Corneliu SAU: "Our biggest competitor is ourselves"
The interview of InfoMarket agency
He offered via social networks 700 euro to someone who recommends him a candidate for the vacancy of a business assistant. There were made more than 700 reposts, over 32 thousand views of this message, hundreds of recommendations. So, Corneliu Sau managed to find the employee in his company without resorting to expensive services of HR companies or headhunters. Three weeks after his post, we couldn’t wait to find out about the result ...InfoMarket agency editor talked to Corneliu Sau, co-owner of the Tandem furniture factory in Chisinau, about rebooting, business expansion, trends, proper sleep, and what’s common between pizza preparations with furniture production.
InfoMarket: ... So, you found an assistant, do you? And you paid 700 euro to the one on whose recommendation he came to you?
Corneliu SAU: Found it. Her name is Elena, if she works for two months, I will pay the promised reward. She is already actively involved in the work.
InfoMarket: So, this method of searching an employee worked?
Corneliu SAU: This is a good method, although three years ago I was looking for a manager in the sales department in the same way, there were a lot of re-posts of ads in social networks, but it did not work finally. But, it worked this time. Moreover, I was choosing between three candidates and it was a difficult decision.
InfoMarket: Is Tandem one of the few factories in Moldova that produces cushioned and cabinet furniture...
Corneliu SAU: In such volumes, perhaps, yes. Especially, cabinet furniture, many companies choose to work on individual orders in our industry, but this limits their production volumes. This approach is not the right one. For example, German company "Mobilia" produces 2800 kitchens per day on individual orders. It works on a modular system consisting of cabinets, the kitchens are assembled to the requirements of a specific customer.
InfoMarket: And this is what Tandem is heading for? Did you always go for it?
Corneliu SAU: The companies of the Tandem group were organized 3 years ago in their current structure. Everything was changed by the book, long ago presented to me, but waiting in my bookcase, "My Life And Work" by Henry Ford is the best book for entrepreneurs. This book extended the horizons of what we can do. Before that, we had not a factory, but a manufactory; we made furniture on individual orders within 12 years, like every other company at this market. The book simply explained: if you come up with a new car every time, then you are a fool and your client too. And you cease to respect yourself every time you do it.
It was difficult for me to convince my partner to close the old manufactory, which brought a certain profit, 2-3 million lei per month of turnover, many are striving for this figure ...But we "cut down the old tree and planted a new one"; and now, three years later, our turnover is almost 10 times more, which is 20 million lei per month (1 million euro). We are planning to double this figure next year.
InfoMarket: It’s just the right time to talk about Tandem is today.
Corneliu SAU: We opened a large store at Petricani street (in Chisinau), it has 1000 sq.m. selling space and we are building another 600 sq.m soon. We also built a factory of 6000 sq. m. and another factory 5000 sq. m. is at Ciocana sector. We employ about 200 people, but there was a time when the staff reached 280 people, when we made furniture on individual orders. That is, now we were able to increase production volumes threefold and reduce the number of people, reducing costs, as a result, the prices of the products reduced by an average of 40%.
We make modern design furniture using new technologies and innovative materials, for example, we use waterproof textile for cushioned furniture. We give 5-years warranty for cushioned furniture and 10-years warranty for the mattresses made by us. Any model at our website or in our shop can be tailored to the needs of the customer: our furniture is adaptive as LEGO game, the concept of the products does not change, and the orders became just the set of checkmarks on your computer. The timing of orders is one week and 2.5 weeks for the Romanian market, taking into account logistics and delivery. We have two shops in Chisinau and five shops in Bucharest, also, one partnership project in Brasov.
InfoMarket: So all 5 stores in Romania work in Bucharest?
Corneliu SAU: Yes. But, this year we started a partnership project in Brasov. This is not exactly a franchise, but rather an official dealer. We do not want to limit our partnership by certain obligations, so the partner has more freedom to sell furniture from other manufacturers, although he prefers to deal only with us. We have trained the sellers and we try our best to support the partner in Brasov. The partner has two business plans of the development in Brasov, one is ours and one is his own, which is 20% higher than ours. Now, the third month of our partnership is ending and everything seems to be according to his own plan.
InfoMarket: Are you going to expand the sales geography in Romania?
