CASE STUDY >
Adaptable by design
Written by: Tim Gosling
Photo by: Luminum

The Woodface showroom, scattered across 30 locations, is on its way to becoming a ubiquitous feature for Czech shoppers, and a boon to those keen on home improvement.

Petr Janů

THE COMPANY has come a long way in 14 years, producing a huge range of designer cupboard space from a collection of former farm buildings on the outskirts of Prague. Petr Janů, director and owner of Woodface, studied international business. In 1988, at the age of 23, he joined a group of entrepreneurs setting up to work in carpentry for the construction business. The group, Janů says, was convinced of his organizational skills. By 1991 however, the businessman was growing tired of dealing with contractors on construction projects, and had new ideas about producing furniture.
Taking a bank loan of CZK 2 million, he purchased 7,000 m2 of land, including an old farmhouse and outbuildings, in his hometown of Čakovice. He spent the remainder of his capital on renovation and payrolling the six-employee operation, while production machinery was taken on lease or credit directly from manufacturers.
In the early days of Woodface's production, the typical consumer couldn't buy so much as a wardrobe or chair. This is because the company set out as a supplier of office furniture to banks and other institutions. Janů recalls that business was healthy from the start, and he cites his relationships with architects - which he had established during his time in construction - as a key factor.
Janů is quick to point out that, commercially speaking, the early 1990s were a unique period in the Czech Republic. Nothing was guaranteed, and supply and demand was erratic. It's understandable then that Janů was in no mind to rest on his laurels, even with a company achieving steady growth in its infancy. His wariness led to recognition of another large gap on the market. "People had no money to buy a new home," he says, "but they were keen to improve the homes they had, and to give themselves more space."
The owner explains that when his new venture began, there were no standard dimensions in the building trade. Standard sized wardrobes wouldn't fit into Czech homes, so Woodface had to offer custom-made fittings. Thanks to solid investment into production facilities, the firm could offer this service at about the same price it charged for standard furniture. Janů litters his story with references to his "intuition", claiming to have relied upon it often. In 1993 he decided to put his theory to the test, and rented 15 m2 in Kotva. The expenditure was enormous - the tiny space cost the same as 100 m2 in a major Czech shopping center would today.

Floor space, not ad space
Despite an unambitious marketing campaign, which consisted of "two ads in free papers", demand was immediate. Inside of six months, Janů realized that the new "side venture" was the way forward. "Making the decision to close the other business line was surprisingly easy," he says. Woodface put all its resources into stocking the public showrooms and expanding the brand network, and the second Woodface outlet opened in 1994.
It was at this time, notes Janů, that one of his central strategies developed. He determined that Woodface showrooms had to be present wherever the highest pedestrian traffic was to be found. In 1994, that was in department stores - so he immediately began negotiating with the major developers across the country. The owner says he never "thought about selling only in Prague. I knew from the beginning I wanted showrooms around the country". The roll out was quick and aggressive: by 1995 there were 15 Woodface outlets in the Czech Republic. Janů admits it was an expensive, even risky, gambit...but claims that his instincts and observations told him that this was where the company should invest.
The move into retailing saw the company dealing with thousands of small orders in place of a few business clients with large contracts: "We had to completely reorganize the way we worked," Janů winces. The logistics concerns of the business exploded whilst the unceremonious businessman found himself having to deal with marketing to introduce the company. In spite of this, he has never needed to refinance beyond the start-up bank loan in order to achieve the expanse his company now boasts. The new stores were funded by operating capital, and the production line augmented by further credit from equipment producers.

Benchmark - Strategy adapted as company size and market changed - Rapid, targeted expansion - Custom-made product offered in the widest design range possible - Investment in high profile outlets and technology

Janů remarks that Woodface is a very different beast these days. He posits 2000 as the year in which "the pioneering period of the company ended". He observes that it's now impossible to run a company without in-depth systems. "The old way will not work in today's environment," he says. "The company is too large, costs and salaries are much higher and margins much lower. If I make mistakes now it's much more serious."
To illustrate this by example, Janů points out the pressures that his network of outlets puts on cash flow. Maintaining the stock while unifying showroom design means that introducing new products or shops requires far more careful consideration today. The rapid expansion that saw turnover peak in 1998 has slowed, yet in 2004 Woodface had revenues in the neighborhood of CZK 200 million - one million for each employee. Janů describes this as "not a great deal of money; we're still a small company and this is just the beginning".
Which begs the question, "What next?" Janů says he wants to expand the network of showrooms further and introduce some specialist high design outlets, but for now he's busy still introducing "systematic organisation" into his operations. He goes on to refer to "working with some partners in neighbouring countries". The once-cavalier entrepreneur will not be drawn into providing further details. Business these days is far more serious indeed.

 

Following the crowd JANŮ SAYS he understood early on that Woodface customers were in the middle and upper class segment. He thus determined that his showrooms would be present wherever this target is most highly concentrated. This strategy saw many outlets opened, but nearly as many closed, as department stores were replaced by new shopping centers as the most popular destinations for consumers around the country. Furthermore, the strategy is expensive and relies on driving high demand. Woodface showrooms are flanked by retailers offering clothes, shoes and jewellery. Other furniture and interior design companies are conspicuous by their absence in these locations. Janů admits that with hindsight it was a risky tactic: "It may look like Russian roulette," he laughs, "but it worked!"

Top of the form Design is a vital element for Woodface's operations. Janů says the Czech customer is ever more demanding, so he spends a great deal of his time all over Europe assessing new ideas. He feels that Woodface needs to tread a fine line between responding to current Czech tastes and introducing new elements. To this end, he intends to "split the brand, to some extent," by introducing Prague showrooms focused on new designs. The quality and style of Woodface wardrobes can compete with the top designer furniture being imported from Italy, the director says. He claims that the company has several advantages. Being based in the country reduces costs, not only with regard to logistics, but also on labor. Janů asserts that his firm will have your wardrobe in situ within two weeks. Janů remarks that high investment in production facilities is the key. In comparison with standard imported units, Woodface can supply custom-made units of the same quality and design for the same - if not a better - price.