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edition 1 (177)
January 2013
Interior Design

Designed for growth

Despite flatter consumption interior design chains are focusing on expansion

Zuzanna Wiak

The weaker economic outlook for the residential market could also mean a slowdown of the interior design market. It might, but it doesn't have to. Polish and foreign furniture manufacturers operating in this business are planning the expansion and development of their sales chains

The Polish furniture industry has a long tradition. We could even say that this branch of the economy has had a considerable influence on the development of the largest furniture chain in the world - IKEA. After all, the manufacture of the cult Ögla chairs started at Zakład Mebli Giętych [the Bent Wood Furniture Factory] in 1961 in Radomsko. Poland is the second most important (after China) manufacturer of furniture sold in IKEA shops across the world. According to the National Chamber of Commerce of Furniture Manufacturers in Poland, we currently have app. 24,000 furniture manufacturers, 22,000 of which are micro-businesses. Poles love Polish furniture - or perhaps this is only what they can afford, because the import of furniture to Poland amounts to only 15 pct of the value of Polish furniture exports, which constitutes one of the largest groups of exported goods. In 2011 the value of furniture manufacturing exceeded the previous record amount of PLN 30 bln, of which exports accounted for app. PLN 27 bln.

Slightly weaker 2012
The crisis on the financial market has impacted on the interior design market, which has registered an average decrease of 5 pct in the last two years and, according to research company PMR, had a value of PLN 12.6 bln at the end of 2011. "Customers are spending their money on furniture more cautiously. However, they continue to buy products from lines generally related to sleeping, which makes us personally very happy, because this is the segment we are experts in," says Piotr Padalak, the general director of Jysk Polska. According to the forecasts for 2012-2014, the value of the market will decrease by another 1 pct. This shows that the Polish retail trade is doing much worse than the wholesale trade earmarked for export. According to PMR, the chains that offer interior design products are reviewing their outlets, as a result of which nearly 130 have been closed, which is not a significant result. "Even though recent years have been a difficult time for the interior design market, particularly for specialist chains, we aren't talking about considerable changes when it comes to brands. However, it has to be pointed out that the majority of players have been reviewing their sales chains for the last two years and closing the least profitable outlets. Brands such as Swarzędz and the Decorador chain of decoration stores have withdrawn from the market," says Jarosław Frontczak, a retail market analyst at PMR. Despite the fact that the market is going through a slightly weaker period, we are by no means faced with a collapse. Furniture chains are continuing to grow and are opening more outlets. However, the biggest player is Swedish retailer IKEA, followed by Jysk, which is also Scandinavian. Polish companies are represented by players such as Bodzio, Komfort and Abra Meble. However, Black Red White has been the largest local furniture group for many years. The company focuses on the manufacture and distribution of furniture. "As well as having one's own-outlets, franchising is a popular form of retailing in our line of business. When we look at the numbers, there are more outlets owned by chains than franchises. Partner outlets are also a popular format. In the case of furniture chains, the biggest players, such as IKEA, Bodzio or Jysk, build their retail chains on the basis of own-outlets. Other large chains, such as Abra and Meble Vox, are expanding through franchise agreements, but most stores are owned by the chains," claims Jarosław Frontczak of PMR. BRW currently manages a chain of around 2,300 of its own-outlets, more than half of which are abroad. The group currently generates 40 pct of its sales beyond Poland's borders. It now operates in Ukraine, Belarus, Slovakia, Russia and Bosnia-Herzegovina. At the end of 2012 it opened the first of its own interior design shops in Budapest. The 2,600 sqm is located on Gyáli út.

Expansion directions
And what are the benefits of a strategy based on diversified sales? "Our company carries out a significant part of its sales on the European and global markets as a supplier of contract furniture. In Poland and the CEE region we concentrate our efforts on two brands targeted at the residential market, Woodways and Paged Meble, as well as the Meble Jarocin brand aimed at investors from the hotel and catering market. We sell our residential furniture through a chain of independent partner furniture stores. This entails a typically selective kind of distribution based on certain established display standards for our furniture brands, which our partners are obliged to follow. The chain has a very diversified character. In terms of the numbers, the majority are medium-sized stores that are mainly located in specialised furniture centres - 40 pct of the locations. It is worth emphasising the growing significance and share of the chains in the local furniture market, as they currently hold 20 pct of the market share. We are now concentrating on developing a sales chain based on external partners. We also cooperate with selected chains of furniture stores in order to ensure our furniture collections are displayed in the best possible way, among other things," explains Tomasz Dybczak, a board member of Paged Meble. Correctly selecting the spot where the furniture is displayed and sold seems to be essential in this line of business. It is rarely the case that customers buy furniture while shopping for other products. We tend to be most keen to go shopping for interior design products at places where we can see a few stores at the same time. "Furniture does not like multi-sector trading and requires specialisation," says Marek Adamowicz, the director of the office of the National Chamber of Commerce of Furniture Manufacturers in Poland. As he explains: "Customers who are interested in interior design products should be immersed in a world of furniture while shopping - a fact that is very much understood by manufacturers. So it is not the best idea to create areas dedicated to the sale of furniture in multi-sector shopping centres. On the other hand, such facilities attract a lot of customers, which is why some companies opt for locating their shops there. Large furniture centres and the integration of smaller retail outlets are the future."

Plans, plans, plans...
"We are interested in both shopping centres and stand-alone facilities," declares Piotr Padalak, the general director of Jysk Polska. "We lease all our retail areas and we appreciate working with large shopping centres as well as the owners of detached stores. The average area of our newly-opened stores is about 1,100 sqm. Our chain is already present in all the major Polish cities, and now we are also considering locations in smaller centres, starting with towns of more than 25,000 inhabitants. Jysk has recently opened its two-thousandth outlet in Lofoten in Norway and its Polish branch had as many as 144 shops at the end of 2012. In 2013 the company is planning to open 12 to 15 new stores," adds Piotr Padalak. "Most DIY hypermarkets also have expansion plans," says Jarosław Frontczak of PMR.

Zuzanna Wiak

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