Stocking the workplace

Written by: John Letzing & Klára Smolová
Photo: René Jakl, Tomáš Kubeš

As major local firms centralize operations into large office complexes, fresh opportunities are being created for suppliers prepared to provide everything from copiers to garbage cans.

Tony Shee

TONY SHEE has a question: “How do you make office furniture interesting?” Shee, managing director of Kinnarps (pronounced ‘Shin-arps’) in the Czech Republic, an international producer of office interiors, is posing the question in a strictly rhetorical sense. Because he could spend hours, days even, expounding on the fascinating minutiae – from color philosophy to ergonomics – of a proper working environment. Just try him.
The Czech market provides a tough test for Shee’s skills as a salesman (as it does that of salespeople at all office supplies firms here), as its limited number of large potential clients creates fairly intense competition. “It’s not like other countries where the big head offices are located, where they have tens of thousands people,” says Shee. “That’s a juicy piece of bone for me, but it’s a dream.” The reality here is that the biggest single entities, a Czech Telecom or a Česká spořitelna, carry between ten and 15 thousand employees at dispersed locations. Their largest single offices make up a small and much sought after group. Techo, a Czech-owned office interiors firm more than a decade old, has supplied Česká spořitelna for the past seven years. Yet, Techo must still look abroad for the sort of contracts that make or break an enterprise. It recently won a tender to supply the Met, the Meteorological Office in Wales, worth CZK 100 million – which will, according to Techo director Jiří Kejval, effectively double revenues for the year.
Even among what big potential clients there are here, the degree to which they will be willing to tailor an attractive work place is a bit nebulous. Whether a firm will be willing to invest considerably in something like office interiors, for example, “depends on the maturity of the customer,” says Eric Balloffet, general manager of American-based office interior supplier Steelcase. Someone like Shee at Kinnarps can spend an entire sales call discussing the importance of ergonomics or color, but will customers listen, or care enough to spend any extra? According to Shee, soon they won’t have a choice. With EU entry and, presumably, a new set of professional standards on the horizon, employers need to act now – and suppliers need to be ready to accommodate them. “This market has only a certain number of (potential clients), and to acquire them we (suppliers) just can’t do it like the old days, you know, here’s your table and chair, now work there,” says Shee. “People who are qualified will demand a good working environment.”
It should be noted that the Czech office supplies market has already undergone radical change – smaller firms have progressively been stamped out by bigger players capable of offering complete product lines and full services. “Four or five years ago there were a lot of small companies on the market,” says Techo’s Kejval, who adds that progressively tighter quarters draw him into more intimate competition with big foreign players.

Who needs what and why
“Our furniture is like Legos – they can be taken down and rebuilt, and when they’re moved and end up missing a few pieces we replace them,” says Kejval, underlining what separates the serious competitors in office supplies from others – an ability to implement huge and flexible orders. When someone like consulting firm Ernst & Young, for example, announces a tender for supplying the offices of its 400 employees in Prague, including outfitting its new location on Prague’s Karlovo náměstí, it can now afford to be choosy like never before. Petra Di Nicola, facilities manager for Ernst & Young, says, “most of the suppliers, in order to succeed in the (annual tender), constantly improve their services,” and adds, “as competition grows fast on this market… suppliers are trying harder to meet clients’ needs. Some gaps are only in terms of offered goods.”
Kateřina Voráčková, senior manager at Pricewaterhouse-Coopers, which went with Steelcase for the outfitting of the interior of its Czech flagship office on Kateřinská street, also indicates a need for any potential supplier to be as flexible as possible, and to be “able to customize.” What a firm like PwC (with 550 employees in Prague) spends on office supplies is nothing to scoff at – Voráčková says that the firm spends up to CZK 80,000 per month on stationery alone.


