As Office 1 Spain looks to double its number of stores this year, managing director Pedro Echeguren tells the struggling independent sector – "if you can’t beat us, join us!"
If Spain is proud to be different, then that adage can most certainly be applied to Office 1’s ebullient managing director Pedro Echeguren.
Since spearheading the launch of the Office 1 concept in Spain some two years ago, Echeguren, who will be speaking at OPI’s European conference, eurOPe 2005, in Barcelona this summer, has helped establish the brand in an increasingly competitive marketplace, and positioned it for rapid expansion in the years to come.
While Echeguren’s background may not be typical of an OP franchisor, it ideally placed him for the successful launch of the Office 1 concept in Spain. He began his professional career in the investment banking world, leading equity research teams of such high-profile institutions as NatWest, Bansto and La Caxia, where he helped lead stock market flotations for a number of retail companies, including the Spanish subsidiaries of Carrefour and Promodes.
Says Echeguren: "What investment banking and the office products industry have in common is the emphasis on marketing and product selling, techniques which I am able to apply to the Office 1 concept in the same way as in my former positions."
And Office 1 has taken full advantage of this expertise, faced with stiff competition from the likes of Office Depot, which opened its first stores roughly at the same time as Office 1.
Echeguren stresses, however, that the two companies have taken different approaches. He explains: "Although we came to life almost simultaneously, our strategies are not comparable. Office Depot launched three city stores in Madrid and three superstores on the outskirts and announced an aggressive programme of openings throughout Spain.
"Since then it has closed one city store and I do not know if there are any other openings planned. Depot is an excellent company and I expect it may be in the process of refining its concept for Spain. Its problem of course will be the use of different brand names in each distribution channel, but I have no doubt it will ultimately do well."
While Office 1 Spain has been able to tap into Echeguren’s financial expertise on the retail side, it has also benefited hugely from the experiences and market knowledge of CEO Mark Baccash, who ironically founded Carlin, the country’s largest OP retailer, in 1989.
It was while Baccash was still at Carlin that Echeguren first met the charismatic Egyptian-born entrepreneur. He recalls: "He lived in Madrid before founding Office 1, a move which signalled his return to the US. When he began to plan the launch of Office 1 in Spain, he offered me the possibility of working together, forge a winning team and replicate his success at Carlin.
"Leaving my career in investment banking to start something new was a difficult choice. But the experience Mark brought, his past success at Carlin and knowledge of the OP market in Spain was crucial in convincing me to join."
And it is this local knowledge that has been vital to Office 1’s success in Spain. Without it, says Echeguren, the venture would have quite probably failed. He points to the motto of the local tourist offices – "Spain is different!" – and says that it is just the same for OP. "The way the Spanish customer behaves, his preferences, shopping hours, even his approach to brochures, are different to the rest of Europe.
"The Spanish buyer is very difficult, demanding product innovation while at the same time being too shy to buy radical designs. And he is terribly price conscious. Both elements make it difficult to lure him into buying expensive products."
So Echeguren put this knowledge to good practice. He adds: "We decided to adapt our store format to the Spanish market. We have dedicated a lot of effort to tailor the Office 1 concept and make it the most attractive proposition in OP to the Spanish buyer. Our flexibility and local knowledge is a competitive advantage vis-Ã -vis other competitors that focus on serving tea for all, when the locals demand black coffee."
While Echeguren admits the past two years have not been totally without their problems, he has overall been delighted with how things have progressed, particularly with the support it has received from the vendor community.
"Their faith in our project even before launching the first stores has been decisive in our success," he says. "We expected a muted reaction but were astounded with the backing and constant support from the different brands. Working with a close group of vendors has given us a different perspective and has forged close ties which we are proud of.
"Our launch has not been devoid of problems, but the overall balance is very positive. The time spent adapting our concept to the Spanish market is part of our success. With the support of Office 1 International and its know-how, we were able to avoid painful mistakes and delays."
As the OP landscape shifts in Spain, the main victims, according to Echeguren, are the independent retailers. He says: "Old fashioned stationers strive to remain in business, but their loss of market share has been dramatic.
"Until the arrival of Office Depot, retail was ignored by the foreign groups which avoided launching stores. The entry of major players has greatly affected the smaller dealers. They lost their high volume clients, purchasing power diminished, competitive pricing disappeared and the only advantages for the clients that stayed loyal were the convenience of their store and, initially, the quality of service. Now that logistics have been fine-tuned, the stationer finds it difficult to compete in pricing or deliveries with the power players."
As for the largest OP retail player in Spain, Echeguren claims Carlin’s reaction to the changing landscape has been rather muted. "They carry a heavy load on their shoulders!" says Echeguren mischievously. "Do not forget that making changes to a group of over 300 stores is a slow process. Carlin is a reference in Spanish OP, but Office 1 has the flexibility of being smaller and we can make changes without the burden that size represents.
"Carlin has few territories available and is focused on replacing those subs that leave its brand and re-freshening the look of its stores. And, I assume, repelling newcomers such as ourselves is also high on its list of priorities!"
As Office 1 ramps up its operations – the tenth outlet is currently being worked on with that number expected to double over the year – and the market continues to mature, Echeguren says the beleaguered independent basically has two choices. Move upmarket towards the boutique concept and premium brands, or join a buying group or franchise – such as Office 1!
"The situation signals difficult times ahead for the stationer wishing to remain independent. We see Office 1 as the best solution for the troubled stationer that needs to join a group to compete and survive in this difficult OP environment," says Echeguren. "Our modern brand image, store look, marketing material, purchasing power, high-margin OEM branded products, warehousing and logistics are the weapons which any stationer that seriously wants to remain in business needs to compete effectively."
Echeguren talks a good game, but only time will tell if he continues to play one.