Corneliu SAU: We drove through this country and we saw seven cities where we can work: Cluj, Constanta, Iasi, Timisoara, Oradea, Brasov, Bucharest. But I want to enter these markets by partnership, like in Brasov. Let's see how "the seasonal decline" goes from February to May. If we go through this period with the partner well, we will use this model in other cities. Investment in the opening such a shop is only 60 thousand euro; an estimated profit is 5 thousand euro per month. Such a model should pay off in a year, because the partner has more motivation than a hired manager. There is also a good opportunity in Romania to get a cheap loan from a bank up to 40 thousand euro for a start-up.
InfoMarket: How are sales in Moldova and Romania divided now and what prospects do you see, maybe other markets?
Corneliu SAU: Today, it’s about 50% to 50% of sales. In total, we sell 400 mattresses, 300 sofas and 700 beds per month. We are planning to sell 700 mattresses, 500 sofas and 1000 beds within a year. According to our calculations, the Moldavian market still has to grow by 60% we are still planning to take that niche. We do not stand behind the backs of our potential customers, but we provide high-quality products, we try to "embrace" potential customers with our services, for example, we make the delivery faster than the expected date.
We are also very interested in the Russian market. But there, unlike Romania, it is interesting to establish joint production, to build a factory using our technologies and knowledge. Things move faster if there is a local partner who knows the market. There is too much competition in Moscow, so we are looking to the south of Russia, Krasnodar, Rostov-on-Don particularly, we have friends in Siberia. But, it is all at the level of thoughts at the moment.
InfoMarket: Do you plan to open production in Romania? Will it be cheaper than to transport products from Chisinau?
Corneliu SAU: For the export of furniture to Romania, we have no additional taxes in the form of excise taxes, and logistics costs 5% of the prices. If we take into account that wages in Romania which are 30% higher than in Moldova, and the wages included in the cost of a product is 25-30%, then even taking into account the logistics costs, export from Moldova to Romania is 5-10% more profitable, than organize production there.
InfoMarket: How different is your buyer in Moldova and Romania?
Corneliu SAU: It is the middle segment in Romania. Anyone, who has a job, by the age of 27 years. 70% of sales go to new apartments and some new houses.
We are listed in the more expensive segment in Moldova, and not everyone who works can afford our products; many wish, but not all, unfortunately, can. We are actively using loan programs with partner banks, and the peak of sales is the traditional months when our fellow citizens who work abroad come on vacation, August-September, December-January. These months the opposite is a recession in Romania, people are on vacation.
InfoMarket: Who do you see as your competitors in Moldova and Romania?
Corneliu SAU: Honestly, we do not look at the local market, do not study prices and do not know the sales volumes of other participants. We have a different strategy. We focus on our client, and our biggest competitor is ourselves. If we provide better services tomorrow than today, then "we are on a roll". We look at our own goals, we do not get distracted by others, we work in the direction we set ourselves: we are looking for better materials, we reduce costs, improve the design (there is one sofa, the design of which we have developed only from 27 attempts)
We see only one direct competitor in Romania, it is Mobexpert company and that is another issue. If you have one main competitor, you can focus on him, understand his features, his thoughts, where he moves ... And if you, like a rooster, get distracted by all sorts of red rags, then in the end you do not have time and energy to concentrate for own breakthrough actions that lead you from one point to another.
If our products are copied, it is nice. On the Internet, you can find a lot of our, but slightly modified models, and this makes us direct advertisements. Since we make furniture in a higher price category compared to the average price in the Moldovan market, those who consider themselves to be our competitors reduce their price by 10-15%. And it is nice that they are positioned by us. But even if our products will be 30% more expensive than the equivalent of someone else, I can explain each lei in the price and why it costs that much.
InfoMarket: How does the market change? Where are we going in the furniture industry?
Corneliu SAU: I aim at developing markets because big companies will come here anyway. There are certain trends in Europe, two types of companies remain, giants and self-employed entrepreneurs engaged in small orders and repairs. The large companies produce massively, have preferences in the purchase of materials, can plan long-term, have access to preferential loans, equipment, and government subsidies.
Today, the wages in our company are higher than those of many who call themselves “furniture makers”. If you calculate in total how much they earn in a year, they could get a higher salary, working from 8 am to 6 pm. We have more efficiency. Today, 8 workers produce 700 beds per month; one worker produces 3 beds per day. But, the manufacturing market, as a rule, produces one bed per week. There, the clients credit the manufacturer with advance deposits and at some point the manufacturer may seem to have more money than expected, the manufacturer believes that earned it and spends it, then, falls into the debt trap due to low financial literacy. Finally, he goes abroad to pay back debts and remains there.
