Practice makes perfect

We invited market participants to share their experience about strengthening their foreign economic relations.

05/11/2018

According to the Federal Customs Service of Russia, from January to October 2018, exports of domestic furniture and mattresses increased by 17% compared with the same period last year. The geography of Russian furniture-makers exports extends far beyond the borders of the Eurasian Customs Union and the CIS countries. They are now interested in the most unexpected directions ranging from Kenya and Oman to Cambodia and Australia.

Russian furniture-makers use international industry exhibitions as the primary method to promote themselves and to search for foreign customers. This is not only the imm cologne, but also events in Eastern Europe (in Poland, Czechia, the Balkans), in the Middle East and in Southeast Asia.

We invited market participants to share their experience about strengthening their foreign economic relations. We are sure that the responses sent to our editorial office are not the last, and even more breakthroughs are ahead.
 

Alexander Shestakov
CEO of Pervaya Mebelnaya

Directions of priority for the export development of Pervaya Mebelnaya today, are CIS countries and certain far-abroad countries: Germany, France, UAE. The launch of export deliveries itself, is a labour-intensive and long process; it may take more over a month from the start of work to the first shipment. What do we do? We take part in specialized exhibitions, negotiate with potential clients, study special aspects of a particular market, evaluate our own capabilities and prospects.

There is progress. If we talk about the CIS countries, then we began to build a sales network in Kyrgyzstan: we opened the head office in Bishkek in August 2018. Itis built on the same principle as all the showrooms of Pervaya Mebelnaya, being focused on both retail and corporate clients. All orders made in Bishkek are also processed in the shared order centre of Pervaya Mebelnaya, after that they are sent to manufacturing, and then they are delivered to the final customer.

Speaking about distant foreign countries, in 2018, for example, we have carried out a large project supply to France: it was furniture for a residential apartment complex equipment. We widely presented our products on Index Dubai 2018. Those marketing materials about our projects of furnishing state institutions, high profile hotels, which we prepared for our trip to Dubai, ‘hit the mark’. Now we have preliminary agreements with potential partners from UAE on the implementation of several major projects on furnishing villas, hotels, and 5-star level apartments. These are serious projects of a very high level. As a result of the exhibition in Dubai, companies' representatives — potential partners for contract project — came to our manufacture in St. Petersburg. They looked at the organization of our work, the equipment, thoroughly looked into all the possible aspects, found out what materials and accessories Pervaya Mebelnaya uses, what we can produce.

In general, Russian furniture today is truly competitive in international markets, it has a high export potential, which is the expected result of the general domestic furniture industry development and the achievements of its individual representatives. However, we must be aware that signing the contract is just the tip of the iceberg. It is always preceded by a huge preparatory work in any company.

 

Sergey Zmievsky
General Director of Lubidom / Almaz

We continue to increase the share of imports in all possible directions. In Europe, we are strengthening our partnership with XXXLutz and Agata Meble. As usual, markets of neighbouring countries, such as Kazakhstan and Kyrgyzstan, work well. We have recently executed a strategic partnership agreement with a company from Uzbekistan. Our retail chain will be opened there throughout the year.

In 2019 we are exhibiting at imm cologne again, and we are preparing something new for this January show in Germany. In particular, we will show furniture with prints of Warner Brothers heroes — Spiderman, Harry Potter, Batman, and others. We bought a license to use these characters this year. It is valid for both Russian and European markets.

 

Evgeniy Aksenov
General Director of the Ormatek Trading House

The geography of our interests in exporting is wide enough. When we debuted at the Cologne exhibition two years ago, potential customers from Cambodia showed great interest in our products. It was about equipping the chain of 4/5 star hotels with Verda mattresses (they are of a premium segment), pillows and box spring bed basements in various modifications. The partnership took off with lightning speed, and after only a few months we started delivering to Cambodia on a regular basis, and, in addition, we launched a number of projects with contract customers in the HoReCa segment.

For us, this country was the first experience of such a close cooperation with the Asian market, and the real interest from the Cambodian partner spurred the growth of exports. It turned out that the Ormatek product corresponds to demands of the local market (both in quality and performance) so much, that in August 2018 one of the wholesale customers opened the first Ormatek manufacturer dealer stores in Cambodia.

