Big Interview: Greek giant



by Heike Dieckmann
In a country largely devoid of international players, Greek company Plaisio Computers has carved itself an impressive niche with its diversified multi-channel approach.
On the south-eastern rim of Europe, Greece is an office products market largely untouched by the international reseller community.
Outside the confines of the OP industry’s definition of a ‘traditional’ big box operator, Plaisio Computers can confidently be described as a power channel player in the country. It hasn’t got the vast store base of a Staples, the contract presence of a Corporate Express nor the international reach of a Lyreco, but in terms of strategy, execution and – perhaps most importantly – sales and profit growth, Plaisio is a formidable force in the Greek marketplace.
Since starting the business in 1969, George Gerardos has led the company to become a multi-channel operator with a strong presence in the B2C as well as the B2B arena through its retail stores, its web shop and its mail order operation.
And while the strength of the Greek economy and consumer confidence has certainly worked in its favour over the last few years, Plaisio’s growth has vastly exceeded the country’s generic GDP growth. In 2007 alone, the group’s sales grew a staggering 23.8 percent, to €385 million ($593 million), while after-tax profits increased an impressive 55.6 percent to 19.9 million.
These figures go some way towards explaining that the Greek market offers a great deal of growth opportunities and the lack of big international players may appear surprising. That said, it’s a small market geographically speaking with a population of less than 11 million, and Gerardos believes that the investment needed to make a successful splash in the country would likely be disproportionate to the level of sales and market share that can be gained.
Talking about his own company, Gerardos points to flexibility and an uncluttered management structure as important parts towards achieving success with Plaisio’s multi-channel approach. Excellent systems support in the shape of datamining, a lean logistics operation as well as a comprehensive CRM policy complement his strategy.
OPI: George, first up, please tell me a little about the structure of the Greek office products market?
George Gerardos: The Greek market is very fragmented with most small store format operators covering both the B2C and B2B segments. A proportion of companies specialise solely in the B2B sector.
I would guess that there are about 2,000 office supplies stores and about 100 B2B specialists in the country.
OPI: Where does the market concentrate, geographically-speaking?
GG: The market is concentrated in Athens with about 45 percent of overall sales and Thessaloniki with 20 percent. Another 25 percent of revenues are generated in ten other large cities in the country, while the remaining ten percent are spread all over the rest of Greece.
OPI: How do the Greeks buy office products – is the shopping mentality different from anywhere else?
GG: Not substantially in my experience. Corporate businesses tend to order centrally. That said, they demand departmental deliveries and ask for approval and statistics per cost centre. Small and medium-sized enterprises (SMEs), meanwhile, order for the entire firm.
The SOHO sector mostly buys from retail stores and only a small proportion of customers are ordering through catalogues. Most orders are placed via telephone and fax, with less than ten percent coming through the internet.
OPI: Let’s talk about Plaisio and start with your retail presence. How many stores do you have at present, where are they located and what is the typical Plaisio store size? How do your stores compare to, say, a Staples outlet in Germany or the UK, or an Office 1 store in Greece?
GG: Plaisio has 21 stores all over Greece and one in Sofia, Bulgaria. The average store format is 13,000 sq ft (minimum 5,000 sq ft, maximum 25,000 sq ft). We have 15 stores in Athens, three in Thessaloniki, one in Crete, one in Patras and one in Larissa.
Our big stores are similar in size to those of Staples. However, we don’t devote much space to office products and even less to office furniture. Also, unlike many international resellers, we don’t sell jan/san products in our stores and we don’t have facilities such as copy centres. That said, for our retail customers specifically, we are very strong in office, art and drawing supplies and equipment.
Plaisio’s main emphasis is on computers and in this category we are market leaders in Greece. This range is complemented and completed by telecom products and consumer electronics items.
You mentioned Office 1 in your question. Office 1 has a very small presence in the Greek market with a small store format. The company mostly targets the B2B market.
OPI: What is a typical Plaisio customer?
GG: Plaisio’s typical customers are Greek businesses, since we are able to offer the same terms of our contract division through our stores. All stores are centrally connected with our SAP system, which means that our B2B customers get contract prices rather than retail store prices.
In addition, the demanding B2C retail business segment constitutes a main customer base, those needing specialisation and a high level of service.
OPI: So overall, how big is your contract presence in Greece?
GG: Contract business revenues make up about 30 percent of our total business. The remaining 70 percent are covered by SMEs, SOHO businesses and end-consumers.
