We need large land tract near highways and metro’
Juvencio Maeztu, the IKEA India CEO, is more familiar with bathrooms and bedrooms in Indian homes than many of you would be. "We have been sitting in bathrooms and bedrooms and asking people to show their wardrobes and how they live," he says while sitting in his modern office in Gurgaon. The visits are part of a familiarization trip by executives from the Swedish furniture and furnishings firm to figure out how Indians live. The inputs are being used to plan the stores and what will sit on the shelves in the outlets, each with an investment of Rs 500 crore and spread over three lakh square feet. Although the company has got permission to invest over Rs 10,000 crore, it seems to be in no hurry to open its stores. In an interview with TOI, Maeztu says the company will roll out stores at its own pace. Excerpts:
Now that IKEA has obtained clearance for a 100% venture in India, what is your next step?
We don't want people to have expectations that we will open stores as of this summer. We have to do the right thing at the right time. The right location for us is a big piece of land with easy connection to the highway and it has to be near the metro (train). Finding the right location is important. We would like to buy the piece of land and develop it. If we have the land today, we may take two years to have the store. But imagine we have the land in three years from now, then it will take five years to open a store. We can't say in Year One we will have x% growth or in Year Four, y%. But overall, if we look at India after 30 years, there will be lot of stores, lot of local suppliers.
How have the reactions from state governments been for opening IKEA stores?
We feel very welcome in India and we will start dialogue with the regional governments in the coming months. That is why we want to start the process of talking to regional authorities. Our entry point is the city and not a shopping mall. In India it is interesting because the cities are growing so fast. We need to build a picture of India in 2020 or 2025. As far as we know, the big growth will happen in the big cities.
You have proposed an investment of over Rs 10,000 crore in the long term. What is your planned investment in the near future as you open stores?
Investment will depend on the pace of expansion. An IKEA store may cost Rs 500 crore on average. The size of the store will be around three lakh sq ft. It is a big investment. How much growth and in how many years will depend on the ability to find the right place. What is important is that we will not take a short cut here.
Will localization of products be a priority?
We are doing several things here. We are visiting homes. We need to understand how you live. We go to homes and we are seated in the bathroom or in the bedroom and then we ask them open their wardrobes. We need to understand life at home. We have a range of over 9,000 products and a majority of them will be introduced here. There will be no compromise on that. Our second priority is to present that range in a way that it meets the customer needs. The third is the basics — that we do not have in the range but we need to have in India. So, we may need more bowls for daal, or some special things for cooking.
Q: You have been sourcing from India for many years. How will the sourcing target change once you open stores here?
A: We are not just a retail company. We provide furniture, but we also sell solutions for a better life. We have to source much more in the future and we have to feel confident that we have the right product at the right cost because our model is based on affordable solution. We already source goods worth $450 million from India. We are starting the process of mapping and inviting more suppliers. We need to find good supply chain and support them. Today we produce two-thirds of our furniture in Europe and one-third in China. India is not present in the list. Big part of our production in India is in the textile space. We need to develop more industrialized products here.
Q: IKEA has been permitted to operate restaurants within its stores but not retail food items...
A: We can sell food and beverage in our restaurant and cafeteria here. Our restaurant and cafeteria are meant to provide good shopping experience. It is not like a supermarket.
Q: How important is the Indian market for IKEA?
A: India is going to be a big market, an important market for IKEA. We don't see what is going to happen in year one or year two. We tried to come to India five to seven years ago but the conditions were not right. Opening a store is not the approach here. It is about long term commitment.
Q: What are the major challenges in the Indian retail space? Is real estate one?
A: Real estate is a big challenge here. It is even bigger for us because we will not compromise on the IKEA concept. We have to talk to the regional authorities and the government to see how we can contribute and have the right dialogue. On the other hand, we like challenge - to produce good products at low price.
Now that IKEA has obtained clearance for a 100% venture in India, what is your next step?
We don't want people to have expectations that we will open stores as of this summer. We have to do the right thing at the right time. The right location for us is a big piece of land with easy connection to the highway and it has to be near the metro (train). Finding the right location is important. We would like to buy the piece of land and develop it. If we have the land today, we may take two years to have the store. But imagine we have the land in three years from now, then it will take five years to open a store. We can't say in Year One we will have x% growth or in Year Four, y%. But overall, if we look at India after 30 years, there will be lot of stores, lot of local suppliers.
We feel very welcome in India and we will start dialogue with the regional governments in the coming months. That is why we want to start the process of talking to regional authorities. Our entry point is the city and not a shopping mall. In India it is interesting because the cities are growing so fast. We need to build a picture of India in 2020 or 2025. As far as we know, the big growth will happen in the big cities.
You have proposed an investment of over Rs 10,000 crore in the long term. What is your planned investment in the near future as you open stores?
Investment will depend on the pace of expansion. An IKEA store may cost Rs 500 crore on average. The size of the store will be around three lakh sq ft. It is a big investment. How much growth and in how many years will depend on the ability to find the right place. What is important is that we will not take a short cut here.
Will localization of products be a priority?
We are doing several things here. We are visiting homes. We need to understand how you live. We go to homes and we are seated in the bathroom or in the bedroom and then we ask them open their wardrobes. We need to understand life at home. We have a range of over 9,000 products and a majority of them will be introduced here. There will be no compromise on that. Our second priority is to present that range in a way that it meets the customer needs. The third is the basics — that we do not have in the range but we need to have in India. So, we may need more bowls for daal, or some special things for cooking.
Q: You have been sourcing from India for many years. How will the sourcing target change once you open stores here?
A: We are not just a retail company. We provide furniture, but we also sell solutions for a better life. We have to source much more in the future and we have to feel confident that we have the right product at the right cost because our model is based on affordable solution. We already source goods worth $450 million from India. We are starting the process of mapping and inviting more suppliers. We need to find good supply chain and support them. Today we produce two-thirds of our furniture in Europe and one-third in China. India is not present in the list. Big part of our production in India is in the textile space. We need to develop more industrialized products here.
Q: IKEA has been permitted to operate restaurants within its stores but not retail food items...
A: We can sell food and beverage in our restaurant and cafeteria here. Our restaurant and cafeteria are meant to provide good shopping experience. It is not like a supermarket.
Q: How important is the Indian market for IKEA?
A: India is going to be a big market, an important market for IKEA. We don't see what is going to happen in year one or year two. We tried to come to India five to seven years ago but the conditions were not right. Opening a store is not the approach here. It is about long term commitment.
Q: What are the major challenges in the Indian retail space? Is real estate one?
A: Real estate is a big challenge here. It is even bigger for us because we will not compromise on the IKEA concept. We have to talk to the regional authorities and the government to see how we can contribute and have the right dialogue. On the other hand, we like challenge - to produce good products at low price.
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