Written by: Kateřina Zapletňuková
Photo by: Jan Vágner

A Czech fashion firm started from scratch ten years ago has managed to become a trendsetter in the Czech Republic and abroad. The owners’ heavy investment into sales culture proved key for gaining a strong reputation and faithful customers.

Alena Loudinová & Petr Hendrych

 

ALTHOUGH THE TRADEMARK has been on the market since 1993, few know that the Italian-sounding Pietro Filipi is actually a Czech fashion brand. Ten years ago, Petr Hendrych and his two partners, Petr Fliegl and Alena Loudinová, launched their first collection, designed to fill a huge post-socialist gap for fine clothes on the Czech market. “Now we can present our company as a Czech firm, but at that time customers were lining up for goods that sounded foreign,” recalls Hendrych. “We wanted customers to accept our product so we had to offer it the way they needed it.”
Before creating their first collection, Hendrych and his partners were in the foreign clothes importing business, bringing in such trademarks as Easy, Drandie, and Pioneer from the West. This activity not only helped them gain initial capital, but also defined Pietro Filipi development. Pietro Filipi started from scratch and Hendrych is convinced that this was an advantage, as the company did not have to bear the burden of an indebted socialist-era firm. “We could clearly define our way and could increase our sales gradually, which was very important. If we had some turnover already that we had to maintain, our managerial decisions would have been different and the process would have been much more complicated,” says Hendrych.

Creating fashion
Pietro Filipi employs about 100 people, including six designers and several modelers, including Czech, Slovak, Portuguese and Yugoslav craftsmen. This business model was never designed to actually produce material goods. The company’s main know-how is design and preparation of collections for production. Modelers create patterns that also remain intellectual property of Pietro Filipi. “We pay a great attention to producing our own patterns. We try to protect our ownership of these patterns, although sometimes it is not easy because they are sent to so many various producers,” says Loudinová. Actual production is outsourced from several Czech, Slovak, Polish and Asian factories, to which Pietro Filipi supplies fabrics, designs and patterns. The firm also imports fabrics from EU countries, mainly France, Italy and Germany.

Benchmark – dividing complete clothes collection into market-specific lines – investment into sales culture – educating clientele – strategic positioning of sales outlets

From the very beginning our vision was to create and sell a brand name,” says production manager Loudinová. Pietro Filipi’s owners were business people rather than producers, and their ambition was to win over the market by finding a way to appeal to customers. “We never wanted to become an isolated Czech fashion trademark, because we knew that people dress according to worldwide fashion trends and that it is almost impossible to promote ‘Czech fashion’,” explains Loudinová. From the very beginning the entrepreneurs realized that their trademark would not be among the top ten, but neither would they be sold at supermarkets. Pietro Filipi represents high-quality clothes for everyday wear, aimed at upper-middle income customers and people who like to dress with class. Collections include everything from men’s suits to swimwear and accessories. Outsourced production gives Pietro Filipi’s designers more space for experimenting and creating new looks. The brand’s collections are divided into subcollections, including Selections – classical style clothes, and RED – a line for casual wear.

Sales culture
While Pietro Filipi has earned hundreds of million crowns in revenues, the company invests a minimum into direct advertising. “Before investing into advertising, we started producing shop equipment and supplying it to our wholesale customers so that they could sell our clothes the way we wanted them to be sold,” says Hendrych, who considers sales culture the key to his firm’s success. During its early years, Pietro Filipi had to sell in supermarkets such as Prior, but even then the firm demanded that their goods be sold from a separate stand with a Pietro Filipi logo. Around 1997 the firm started selling through chains of specialized shops, and a year later its first independent shop was opened. “If Pietro Filipi continued its sales policy through supermarket chains, as in early nineties, the revenues would have been five times higher than they are now. But it would not have been the trademark it is today,” acknowledges Ondřej Vojtěch, the company CEO. “The philosophy of the trademark, the perception of our product and their presentation has changed dramatically.”
Yet Hendrych is quick to emphasize that early investment into sales culture is paying off now, as the domestic market becomes inundated with foreign fashion brands like Zara, Mango and Cottonfield. “Our advantage was that we understood what the sales process of fashion should look like over time. It requires a direct connection between the trademark and its customers,” notes Loudinová. When shopping centers appeared in the Czech Republic about five years ago, Pietro Filipi was quick to rent spaces in all important malls and fashion streets. “Our plans are to maintain our trademark’s position on the Czech market, even under the new conditions of increased competition,” Loudinová says.

 

Financing strugglesSince 1997 the company has had good working relations with factoring company O.B. Heller (a subsidiary of Československá obchodní banka), which provides factoring services. Pietro Filipi assigns to the factoring company its invoices to customers in exchange for advance payment. The remaining sum is paid after O.B. Heller receives all due payment from a customer. Factoring services cost from 0.2% to 1.4% of the sum depending on turnover. The company chose this cooperation because its expansion is strained by lack of operational resources due to the fact that Czech banks are still very rigid in providing loans to medium-sized companies. “The business environment in this country is the biggest problem. There is no functional capital market and it is almost not possible to get a bank loan,” says Pietro Filipi’s CEO Ondřej Vojtěch. He explains that a medium-sized company has no possibility to raise money through an Initial Public Offering because the Prague Stock market does not function like stock markets in other developed countries. In some cases negotiations with banks last for up to nine months, while the money is needed to finance production.

 

FranchisingCURRENTLY about 90% of Pietro Filipi’s products are sold through franchised shops. This model enables the company to have a firm grip on how its clothes are marketed. “Such relations are more profitable for our partners than classic customer-supplier relations, because we share some know-how, and such projects entail less financial risk for franchisers,” says company CEO Ondřej Vojtěch. During the first year, until a new shop is self-sufficient and has established a customer-base in its particular locality, the home office operates it. After the first year, the shop is handed over to a franchiser for a negligible lump sum payment. Franchisers then pay for goods but keep all profits from sales. The company currently has 10 such shops in Prague, Brno, Ostrava and Hradec Králové.