In Europe, we signed the contract and have already started shipments for a large Czech retail chain, with which we will cooperate on an ongoing basis. They have over 50 shops in Czech Republic, Hungary, Slovakia, Poland. Especially for their needs and standards, we have developed a collection of beds and mattresses in the medium and medium-plus segments.

We are currently signing contracts with several retailers who are developing popular retail chains in the Baltic countries. The manufacturer’s brand was introduced in Riga, presenting solutions of premium segment, with the potential of transforming into a fully fledged Ormatek store by the end of the year.

Speaking about exports to neighbouring countries, I note that our manufacturer's retail chain has been developing in Kazakhstan for more than five years: today 4 partner outlets work there. A partner from Belarus opened two stores in 2018. In July the Ormatek store was opened in Armenia. We perceive it as proof that our retail format is efficient and our solutions in the area of sleeping equipment are relevant. We also work with wholesale partners in all of the mentioned countries.

This year we dispatched our products to a wholesale partner in Uzbekistan for the first time. We have been working with Tajikistan for a year and a half now. We started with single wholesale shipments. When the customer was confident in our reliability, the goods' quality and that the goods are in demand, we arranged regular shipments. Opening the first brand showroom there is under negotiation.

Our company is now an exclusive representative of Tempur&Sealy International Inc. not only in Russia, but also in Kazakhstan, Tajikistan, and Uzbekistan. Customers in these countries can enjoy the unique experience that is provided by the goods of the legendary international brands included in our portfolio.

We value and support all our clients, both from Russia and foreign countries. We always provide them with support in any field: administration, logistics, maintenance, personnel training, etc. For instance, our new partner in the Czech Republic used to have a regular supplier from China. However, no support was provided on top of the actual product; the business relationship wasn't developing. Our approach is different. In this particular case, we have designed a special product in strict accordance with the Czech chain's specifications; on each stage, we maintained close communication with the customer, and we still stay in touch. The partner can see through real business, that we are interested in the project as much as they are.

We often serve as mentors in the markets of CIS countries. The ‘sleeping equipment’ segment in these countries is not yet developed enough. Together with our partners, we do everything possible in order to bring the ‘culture of sleep’ into final customers' lives.

According to the results of the first three quarters 2018, our export revenue increased by 64% compared to the same period last year. With no doubts, further growth is planned, both through developing the existing projects and entering new markets.

 

Yana Shamber
Head of Skyland company, subsidiary of Taipit Group

This year we, by tradition, took part in the Meble Polska exhibition, which takes place in Poznan. This is justified by the fact that we have a branch office with a warehouse in Tallinn. Free access to the EU market makes even small customers from Europe, who purchase in small lots, interesting for us, we can quickly ship everything from the warehouse.

We took part in the Bulgarian exhibition in Sofia for the first time. The event is quite small, focused on the local market. But anyway, by participating we supported our dealer, who works in this market.

Perhaps, the brightest event was our performance at the largest furniture exhibition in the world — the March CIFF in Guangzhou. We presented all of our key brands: Taipit office chairs, SkyLand office cabinet furniture, and several kitchen models, which are promoted under the AlvaLine brand.

According to our estimates, several thousand visitors from all over the world passed through the stand in Guangzhou (except visitors from Antarctica, perhaps, though it is impossible to vouch for that). We collected about 900 contacts from 30 countries all over the world and we expect about a hundred more potential partners. The traffic is truly impressive! And there are quite a lot of ‘warm’ contacts.

As another result of the exhibition, we put samples of kitchens in a furniture outlet in Sydney. An Australian wholesaler specializing in kitchen furniture came to our stand in Guangzhou. Despite the long delivery times to Australia, the offer we made turned out to be very attractive: it turned out that we beat even Australian companies working in the same segment. The delivery was successful.

In general, the impressions are positive, we continue to cooperate. Among others, we, with great interest, are considering new international exhibitions to take part.

 

Alexei Kovach
Commercial Director of Katyusha Kitchen

Our company is actively working in the external markets. The agreements that were achieved in the first six months of 2018 are currently being implemented. We have to communicate with foreign customers on an almost everyday basis. For these purposes, we have formed a team of English-speaking export managers, who systematically maintain and develop these relationships. Forming the supply chain is a separate serious work. We have purposely involved consultants, who helped to solve the issues of shipping the furniture to Africa and the Middle East: target regions, where we are now actively developing.

