Promotions and new products drove sales up, after store openings, the growth drivers of the past, stopped being the top priority.
Optimism on the furniture market now comes from the expectations for winter holiday sales or sales to foreign market, companies in the industry say.
Kika Romania, for instance, budgeted growth of 4% for this quarter (the third of the company’s fiscal year, the fourth of the calendar year i.e.), compared with the year-ago period, said country manager Lars Lund. He thinks the company would do even better than expected because of the promotions conduct this month and Christmas decorations collection launched on October 15. Lund also said he hoped the growth would be 5% or 6% for the quarter.
The Austrian-owned retailer has only one store in Bucharest, opened in West Park shopping park. The store stretches on 27,000 square meters and required a EUR31 million investment.
Lund seems to be the most optimistic manager in the furniture industry, where the only foreign major retailers are kika, JYSK and IKEA.
On the other hand, local businessman Dan Sucu, the owner of the Mobexpert group, is skeptical about keeping the growth pace of the first nine months. The group saw a 6% increase in sales in the first nine months, in line with the initial estimates. However, “August was very good, September started to decline, and October does not look good. Last year, October-December was a very good period, better than we had expected,” says Sucu, in an attempt to explain his skepticism.
The stores outside Bucharest have been recovering from the decline that started in 2008, with the help of the new collections. Sucu’s bet, the outdoor furniture, turned out to be a winning bet, but the businessman says it has already reached a certain balance and therefore he is betting now on something else: carpets, mattresses and sofas. Mobexpert’s revenue at the end of the year should be the same as in 2011, EUR114 million.
“I’d like to double sales of carpets in the next two years. The collections I’ve seen in fairs justify it,” Sucu said.
The businessman also said that he was negotiating with a US brand over a license to manufacture mattresses in its Soft Mex plant for the regional market of the US partner. The plant is currently not exporting any of its production.
Mattresses seem the likely growth driver for furniture and home decor retailers. Kika sees it as well, and its country manager says sales of mattresses rose by 18%, kitchens increased by 15%, dining items were up 12%, while sofas saw 7% higher sales.
Another optimist is Alexandru Rizea, founder of Lemet, who estimates revenue growth of 20% this year, when it stood at RON173 million.
“Sales went as expected in the first part of the year. Sales exceeded RON70 million in the first six months and the increase will surely remain the same in the last quarter,” Lemet founder said. He explains the growth was brought about by investments in the new assembly line of Lemet, which makes limited collections of furniture. The investments stood at almost EUR6 million.
Lemet, which also operates the retail chain Lem’s, expanded the floor space of its stores to 600-700 square meters, which gave sales a boost.
Mobexpert’s Dan Sucu, too, has something to say about limited collection and customized production.
“There is no future without the possibility to customize. Our work on the furniture, the major change we implemented in 2009 is the possibility to reduce serial production and boost variety. There are plants in the group that are now manufacturing things they wouldn’t have even thought about in 2008 because they were not organized to do it,” said the businessman whose group returned to profit in the first nine months of the year.
Kika says the best part of the calendar year is about to start; it has also noticed that customers are now paying more attention to detail. It posted 5% increase in revenue in the first nine months of the year.
Lemet felt sales of premium and luxury products, including mattresses on the same price segment, pick up.
Companies whose retail operations are not that strong boosted sales through exports, as they did last year.
(English version by Loredana Fratila-Cristescu)