Don’t unpack your electric drill and allen keys just yet.
Ikea may have announced ambitious plans for retail operations in India. But anyone who has observed the India retail saga for the last decade or so will know to take all announcements of investments, growth, hiring, revenues and “nationwide roll-out” with a healthy dose of scepticism.
It may still be a while before bewildered Indians collapse in front of flat-packed Ikea beds and bookcases tearing their hair out in frustration.
On paper, India’s retail story makes complete sense. There are a lot of people in the country. Many of them have money. Most of them need things. All you really need to do is sell them whatever they want. This is the dominant narrative of a story that, it turns out, is vastly more complicated and messy.
It has proven extraordinarily hard to retail anything in India at any scale or any profit. And while millions of dollars in private equity and venture capital have flown into several major retailing ventures, the only people who have benefited from these transactions have been promoters. Many entrepreneurs have walked away with cash, leaving behind a trail of debt, bamboozled investors, rotting inventory and shuttered stores.
And there are no trends to these busts. Retailers of all shapes and sizes—Lilliput, Subhiksha, Vishal Mega Mart, Koutons and The Loot—all currently struggle or have gone out of business in a blaze of rumour, controversy and litigation. Earlier this month, this newspaper reported that the discount retail industry in India had contracted by around 25% last year.
Ikea has its work cut out. Executing those billion-dollar plans involves entering a country with none of those well-connected gargantuan suburban retail parks that Ikea thrives in, and competing with no-name furniture retailers who deliver assembled goods. Discounting alone does not work.
Which is perhaps why the brand’s plans, it has been reported, include explicit demands for concessions from the government. Some of these will be tantamount to rewriting retail foreign direct investment policy. This is a clever move, given the United Progressive Alliance (UPA) government’s ever-weakening international reputation for business friendliness.
Now Indians and Swedes wait. If only there was a way to send the UPA policies in flat-packed boxes with clear directions to assemble.
Do you think UPA policies have pulled back the Indian retail growth story? Tell us at views@livemint.com