OPI: How important is mail order for you?
GG: Mail order comprises SMEs and SOHO businesses for us and both of these account for 35 percent of our OP business. In total, we have 160,000 Greek businesses as active customers.
OPI: That’s a staggeringly high number of customers, is it not?
GG: It is, but it’s not an overstatement. According to our accounting system, every small company and every freelancer is an enterprise. Our SOHO customers represent a considerable number of those 160,000 businesses.
OPI: You also have a web shop. How is that doing?
GG: Our online store was launched in 1999 and it was basically the first consistent online store in Greece. Nowadays, it is by far the most visited site in Greece, having on average 60,000 unique visitors per day, targeting basically the consumer segment.
The volume we generate is good and we’re very pleased with its performance, but it’s nothing like what the big operators like Amazon achieve. There’s still plenty for us to do…
OPI: So generally speaking, who does Plaisio compete with?
GG: Well, as you know, we don’t have much in the way of international competition. Our competition comes from the specialised companies in the B2B segment and from the hypermarkets in the school supplies segment. Also, our competitors are the small stores in each neighbourhood all over Greece.
OPI: Let’s talk about specific products: What are your major growth categories right now, in terms of revenue as well as profit margin? You mentioned computer and associated computer products earlier. Is the current Greek workforce still largely the first generation of computer users?
GG: We have serious growth in all product categories. For the time being the biggest growth in revenues comes from the consumer electronics sector even though percentage-wise margins are low.
In Greece, computer and internet penetration is significantly lower than the European average. Our success lies mainly in the fact that we provide customers of Turbo-X computers with the best support. Firstly, we build every computer – desktop or notebook – according to customers’ specific needs. Secondly, we provide a 12-hour technical support service for our clients through a well-organised call centre. Finally, we have 18 service centres all over Greece where we can repair our Turbo-X computers within four hours.
The hunger for more, bigger and better products has always existed. The definition of competition is to have constantly better products and services at lower prices. This has always been our main concern and this is why we continuously try to improve our systems and to increase our productivity.
OPI: Apart from being a retailer and a contract stationer, you also act as a wholesaler, I believe. How big is that part of your business?
GG: Our business philosophy is to buy directly from the original manufacturer and to sell to the end-user. We do not specialise in wholesaling.
OPI: But you’ve been involved with European wholesaling alliance interACTION from the early days. Doesn’t that membership require a wholesale presence? What does being part of this alliance mean for you right now?
GG: It is true that most interACTION members are wholesalers. Nevertheless, this is not a prerequisite. What is more important is that an interACTION member is a major player in his country.
By connecting the buying power of all the members, we have had the critical mass to go directly to the original manufacturer and to create a pan-European brand with Q Connect. In our case, we have full disintermediation since we buy directly from the original manufacturer and we sell directly to the end-user, building at the same time a strong brand throughout Europe.
The interaction and collaboration among the alliance’s members, concerning all possible business activities including managerial, marketing and logistics issues has always been a source for new ideas and higher productivity.
OPI: Plaisio is a true multi-channel operator. Is that a unique way of operating in the Greek market? Does it dilute the impact of any particular channel you’re in or rather complement it?
GG: In 1995, Plaisio started to develop a multi-channel business model, combining at that time stores, mail order and B2B sales. During that year, this type of business model was unique not only for Greece, but also for the international business environment.
We had to develop this model because Greece is a small country and in order to have any critical mass we had to get additional sales from every possible source.
What we have found by adding more channels is that 1+1+1 is much more than three. Operating in several channels has a multiplying effect on sales due to the fact that you approach customers in more ways, more frequently. If customers need to see the product, they go to a store; if they know the product and want to have a check list, the best channel is the catalogue; if they need the latest information, they go to the web; if they want some advice, they approach the call centre.
It’s also worth pointing out that multi-channel buyers purchase significantly more than single-channel buyers.
OPI: Please tell me about your logistics operation.
GG: We currently have one centralised distribution centre in Athens from which we cover all our stores and all our direct customer deliveries. We’ve invested €15 million ($23 million) in our logistics operation and it will be completed at the beginning of 2009.
It’s very important to us that we run a lean logistics operation. At the moment, logistics account for less than 3 percent of our overall cost base.
OPI: That’s very lean indeed. You’ve also had fantastic sales and profit growth over the years. What are the latest figures?