InfoMarket: And for yourself, what risks do you calculate?
Corneliu SAU: Big companies will come inevitably. IKEA opens second store in Bucharest. There is a risk of "dying small", we need to grow quickly.
The other risk is that Europe is hiring away local specialists; they are better paid for their services in Europe. We have a very difficult business, specialists are not easy to replace quickly without loss of quality and production volumes.
But, we still want to remain in this business. This is good long-term business; not a sprint, but a marathon.
InfoMarket: So, why did you open a factory a year ago?
Corneliu SAU: We estimated that the construction of the factory costs 2 million euro and its payback is 5 years. We asked ourselves a question: Do we want to work in this area for another 5 years, or try something new? The answer: We decided to continue and we see that we will pay back the investments in 3-3.5 years.
InfoMarket: Are these loan funds?
Corneliu SAU: Basically, these are credits. We have always been actively credited and we took loans in both euro and US dollars to avoid dependence on the exchange rate. And now, we have positive credit history, thus, the banks of Moldova provide us with funds at very favorable rates. Today, lending in Moldova has become cheaper than in Romania (in currency).
InfoMarket: Do you include salaries to the production?
Corneliu SAU: Yes, it motivates, but there is a rather high minimum compared to the market. We even tried to tie accountants to working out, because the rate of invoice discharge and timely settlements with suppliers depends, for example, on a discount that suppliers can additionally provide to us. After all, we work without warehouses, relying on the punctuality of our partners: the order in the morning, the delivery in the evening. We import and store only those items that are not found at the market, importing materials from Germany, China, Poland, and Turkey.
InfoMarket: What parts of imported components are used in your production?
Corneliu SAU: We use 100% of imported components. But, we work with all suppliers in Moldova, whose materials we need, considering that any exclusive rights and obligations only limit the possibilities of both parties.
InfoMarket: In addition to beds and cabinet furniture, you also specialize in the production of mattresses, although there are enough manufacturers at the market, even more imported mattresses here...
Corneliu SAU: We are different in that, we want to develop and educate the customers; we explain that their own sleeps are more important than parking of their cars. Parking costs 10 lei per night, which is 3500 per year; and the mattress, even the high price category of 10 thousand lei, pays off in three years, and if the spouses sleep on the mattress twice as fast. Who do you like more, the car or yourself?
Customers come for our mattresses also because our people travel a lot, and sleep in hotels on good mattresses, realizing the value of quality sleep. In addition, we give 90-days trial period: if a customer did not like the mattress during the trial period, we can either change it to another mattress with different characteristics or issue refund. Now, for example, we are developing a mattress for spouses: there are materials that allow us to make one half more rigid, the other softer, depending on the needs of the client.
InfoMarket: Do you calculate the business in advance? How far you dare to look?
Corneliu SAU: 25 years at least... We believe that by that time eco-friendly furniture will be available, but it will be produced on 3D printers. There will be used self-repairing elements in the production of furnitures, transformers from classic to modern design, without changing the main frame, simply switching ...I already saw furniture made on 3D printer at an exhibition in Milan, the printed furniture was made of polymer with the addition of wooden chips, it looked like wooden furniture.
People go for individualism, minimalism and they need speed. Who can give those three indicators also a shape, that is, design; will tear the market apart no matter what will do. For example, we want to ensure that after 2-3 years, when a buyer order furniture in our salon, he could come to pick up the groceries on the way back home, but the furniture will be waiting for him at the door. And, it will be custom-made furniture, assembled from spare parts in accordance with the individual order; as in a restaurant, when you enjoy your meal in 20 minutes after you made an order, but the preparation of the ingredients takes a day or two.
I strengthened my work travelling in Russia to get aware of DODO Pizza technology. They opened their first pizza restaurant only seven years ago in Syktyvkar, now; they open one pizzeria per day in Russia. They have 408 pizzerias in 11 countries. After all, their business process is absolutely identical to furniture. There are similar steps to make a pizza that we take to produce a sofa. Since their concept and know-how works for pizzeria industry, then it will work for furniture production and we will not give in the leadership. // 20.11.2018 - InfoMarket.