Ikea Is Facing Huge Problems in This Important Country
Ikea’s plans for penetrating the all-important retail market of India has hit a boatload of issues that threaten to hinder its efforts.
The Swedish retailer’s problems are due to a stipulation by the government that at least 30% of Ikea’s inventory must be made in India. This has led the company into a head-on fight with poor manufacturing quality, low local labor standards, and miles of red tape, according to The Wall Street Journal.
“It hasn’t been easy,” Sandeep Sanan, IKEA’s new business head responsible for operations in India, told the Journal. “Change is a slow and painful process—and cannot happen overnight.”
India is projected to become the fastest-growing nation in the world over the next two years, according to the World Bank, in light of China’s economic slowdown. With a recent Moody’s report pointing to sustained growth in consumer spending, it seems natural that retailers would want to establish a presence in this potentially lucrative market of 1.2 billion people.
But Ikea is a case study in possible obstacles to such intentions. Accustomed to European Union criteria that govern limits for chemical content in items such as table tops and cutlery, for example, Ikea’s scouts have found that table tops from Indian suppliers contained unsafe levels of formaldehyde, and steel plates leached chemicals into food, the Journal reported.
The company also had issues with workers who wanted to work overtime to reap more pay, contradicting Ikea’s internal daily limit of eight hours. For one factory making rugs, Ikea went door-to-door to ask women to work, built a nursery at the factory, and gave personal hygiene classes for its workers.
The company currently has 45 local suppliers signed up and hopes to add 10 more this year, including ones that can make mattresses, sofas, bookshelves and wardrobes, according to the Journal. “We want to continue making more in India,” Sanan told The Journal. “But it will take time to do it right.”