	Petra Di Nicola

Tony Shee, of Kinnarps, earned his stripes in the Czech market nine years ago by designing offices for a new start-up TV station called Nova. Shee adamantly believes that it’s more than flexibility that his customers are after. To him, the subject of what color to paint an office alone can require lengthy considerations that rely on symbolism more than the financial bottom line. Yellow, he tells us, is a get-up-and-go color, while green means comfort and security, and orange is ideal for meeting rooms. Why orange? Well, it’s the color of fire, around which humans have naturally congregated since we were hunting mastodons and living in caves. Whether you buy this bit of psychologizing or not, Shee makes one point that’s difficult to refute – “20% more sick leaves occur in buildings that are gray or black.”
Kinnarps’ new showroom, now being finished in Průhonice, is meant to be more of an art space, to hear Shee tell it, than a sales office. Physically, the building is a radical new addition to the countryside east of Prague, an unflinchingly modern construction of wood and glass designed to look like a boat floating beneath a suspension bridge. It’s an ambitious venture, clearly indicating that Kinnarps has a good deal of confidence in the future of the office interiors market here. Kinnarps is not alone – most observers agree that as the local economy develops, more and more firms will be able to afford an unprecedented level of style and comfort. And of course, in the face of rigid ergonomics standards imposed within the EU, many soon won’t have a choice.
A key area of the local market as-yet untapped is public facilities. Currently cash-strapped and usually slightly better than putrid to look at, public offices will likely be able to dramatically upgrade their environs in the not-too-distant future. “That’s virgin territory at the moment,” says Shee, adding, “the ministries, hospitals, post offices, police stations, they will all have the possibility to invest in better furniture, a better environment and a better life.”

Local player makes good

Jiří Kejval

When a young Jiří Kejval launched the firm Techo with schoolmates back in 1991, most offices here were of a piece – dreary, uniform and overwhelmingly bland. Kejval and friends put up an assembly area right on campus in Prague, and things moved fast.
By 1992 Techo had 200 employees, and in 1994 its first full line of office furniture was released in cooperation with Ikea. Two years later Techo had the resources to tap renowned Dutch designer Hans Verbloom to put together their Arka series, a collection of desks, tables and various accoutrements. Verbloom has a vanity shot on the Techo web site making him appear more hip hairstylist than furniture designer. His brainchild, Arka, is by contrast quite mundane – you’ve likely seen his work in a number of local offices and not thought twice about it. But here lies the conundrum of office interiors; one needs big clients to make bulk deliveries of easily assembled and uniform furniture; yet one also needs to maintain an image stylized enough to be deemed worthy of decorating interiors for demanding customers. Tony Shee, managing director of Kinnarps, a Swedish-based office interiors firm, says “it’s difficult” to blend a high design concept with the practical realities of his business, “but definitely feasible.” Techo is unique as a majority Czech-owned firm battling successfully with big foreign players like Kinnarps and Steelcase for juicy bits of this market. Turnover for Techo this year is expected to be some CZK 600 million, and Kejval says he’s comfortable estimating that in 2004 it could reach CZK 1 billion. Techo’s international presence, which now stretches from Britain to Romania, has helped it get further familiarized with the big players that dominate much of Europe. “In Romania there are only about two players, us and Steelcase,” says Kejval, “so whenever there is a big project, there are only two of us.” Ironically, here at home Techo finds conditions to be in some ways more problematic than elsewhere. Says Kejval: “in the Czech Republic it’s very tough – we have to have our lowest prices here.”

