This is a case study on Business and Pricing strategy of IKEA when it entered into India

1. IKEA IN INDIA
“Providing clever solutions in the smallest
possible space is our greatest strength”

3. IKEA
CONCEPT
IKEA follows three tier strategy which are best price, god
quality and signature products.
The IKEA Concept is based on offering a wide range of well
designed, functional home furnishing products at prices
so low that as many people as possible will be able to
afford them.
Rather than selling expensive home furnishings that only a
few can buy, the IKEA Concept makes it possible to serve
the many by providing low-priced products that
contribute to helping more people live a better life at
home.

4. FURNITURE MARKET- INDIA
Furniture market is expected to
expand at a CAGR of 12.91%
during the forecast period of
2016-2023.
India furniture market growth
is driven by various attributes
such as rising trend for
modular and state of the art
furniture among the
population living in urban
cities, growing urbanization in
Indian states, rising demand for
durable and hybrid seating
furniture.
The rising trend of online and
mobile shopping in India is
envisioned to bolster the
demand for furniture through
online channels.
Various furniture companies
such as Pepperfry, Urban
ladder and others are creating
huge demand from these
online channels.
The ease of business doing
policies in India gives rise to
new businesses across the
country.

5. Contd.
RAPID URBANIZATION IN
INDIA AND GROWING
DEMAND FOR MODULAR
AND COMPACT FURNITURE IS
EXPECTED TO POSITIVELY
IMPACT THE GROWTH OF
FURNITURE MARKET IN NEAR
FUTURE.
FURTHER, GROWING
URBANIZATION IN INDIAN
STATES SUCH AS GUJARAT,
MAHARASHTRA, TAMIL
NADU AND OTHERS IS
SUPPORTING THE CULTURE
OF HOUSING SOCIETIES.
95% OF THE FURNITURE
MARKET IS UNORGANIZED.
HOWEVER, THE LOW COST
FURNITURE PRODUCTS
OFFERING BY UNORGANIZED
PLAYERS FURTHER DECREASE
THE REVENUES OF MAJOR
MARKET PLAYERS IN INDIA.
FURTHER, THE
UNORGANIZED PLAYERS SELL
THEIR PRODUCT THROUGH
LOCAL SHOPS WHICH
DECREASES THE COST OF
BRANDED FURNITURE. THE
HIGH COST OF QUALITY AND
DURABLE FURNITURE IN
INDIA IS THE MAJOR
RESTRAINT FOR FURNITURE
INDUSTRY. THE HIGH COST
OF WOOD AND LEATHER
FURTHER INCREASE THE
COST OF OVERALL
FURNITURE PRODUCT.

6. COMPETITORS
Evok ( Subsidiary of
Hindware Home Retail
Pvt. Ltd. (HHRPL) )
Geeken India
Godrej & Boyce
Manufacturing Co.
Ltd.
HNI BP Ergo India (A
holding company of
HNI Corporation)
Home Town
IKEA
Millennium Lifestyles
Nilkamal Limited
Pepperfry
Urban Ladder
Wipro Enterprises (P)
Ltd.
Zuari Global Ltd.

7. MARKETING
STRATEGY -
INDIA
Of the nearly 8,000 artefacts on display, about 1,000 would be priced
below Rs 200.
That would make India the lowest priced market for Ikea globally.
Over 75 per cent of the country’s population lives in small houses, two
rooms or less, which means people often sleep in the living .
There will be mocked up version of one-room sets to fit entire family life
-- with playing area for children, smart kitchen with waste segregation
systems, living and bedroom.
There is a difference in the family constitution between India and the
West for e.g. the grandparents and parents often live together.
Low price, high quality, nice unique design, purpose of function and
sustainability, both in terms of environmental sustainability and
durability.

8. Contd. IKEA MAY BE ABLE TO BOOST
INDUSTRY GROWTH AND
EXPANSION OVERALL, BUT ITS
SUCCESS WILL BE HUGELY
DEPENDENT ON HOW WELL IT
ADAPTS TO INDIA.
THE COMPANY FOCUSES ON DIY
PRODUCTS, WHICH ACCOUNT
FOR ROUGHLY 65% OF ITS
PORTFOLIO.
RECENTLY ANNOUNCED A TIE-UP
WITH MOBILE-BASED SERVICES
PLATFORM URBAN CLAP AS ITS
FURNITURE ASSEMBLY SERVICE
PARTNER FOR THE HYDERABAD
STORE. PROFESSIONALS TRAINED
BY IKEA WILL REACH THE
LOCATION WITHIN 90 MINUTES
OF BOOKING THE SERVICES
ONLINE.

