahesh M, CEO, Ishanya. With almost 50 home and interior store brands, Ishanya is now leasing out space to F&B players like microbrewery Smokie’s and Pub Town to compensate for the lack of revenues from pure-play furniture retailers.