Tough competition

Martin Leitgeb

Since the beginning of the nineties, two large firms, Activa and Papirius, have become established on the market of wholesalers delivering office equipment to corporate headquarters. Both of these purely Czech firms started from scratch, and today they have tens of thousands of clients. Their offers include thousands of catalog items, and they set the market’s tempo and trends. In addition to them there are dozens of smaller firms, but they compete on the basis of prices rather than services.
Papirius and Activa, two equally strong firms with sales of over CZK 700 million, are engaged in
a merciless market battle, which ultimately benefits the customer. Both firms offer practically the same line of products, both are active nationwide and have branches in Slovakia (Papirius even has a Hungarian branch). They have comparable standard services, such as delivery of ordered goods within 24 hours, sales over the internet or over a toll-free line, after-sales service for purchased equipment, unconditional product return or exchange, and so forth. Therefore they must attempt to attract customers with additional services or activities. “Customers don’t want paper delivered just to the firm, but directly to the copier. And they want service for their copiers, too,” says Martin Leitgeb, one of Activa’s executives. With Activa, customers can not only order goods for the company, they can also have the goods distributed among individual offices. You can even order a single item, regardless of price, and the packaging will be picked up for free by EKO-KOM, a recycling company that works together with Activa.
Some time ago Papirius established a guaranteed service, “Tomorrow or no charge”, which it has trademarked, and it also offers its customers savings on expenditures for buying office products by means of outsourcing. “More than just office products are involved. Customers want comprehensiveness – they want to save time and money,” says Eva Slezáková, marketing manager for Papirius. “Customers these days are far more demanding. They want to be sure they can rely on their suppliers,” she adds. In order to demonstrate its credibility, Papirius joined a coalition of promoters of ethical business, Viva etika, which was founded by Transparency International.
The companies quickly and easily got used to such pampering, which small suppliers noticed as well, as they were forced to adapt to this trend. “The trend is heading towards complete service. Large companies are coddled, and they want everything delivered,” claims František Lebeda, the owner of Per Partes, which delivers office materials and also offers the entire Xerox line of products. His firm, which has been in existence since 1993, today has about 200 steady customers and 600 items in its catalog. It also offers deliveries within 24 hours and settles complaints by promptly exchanging products. In general, however, prices constitute its main competitive advantage. “Large firms invest a lot, so they have to set higher prices. I can always undercut them,” says Lebeda.
Recently the market has begun to show a trend towards cutting costs, so although the large companies don’t like this price war, they will probably have to take it into account. “Firms have started cutting costs heavily. Some of them are replacing more expensive, brand-name goods, with less expensive ones,” Leitgeb acknowledges.

Outsourcing – reducing worries

Stanislav Havel

Ten years ago firms bought individual technological products in accord with their immediate needs – here a fax machine, there a copier, or a computer for a new employee. Today companies buy complete technological solutions, including software that is customized to their requirements. And the latest hit is outsourcing IT services.
“There is a notable trend towards services on the market,” confirms Stanislav Havel, the marketing director for Hewlett-Packard (HP). This traditional manufacturer of computers and printers currently provides firms with total technological solutions that are ready to go, as well as software and other services that go beyond classic product support, such as CRM systems. “Everyone is trying to rationalize purchases. Firms calculate the return on their investments, and they want services to go along with the equipment,” Havel explains.
Petr Sichrovský, the direct sales manager for Xerox, is of a similar opinion: “Firms want more services with added value, for less money. They don’t just want hardware, they want complete solutions.” Xerox specializes in outsourcing services, primarily in the management and printing of documents. “We can provide out customers with complete service. They receive the prepared document and the invoice, and they don’t need to worry about anything else,” claims Sichrovský. So far the company has about 16 large outsourcing projects that account for about 30% of sales, and each year this figure rises.
Services like these account for a significant part of suppliers’ overall revenues. As Havel says, services alone make up 20-25% of HP’s sales. At Océ Česká republika, which deals in multi-functional digital printing and large format productions systems and associated services, commercial services and technical service account for 64% of total sales, according to product manager Martin Křikava. “Our customers demand a complete approach to solutions for their problems,” he says. “It isn’t just a question of a single purchase, it’s a matter of modifying the customer’s environment, depending on his strategy and changing needs.” Křikava says that the IT field is currently dominated by the realization of large projects, based on long-term relationships with customers, not the simple installation of individual machines, which was once the case.
The most recent offer on the market is the outsourcing of specialized services. This means that a customer need not buy any expensive equipment or take care of it. He just signs a contract with a supplier, who delivers the required product, be it the processing of calls, the issuing of thousands of invoices a month for telephone operators, mail management, or the storing of documents. Although there is not yet much trust in such services on the Czech market, many companies see their future in them. “The development of outsourcing is one of our priorities for this year and next. It works very well in other countries, so we think that there could be great interest in it here as well,” says Havel of HP, which offers outsourcing for large companies, in the area of ERP (enterprise resource planning), for example. This type of services is of interest mainly to large (top 100) and in some cases mid-sized companies (top 500), as it saves them operational costs.