9. Segmentation
In India
Demographic -
Male and female
under 35, Urban
Behavioral -
Progressive
,Creative
Geographical - Asia,
Europe, America

10. Unorganized
Players THE INDIAN FURNITURE
INDUSTRY IS VALUED AT RS.
35,000 CRORES AND ABOUT 85%
OF THEM ACCOUNT TO
UNORGANIZED SECTOR
LOW-COST FURNITURE
PRODUCTS OFFERED BY
UNORGANIZED PLAYERS
DECREASE THE REVENUE OF
ORGANIZED PLAYERS IN INDIA
IKEA’S PRICING STILL HIGHER
THAN THE UNORGANIZED
PLAYERS

11. Pricing Strategies

12. Prices Ending in 99
• Started this practice at
Sweden
• After successful
implementation, expanded
to all the countries
• Consumers read from left
to right, thus ending in 9
impacts their decision in a
positive way

13. Referent Pricing
• When IKEA sets the new
prices, they put the previous
prices as well
• Customers see the previous
price and the benefit they
gain from the purchase

14. No Law of
One Price
DIFFERENT SALARY AND COST
STRUCTURES ARE THE REASON
FOR THE VARIED PRICE POINTS
FROM A MARKETING
STANDPOINT, CONSUMER
ACCEPTANCE (BUYER-
READINESS) DETERMINES THE
PRICE
THE DEVIATIONS ACROSS
COUNTRIES SHOW WIDE
DISPERSION AND NO
DETECTABLE PATTERN
OVERALL
FACTORS FOR DIFFERENT PRICE
ACROSS COUNTRIES -
TRANSPORTATION COSTS AND
LOCAL DISTRIBUTION COSTS

15. Value Pricing
• Decides the target price
first and then designs to
make within that price
• The strategy is best seen
as a pentagon, in which
form, function, quality,
sustainability and low
price constantly
compete with each
other

16. Penetration
Pricing
IKEA India has priced their
products 30-40% lower than their
organized competitors
Aims to reduce the cost further
with expansion plans
Pricing is still higher than the
unorganized sector

17. Affordable prices
• Low prices make well-designed, functional
Home furnishings available to everyone.
• IKEA’s Psychological Pricing Strategy is related
to Consumer Behaviour.
lower
Cost
Lower
Price
High
Volume

18. International Pricing Model
PRICES ENDING IN 99. IKEA OFTEN CONSIDERS A PRICE CHANGE, BUT
HOW THEY MAKE CONSUMERS BELIEVE THAT
NEW PRICE IS A GOOD DEAL.
IKEA PUT THEIR PRODUCTS ON SALE
OCCASIONALLY. SO, CUSTOMERS BELIEVE THAT
THEY ARE SMART BUYERS WHEN THEY GET
PRODUCTS WITH A GOOD DEAL

19. Indian
Pricing
Model
IKEA is putting a massive
effort to start with the
lowest price as possible
Slash prices further to
appeal to a wider Indian
audience.
The first in the country,
offering about 15% of its
products at ₹200 or less.
The more sourcing to do
locally, the more the
reduced prices.

20. Pricing Difficulties
• IKEA in India priced their products as low as possible
• The suppliers count in India is expected to get
increased as announced by the CEO in India
• So, CIF will increase
• Proposed 30 to 40% lower than its organized
competitors
• Unorganized sector cannot be controlled

21. Pricing at levels
For market penetration
The pricing of furniture is
distributed across three
levels
The price levels vary so
to the design and quality
of the product
the problem of lack of
knowledge about the
need of branded product
in the furniture industry
15% of the products
(1000 products) in IKEA
priced lower than Rs. 200

22. Distribution Plan
THE WAREHOUSE FOR IKEA
INDIA, IS IN PUNE
PROPOSED WAREHOUSE IN
BANGALORE, GURGAON AND
ANOTHER LAND IN MUMBAI
DISTRIBUTION IN WAREHOUSE IS
POWERED BY 100 EMPLOYEES OF
WHICH 50% ARE WOMEN
HAVING A PLAN TO ENTER INTO
ONLINE MARKET

23. Suppliers -
India
THEY PREFER LOCAL
SUPPLIERS TO REDUCE THE
TRANSPORTATION COSTS
THEY ARE INVESTING IN
QUALITY CHECK PROGRAM
WITH THE SUPPLIERS
AROUND 55 SUPPLIERS
HAVE SIGNED CONTRACT
WITH IKEA
THEY ARE GOING FOR
OUTSOURCING 30% OF
THEIR SUPPLIES LOCALLY
(ABIDING BY THE LAW)
THEY ARE IN A PLAN OF
DOUBLING ITS LOCAL
SOURCING SOONER IN INDIA

24. Supply Chain Proposals
Rest of the supplies are
expected to be come from
their biggest warehouse
facility in China
The products are
manufactured in Europe
The supplies from the
Europe are collected in a
Swedish repository
Asian share of it is
accumulated in the
Chinese warehouse of IKEA
They are also working on
an alternative to bring in
the products from Europe
directly into India

25. Distribution Strategies
AT LEAST 20 PERCENT OF THE
HYDERABAD STORE’S DELIVERY
SYSTEM WILL BE ELECTRIC
RICKSHAWS POWERED BY SOLAR
BATTERY
THEY ARE PAINTED IN THE
TRADITIONAL DESIGN AND
LOOKING UNIQUE
AUTO RICKSHAW IS THE EFFECTIVE
MEANS OF TRANSPORT IN A
COUNTRY LIKE INDIA WHICH IS
CHARACTERIZED BY DENSE TRAFFIC
IN ALMOST ALL LARGE CITIES
THE IKEA EMPLOYEES IN INDIA HAD
VISITED AROUND 1000
HOUSEHOLDS TO UNDERSTAND
THEIR CUSTOMERS BETTER

26. Suggestions on Distribution
Shipping aggregators in India
Local transportation
Nation-wide transportation
Partnering with startups like Lynk Logistics
Acquisition of startups working in the logistics and supply chain solutions in India
Flipkart and Amazon are already working on it

27. Thank You!