The brand name is forged in competition

A lot of manufacturers and the unstable economic situation transformed the office chairs sales segment into a battlefield. For a few years, furniture makers were affected by the imbalance of supply and demand, currency changes and by an aggressive invasion of Chinese companies. Not all companies participating in the completive battle got off easy, but those companies which managed to hold positions on the market in crisis conditions became an example to follow for outsiders. Olga Dyakonova, Sales Director, furniture trademark “Bureaucrat”, MERLION tells about the company’s strategy, challenges, and won laurels.

- How did the economic situation in the country affect the furniture market, and did the office furniture sector fill the burden caused by sales slowdown?

- The office furniture market (we are talking about office chairs with gas lift cylinders) has been unstable for a few years. In 2014, when the ruble fell down, domestic furniture manufacturing in Russia became a profitable business. At the end of 2016, when the exchange rate became stable, small Russian furniture manufacturers and retail market players had to face some problems, because furniture import became profitable. Retailers started to join together and consolidate or left the market; some managed to expand their product range. By the way, our company did not lose key partners. Our partners had to reduce prices: today’s customers want to buy an office chair for 5,000 rubles, not for 8,800 rubles. Bulk sales were reduced. End users (government agencies, which, by the way, prefer out products not only in tenders) reduced the volume of purchases, going towards furniture repair/refurbishment. This year, we can observe a negative trend again. According to our estimates, sales slowdown has reached about 40 %. The trademark “Bureaucrat” is doing well in comparison to other trademarks and sales have gone down in Q2 2017 only by 30 % in comparison to the same period of 2016. We cannot rule out that after a next slump the office furniture market may show fast growth rates, especially if we observe the entire economy recovery and if the national currency rate exceeds nominal 70 rubles per 1 US dollar.

Our furniture trademark was established 20 years ago. You have already survived two severe national economic crises. What are your methods to keep head above water?

- As for pricing, office furniture, particularly, office chairs do not belong to exclusive products in comparison to say, kitchen furniture or production of sofas and chairs for home use. But, in terms of production costs, our segment has obvious advantages: “Bureaucrat” is able to make large profit. There are two key advantages: production takes a relatively small time reserves while the production volume is very high. We are talking about series production, not a unit order. The most fixed term on our market is the “regular customer”. Therefore, we have regular corporate orders that provide stable loading of production facilities.

The office chairs market is inherently conservative. Despite fast development of electronics and communications, the office chair remains the major component of an employee’s workstation. First of all, any office chair shall be ergonomic, reliable and safe in service. Its design and price shall attract customers. These are basic customer requirements, I suppose. And we develop our business based on these requirements. Of course, the mobile office concept is very popular: If you have a smartphone, you can operate remotely, just seating on your favorite sofa. Sadly, that is not so. Experience has proven that you can achieve a maximum performance only if you use a comfortable chair. Wherever your workstation is arranged (in office, in a coworking space or at home), it shall be equipped with a chair. That is why the demand for office chairs is permanent. In my opinion, this permanent demand has determined the need for creation and development of the office chair segment at our company.

- What is the structure of the competitive capability assessment system at your company? Which criteria are applied to make a decision on one or another solution to be included in the series production plan?

Everyone knows the criteria to determine the value of a product or a service. However, we consider the quality level as our top priority. Of course, we understand that the customer prefers widely advertized brands, often with low consumer properties, than high-quality chairs and seats with the brand name well-known to small professional communities. Basically, the product price depends on production materials and hardware. Here we can observe the direct relation: the higher the quality of materials, the more expensive end products.

For office furniture, the price always means the quality. We are not going to specify criteria of production types, which are given in detail in management guides.

We monitor the competitive market environment and give fast response to any changes. Otherwise, we would never hold our leading positions. We believe that our main competitive advantages are a stable and wide range of product models, high quality of products, a large amount of products in stock, capability to meet project orders, a high level of logistic service for our customers, and available technical support. For now, we offer not only end products for our customers, but also an infrastructure for product support. Our customers are sure they are not left alone with their problems, if any. With such substantial options, it is often difficult to compete in the field of price dumping; however, it up to the customer to choose. Everyone knows: buy cheap, buy twice.

