Ingvar Kamprad grew up on a farm called Elmtaryd in a village called Agunnaryd in Sweden. He started a mail order business in 1943 and christened his business – IKEA (pronounced as eh-ke-yah). The name IKEA is an acronym comprising his initials and the first letters of his farm and village. He ventured into furniture in 1948 and since then IKEA hasn’t looked back. Currently the largest furniture retailer in the world, IKEA designs and sells ready-to-assemble furniture, kitchen appliances and home accessories.
IKEA operates though a very complex set of organizational structure comprising multiple entities in multiple countries. The reason for doing so has been IKEA’s desire to reduce tax burden in order to remain a low-cost player.
The structure underwent changes in 2016. The parent holding company is Interogo Foundation, based in Liechtenstein. Interogo Foundations owns two holding companies – Inter IKEA Holding B.V. (Netherlands) and Interogo Holding AG (Switzerland). Interogo Holdings manages the financial interests of the IKEA Group through its subsidiaries. Inter Ikea Holding has control on three major aspects of IKEA Group – Inter Ikea Systems B.V. (Netherlands), IKEA range and supply and IKEA Industry.
Inter IKEA Systems is the owner of the IKEA Concept and the brand and it’s elements. But it does not own any IKEA store. Almost all the IKEA stores are owned by another holding company – INGKA Holdings (Netherlands), which in turn is owned by Stichting INGKA Foundation (Netherlands), founded by Ingvar Kamprad himself. INGKA Holdings operates as the franchisee and pays 3% royalty to IKEA Systems B.V. which acts as the franchisor.
India is the 50th country for IKEA. It’s first Indian store opened up at HiTec City, Hyderabad on 9th August 2018, and Indians lived upto their reputation, what with around 40,000 people visiting the store on the first day itself. Perhaps a few of them were more interested in the multi-cuisine highly affordable restaurant that accompanies each IKEA store. The samosas cost just Rs. 10/-. By the way, the restaurant is a 1000 – seater, the largest across all IKEA stores. It has surely done it’s homework nicely.
Indians would find that the cuisine has been tailored for their tastes and preferences. However, such adaptation would not be visible in the wonderfully mysterious names IKEA gives to its products. For instance, how about buying an ORFJALL – children’s desk chair? Or a Gamleby – a table with 4 chairs? Well, IKEA would not want to keep Indian – sounding names for its products, which is in line with its global strategy of nomenclaturizing its product range.
The names of IKEA products confirm to a strict logic and is deeply rooted in the Scandinavian culture.
- Outdoor furniture – Scandinavian Islands
- Bed sheets and comforters – plants and flowers
- Bathroom articles – Swedish lakes
- Fabrics, curtains – Scandinavian girl’s name
- Children’s products – Mammals, birds, adjectives
- Rugs – Danish place names
The story goes that the founder Ingvar Kamprad was dyslexic and had difficulty in learning and remembering names, thus he set up the coding system based on popular names of persons, places and things. The same taxonomy is followed by IKEA for all its products across the world. There exists a dictionary too, explaining the meanings of IKEA names.
IKEA has major plans for India – bolstered by the twin promises of a major consumption market and a major source for manufacturing and supplies. It has sought permission for a 25-store, 10,500 crore expansion plan for India and it is already revising it’s target to 40 stores. Next in line are Navi Mumbai, Delhi and Bengaluru.
Omnipresent, omnipotent, Omnichannel:
IKEA integrates the store, the app and the website to create a seamless meaningful experience for the customer. It emphasizes on economizing space and accommodating furniture that you like through IKEA Small Spaces – Small ideas . It’s new app – IKEA Place can give a 3-D rendition of the digital product in your room. The IKEA Catalogue app gets the extended version of the printed and online catalogue. The IKEA Store App enables one to create a shopping list BEFORE entering the store. Additional items can be added to the list by just scanning the bar codes, and the app-enabled checkout saves time and effort. The real effort at convincing the consumer actually begins much before she enters the store. IKEA Planning Tools enables one to plan their decor and furniture needs, sitting at home. The buying guide gives you the entire gamut of assortment available for each product. For the initiated, this would give a tremendous sense of control and ownership on the entire furniture buying process.
The only challenge, which has been widely circulated too, is that Indians are not yet into the Do-It-Yourself zone when it comes to furniture. The traditional carpenter can thus still hold customers to ransom by dictating all the elements of the process. The younger India is aspirational and brand conscious, and suffers from paucity of time. The middle-class, middle-aged urban literate too can comprehend the superlative benefits than IKEA can deliver. Wanting to break free from the clutches of the middlemen, they seek solace in the possibility of being in charge of their decisions and choosing their preferences. IKEA thus might just be what the doctor prescribed. Surat is perhaps the 5th or 6th city in line for IKEA, and I too shall eagerly await the DIY furniture, and ofcourse, the samosas.
- Would IKEA succeed in India? Why?
- Who would be the most profitable customers for IKEA India?