GG: In the last nine years, from 1998 to 2007, we have increased sales 12.8 times and generated an average annual growth rate of 32.8 percent. What that really means is that our sales are doubling every 2.5 years. This is the reason why over the last eight years we have been consistently listed as one of the 500 fastest growing companies in Europe.
OPI: How much can these figures be attributed to the country’s stable and growing economy?
GG: During those years the GDP growth was somewhere between 3 percent and 4 percent which, compared to most other European countries, is very healthy indeed. Part of our success lies in the fact that we have significantly increased our market share by adding new channels and new products. All our growth has been entirely organic.
OPI: Is that likely to stay that way or is an acquisition on the horizon?
GG: Well, in Bulgaria we have grown from a greenfield operation. Our central store there was originally a cinema.
For the further development of our international activities, we are ready to examine the case of acquisition under the condition that it is a well-managed company with a relatively similar business concept.
OPI: Going back to the economy, there’s currently much talk about the housing market, slowing retail sales and of course high energy prices, emanating from the US, but increasingly impacting on some European markets, notably the UK and the large economic forces like Germany or France. Is the Greek market affected by all this?
GG: I believe that the Greek economy is not going to be affected as much as other countries in Central Europe. Even under these circumstances I expect further growth, although I’m not sure which of the markets – B2B or B2C – is going to run faster.
OPI: Plaisio is listed on the Athens Stock Exchange and has been very successful – how is your stock performing at the moment?
GG: Our stock has performed in a very satisfactory way, especially during difficult times where it has shown some serious resilience. Our market cap is about €170 million, with a price-to-earnings ratio of approximately 17.
OPI: So if it’s not the economy, what are the specific challenges in the Greek market right now?
GG: Greece is a country that has the opportunity to become the centre of south eastern Europe. It won’t be an easy job, but Greece has many positive geographical and political elements.
Plaisio itself has a unique business model that we are able to replicate in other countries, as we have already done in Bulgaria.
OPI: Let’s talk some more about Bulgaria – how is that market performing for you? Do you have a retail or contract presence in Bulgaria, or both?
GG: In Bulgaria we have a full multi-channel structure which includes a central store, a call centre, an external salesforce as well as Bulgarian catalogues and a web store.
After two years we now have sales of €6.3 million in the country. Most importantly in that market, however, is that we are going to reach the break-even point this year.
OPI: Do you have any further expansion plans in that market?
GG: We are going to become better in our multi-channel approach and we are looking for a second store in Sofia.
OPI: What other European markets would be of interest to Plaisio, where does the potential lie?
GG: We are examining the potential of other Balkan countries, but we’re still at a rather early stage.
OPI: You’ve always taken a big interest in the international OP market. What can you learn from your peers and competitors?
GG: We have already learned a lot from the international OP community and we are always looking very carefully at some operators that will give us insights into how we can make Plaisio stronger and better.
We have learned a lot about other companies’ marketing approach and from the way they are structured and organised. The list of points that we can still improve on is very long…
OPI: We’ve touched on this earlier. Greece is still relatively free of international office products companies, despite its stable and growing economy. Do you think it will stay that way in the short to medium term?
GG: There are many strong international OP companies that have the financial strength to invest in Greece and get market share. That said, I believe that the investment needed might be too large compared to the results that can realistically be expected.
Greece is a small country and in order to offer a high level of service to customers, one needs to invest a substantial amount in order to establish a very serious infrastructure.
OPI: Depot’s story in Europe is an interesting one. What lessons can be learned from its performance over here?
GG: I am by no means the most appropriate person to judge Depot’s strategy, but it seems that the Viking brand was too strong in the European market to start eliminating it.
OPI: We’ve discussed this question in some detail at our European conference in Rome last month, and you of course were one of the panellists in our discussion. Where does the future – and the opportunities and challenges – lie for the European reseller?
GG: The future of the European reseller is strongly connected with its capability to diversify continuously and be responsive to the needs of the market, which is moving towards more technological, lifestyle-orientated products.
OPI: Lastly, earlier this year you won the OPI Industry Achievement Award. What has been the secret of your success?
GG: To me, the secret lies mainly in two factors. The first one is disintermediation – buying directly from the manufacturer and selling directly to the end-user.
The second one is continuous diversification. We constantly monitor the changing needs of our customers. We then try to address every aspect independently, whether it’s a new product category, a new service or a new distribution channel.
I would say that we’ve achieved and implemented this diversification by having a flexible company structure along with a very integrated and effective human team that always confronts every alteration as an opportunity rather than a threat.