- Please, name the bestseller of the season. Can you explain why consumers choose this product?

- As for the best-selling chair of the season, I can describe it as follows: an ergonomic chair with a mesh back, variable height, a user-friendly seat made in high-quality leather-like material. Such a chair gradually substitutes a traditional large chair, often finished with natural materials.

For a quick assessment of current best-selling office chairs, we shall take in account the segmentation in terms of functionality. In my opinion, our brand office chairs in the operator chair category are best-selling products in terms of the amount of sold units. In summer, just before the beginning of the school year, sales of kids’ chair are considerably growing. In this segment, the line of our products is prosperous. We have introduced many new fabrics with multiple color schemes and intensify the development of this production segment.

Unfortunately, manufacturers currently focus the price instead of quality (with the threadbare price-quality criterion). However, the furniture user continues to make high demands on the product quality. We offer 18-month warranty for our products, and customers know that our seats are able to serve for 7-8 years in tough daily operating conditions. Many models have a longer service life. We often get feedback about normal tear and wear of working surfaces for this period, but the seat mechanism remains operative. I can give you some stats that prove the high quality of our products. Warranty claims related to our products total not more that 1% of sales volume. The high quality factor is the key component for customers who choose our chairs.

- Please, describe the algorithm of testing of seats and chairs in your test lab? Which aspects do you pay attention to when producing a specific group of products? How close are your tests to global test practices?

- We maintain the production quality level by means of state-of-the art equipment, certified material quality standards and through lab tests of prototypes. For now, our lab runs tests according to the U.S. BIFMA standard which has more strict requirements than the Russian state standard GOST. The tests are intended to simulate the movement of the chair in service on a surface with irregularities, i.e. we simulate the process of operation (by applying load to the seat, than to the back); we also test chair armrests, cross pieces and air cylinders. In fact, each chair component passes tests at an individual test facility. This information is disclosed for our permanent clients. To maintain a high level of production culture and European quality standards, we have to observe strict safety requirements for raw materials. Our lab runs timed chair stand tests to determine the amount of sit/stand cycles, including ultimate strength tests, turnover tests, etc. According to test results, we select the most strong materials and structural members. We cannot assemble a chair, using thin plywood covered with a minimal layer of polyurethane foam and fabric of unknown origin, or place a chair on a weak gas lift cylinder and on a unreliable cross piece made in recycled plastic materials in order to reduce the price of the chair model. Such a product will be rejected just at the production stage. That’s why, when I'm taking about the product quality, first of all, I mean the product service life. Our brand chair will serve 4-7 years; if you use our competitor’s brands, you will have to replace 5 user chairs.

- Do you follow industry trends of foreign companies and do you adapt them to your own model of production?

- The latest exhibition in Guangzhou in March 2017 has proven the opposite tendency: Western companies more often prefer solutions offered by manufacturers from South-East Asia. It is difficult to keep up with Chinese companies, particularly not only in pricing for final products, but also on terms of design and quality. Our experience proves that Russian manufactures are still behind the leaders in development of extraordinary new solutions. Multiple customers continue to choose chairs by their appearance, taking into account traditional materials and finish, not to mention preferable colors: elegant black color or classic brown colors are dominating in any series of chairs or seats. Thus, we monitor western trends only to have actual information about global tendencies on the office chair market.

- Which marketing methods and types of sales may stabilize furniture sales next year?

- Focus on end users. Because, we expect a change in the traditional model of business: production-> dealer -> user. We want to and we will advertize products focusing on end users.

Which factors, in your opinion, determine the sales volume and help sustain the demand and popularity of our products for many years?

- Maintaining competitive product prices, regular update of product range, maintaining a sufficient stock of components for production in due time. The most important aspect is maintaining and expanding the scope of services (storage service, transport, service in distant regions). All these factors make our brand name desired and popular for many years.