The IKEA effect: A failure in India?

Have you ever toiled over an Allen wrench, muttering under your breath as you wrestled an IKEA bookshelf into existence? If so, you've experienced the IKEA effect firsthand. This fascinating phenomenon describes our tendency to value objects more highly if we've put some effort into creating them, even if that creation involves deciphering cryptic assembly instructions.

The idea is simple: our labour imbues an item with a sense of accomplishment and ownership, making that wobbly bookshelf seem more precious than its pre-assembled counterpart. This psychological quirk has been a goldmine for IKEA, the Swedish furniture giant whose flat-pack furniture has revolutionised home design. But is the IKEA effect a guaranteed win-win for both consumer and retailer, or could it be a cultural misstep in markets like India? Let's delve deeper and see if the IKEA effect translates across borders.

IKEA’s Indian Debut

IKEA's grand arrival in India wasn't without fanfare. In 2018, the first store opened in Hyderabad, later in Bengaluru and Navi Mumbai, drawing crowds of curious customers eager to explore the massive, 460,000-square-foot showroom. This marked the culmination of years of planning, with IKEA strategically increasing its authorised share capital in 2019 to fuel further expansion. Their growth strategy hinges on a network of stores across major Indian cities, offering their signature flat-pack furniture and homeware at competitive prices.

The IKEA Effect: A Winning Formula in the West

The IKEA effect has been extensively studied and celebrated in Western markets. Numerous research projects have documented how people value furniture they've assembled themselves more than pre-assembled pieces. This psychological phenomenon is rooted in several factors:

• Effort justification: The time and effort invested in assembly create a sense of justification for the purchase. We convince ourselves that the finished product is more valuable because of the work we put in.
• Increased perceived control: Wrestling with those pesky Allen wrenches fosters a sense of control and ownership over the final product. We feel a personal connection to the item because we played a role in its creation.
• Uniqueness: The very act of assembly can personalize the furniture. Minor modifications during assembly or the addition of decorative touches make the final product feel unique to us.

IKEA understands these psychological drivers and leverages them masterfully. Here's how:

• Flat-pack design: Their signature flat-pack furniture is designed for self-assembly, encouraging customers to engage in the creation process.
• Clear instructions (ideally): While deciphering IKEA's pictograms can sometimes feel like solving a cryptic puzzle, clear instructions, when successful, enhance the sense of accomplishment upon completion.
• Affordability: By offering furniture at competitive prices, IKEA positions self-assembly as a way to save money, further justifying the effort involved.

Through this approach, IKEA fosters a sense of value and satisfaction that transcends the price tag. Customers walk away feeling not just like they've acquired furniture, but that they've created something unique and worthwhile.

The IKEA Effect in India: An Undergoing Investigation?

While the IKEA effect has proven successful in Western markets, its applicability in India is a question mark. Here's why:

Cultural Considerations:

• DIY Culture: India has a traditionally strong service sector with readily available handymen for various household tasks. A 2020 survey by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) revealed that 72% of Indian households utilize handyman services, suggesting a lower propensity for DIY projects compared to the West.

Socioeconomic Factors:

• Time Investment vs. Cost: In India, time is often a valuable commodity. A 2021 report by the World Bank shows that Indians work an average of 2,077 hours annually, significantly higher than the OECD average of 1,687 hours. This raises the question of whether time-strapped Indian customers value the perceived cost savings of self-assembly over the convenience of pre-assembled furniture.
• Pricing Strategy: While IKEA offers competitive prices, their furniture might not be the most budget-friendly option for all Indian consumers. Considering the average Indian household income (around ?15,000 per month as per a 2022 CMIE survey), the perceived value proposition of self-assembly might be less compelling.

Availability of Handyman Services:

• Affordability and Accessibility: Handyman services in India are generally affordable and widely available, especially in urban areas. A 2023 report by UrbanClap, a leading online service platform, indicates a surge in demand for furniture assembly services, suggesting a preference for outsourcing this task.

Early Signs of Friction?

While concrete sales data specific to the IKEA effect in India is unavailable, some anecdotal evidence suggests potential challenges:

• Customer Reviews: Online customer reviews on platforms like Google My Business occasionally mention frustration with the assembly process for IKEA furniture.
• Focus on Local Sourcing: IKEA India is strategically increasing its focus on locally-sourced furniture (currently at 25-27%, with plans to reach 50%). This shift might be a way to cater to a market where pre-assembled furniture is a viable option due to the factors mentioned above.

IKEA's Toolkit for India

Aware of the potential hurdles posed by the IKEA effect in India, the furniture giant is implementing several strategic adaptations:

Local Sourcing: A Double-Edged Sword

• Catering to Price and Convenience: IKEA India's focus on increasing locally-sourced furniture (currently 25-27%, with a target of 50%) caters to a price-sensitive market. By reducing import costs, IKEA can potentially offer more competitive pricing on pre-assembled furniture, making it a more attractive option for cost-conscious Indian consumers.
• IKEA Effect Dilution: However, a higher proportion of pre-assembled furniture could weaken the IKEA effect. If the effort of assembly is reduced, the sense of accomplishment and perceived value associated with self-assembly might diminish.

Additional Services to Ease the Assembly Burden

• Assembly Assistance Programs: IKEA India offers assembly services for a fee, addressing the needs of customers who might lack the time or inclination for self-assembly. This caters to the established service culture in India and provides a convenient alternative.
• Assembly Service Partnerships: IKEA has partnered with local service providers like UrbanClap to offer on-demand furniture assembly services. This leverages existing service infrastructure and expertise, making professional assembly readily available to customers.
• Digital Assembly Guides: IKEA India utilises digital tools like interactive assembly instructions and augmented reality apps to enhance the self-assembly experience. These tools can potentially simplify the process and reduce frustration, even for those who might not be DIY enthusiasts.

The Evolving IKEA Effect in India

IKEA's adaptation strategies in India acknowledge the potential limitations of the IKEA effect in this market. By offering a wider range of options, including pre-assembled furniture and assembly services, IKEA caters to a broader customer base and adapts to the existing service culture.

Conclusion

IKEA's arrival in India raises a key question: can the IKEA effect, central to its Western success, adapt to a new market? While initial enthusiasm is promising, challenges exist. India's service culture and time-conscious consumers may not fully embrace self-assembly, and pricing may need adjustment.

However, IKEA is adapting. Local sourcing could lead to more affordable pre-assembled options, and assembly services cater to those who prefer convenience. The future likely lies in a hybrid approach, with IKEA offering a range of choices to suit the Indian market. IKEA's willingness to experiment positions them well for success in this evolving landscape.