The order of furnishing apartments in Kenya, which we mentioned earlier, is at the stage of final approval. The contract is signed, and the samples are shipped. There will be high-rise buildings that will be commissioned in several stages. The first building is already being constructed, so we planned the pilot shipment at the beginning of 2019. The volume of supply is quite large: about 400-500 kitchens for each building. On top of that, cabinet furniture by Dyatkovo will probably be supplied as well.

We count on entering the markets in Jordan (the country is now actively developing) and Syria through the same partner, who is engaged in complex equipping of new development objects. It is interesting that the projects of cities' reconstruction are already developed and approved by the government in Syria, and the budgets are being allocated. It is planned to build high-rise residential buildings and to equip them with furniture, and, of course, we are interested in participating in these projects.

The project of the showroom that we are opening together with our partner from Abu Dhabi was adjusted several times during the recent months. We are now entering the final round of negotiations. We are opening showrooms in Abu Dhabi and Dubai, but not for retail service. The showrooms' main purpose is to ensure that the consultants who are choosing the furniture suppliers for the contract objects, have a chance to look at our products in real life and get a commercial offer from first hands.

All those foreign trade contracts and projects are not just the result of us participating in the Dubai exhibition; they are mainly the result of the in-depth study of target foreign markets and their specifics.

If we speak of the Middle East, there are some interesting observations. The luxury segment, where the demand is mainly formed by the wealthy Arabian audience, barely holds 10-15% of the furniture market. Practically, these are single sales. The main consumers (about 60%) are not the local population, but the foreigners, who work in the region on a contract basis. They constitute the audience that lives in skyscraper apartments, which is our target segment, capacious enough for our further development and promoting our furniture on the Middle East market.

 

Alexandr Linevich
General Director of E1

We are taking our first steps in the export sales. In January 2018 we, for the first time, exhibited on imm cologne, where we managed to collect a decent amount of contacts. Big European chain companies and buyers from the Middle East and Latin America showed interest in our products. Good news is that with many of them we've managed to move beyond the simple exchange of business cards. The main difficulty is that the negotiations often stretch out for months.

So far, we deliver goods only to Brazil, Israel, and UAE. We have dispatched three-four shipments to each of the countries during the year. The quantities, let's just say are impressive. There are both trading companies and representatives of the development companies among our partners. The last order from the UAE was on 400 cabinets for the apartments in new buildings.

Along with that, European furniture chains are our main interest. It is cooperation with them that may bring the company to the international level. As I have already said, the first contacts with the representatives of the European retail market have already happened. And the process of the negotiations is going; so far, however, not by the scenario that would suit us. For instance, one big company from Eastern Europe has requested an exclusive offer for the whole group of products. Initially, we found that proposal tempting. But when we started studying the contract, it turned out that they wouldn't confirm the quantities, but instead, they were literally closing the opportunities of working with other players on the market. We refused. But we still keep in touch. Perhaps, we will be able to find the points of mutual interest.

The next year in January we are going to exhibit in Cologne again, and we really count on advancing in negotiations with chains.

 

Igor Podstolniy
Marketing and Development Director of InterDesign

The export share is slightly over 25% in InterDesign's sales. 10 of them are in the EU countries, 15 are in neighbouring countries.

In 2018, we have reached a new level of relationships with our key European partner, the Austrian company XXXLutz, the leading furniture retailer in Europe with a couple hundred shops.

As you know, last year, XXXLutz left the Begros union and established Giga International, a purchasing group of its own. Many European chains, interested in expanding their regions of presence, have joined it. For instance, the German Zurbrüggen, Oska, Möbelzentrum Pforzheim, and Spar Kauf, the Czech Moma, and the French But are among them.

The good news is that Giga International has included InterDesign in its list. Now one can find our furniture not only in XXXLutz chain but in the shops of all union members as well.

In August 2018, Giga International's home exhibition took part in Wels, Austria. Our furniture was exhibited along with the products of Hülsta, Venjakob, Forte, Gwinner, EwaldSchilling, Koinor, Wiemann and other western companies. We have agreed on a new range of goods and on countries, where our products will be displayed.

As for the neighbouring countries, we have chosen franchising there, as a traditional Russian model of distribution. The situation in Kazakhstan is the best. Together with our partners, we have opened three showrooms in Almaty, Astana, and Kostanay. Three more shops are under negotiation. Besides that, the companies from Kirghizia and Belarus got interested in our franchise license.

 

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