Dealer Spotlight: Office 1 Bulgaria

Becoming market leader in Bulgaria has been considerably easier for Office 1 than maintaining that position in often very challenging circumstances

Starting out from being one of the first franchising markets for Office 1 Superstores International, Bulgaria has not only been a resounding success story, the capital Sofia in 2007 also became the seat of the European headquarters for its globetrotting US-based parent.

Winding back another decade, it all started in 1997 when local player Panda Cooperation signed a franchise agreement with Office 1 and became its master franchisee for Bulgaria. The first 1,000 sq m (10,000 sq ft) store opened in 1998 in Sofia.

The concept quickly took off and gained scale so that only a few months later, the first sub-franchising agreement with another local player was signed. The rest, as they say, is history. By 2001, Office 1 operated 70 stores across Bulgaria, offering full nationwide coverage not only from the major cities but also from less urban areas; by 2008, this store count had increased to 170.

Downsizing

Unfortunately, that growth trajectory didn’t last, first prompted and then exacerbated by the economic meltdown that began in 2008.

Raicho Raichev, owner and Chairman of master franchisee Panda Coop, says: “In order to survive in the times of the severe financial crisis and, on top of that, retain our leadership position in the market, it was necessary for us to take drastic action in terms of reducing cost and improving profitability. It became vital to carefully downsize our activities and our stores network.

“We have now retrenched to 100 stores, 80% of which are owned by sub-franchisees and 20% by Panda. In terms of staff, we have 1,000 employees – 400 of them Panda staff, with the rest being employed by the sub-franchisees.

Resizing the company has meant that we could increase our revenues in 2013 compared to 2012. Most importantly, however, we have managed to increase our net profit by 86%.”

It’s not just the economy, however, that has changed the landscape for Office 1 Bulgaria over the past 16 years, adds Raichev.

“The market has become much more competitive. In addition, our customers have really changed their model and behaviour – they have become more demanding, price-oriented and much less loyal. This has been challenging for us because our goal is not to simply to do business as usual, but to justify our leadership position in the market with quality and innovative solutions, and customer-oriented initiatives.”

Product portfolios too have seen changes that are broadly in line with what much of the OP community is witnessing, with breakroom, jan/san, technology and office furniture all high up on the growth and good-potential agenda.

Having started in 1998 as a chain selling stationery and consumables, Office 1 stores in Bulgaria today centre no longer solely around products, but offer more and more services and solutions. From print management programmes, insurance offers and advertising materials, to business centre and telecommunication services, all of these are now part and parcel of the company’s overall portfolio.

What hasn’t changed substantially is Office 1’s customer base, predominantly made up of SMEs, especially as far as its retail stores are concerned. As the only chain store operator covering the entire country, with the competition largely consisting of local stationers, Raichev says it is important for both the individual and the small B2B customer to have a conveniently located Office 1 store nearby.

But as the company’s focus on the B2B segment has increased considerably over the years, so has its target customer range here. Says Raichev: “We service many large private companies at a national level and we have also set up a department that specialises in dealing with government contracts. This segment is becoming more and more important for us.

“One of the achievements we are very proud of is our cooperative agreement with the national education system. We have for example created a specialised catalogue for schools and kindergartens named The Contemporary School. This contains not only educational materials but also sports equipment branded Office 1 Superstore Sports. It’s a fairly new but very promising product category in our portfolio.”

Office 1’s own brand range now incorporates approximately 1,000 SKUs, manufactured both in Europe and Asia. These products not only serve the local market but, stocked in the company’s warehouse in Sofia which also serves as a central logistics hub for the cross-border operations of Office 1 Superstores International, are distributed along with other brands and goods to Office 1 master franchisees and dealers worldwide.

Part of the own brand range is Office 1’s office furniture portfolio that it manufacturers itself and which includes chairs, archiving systems, presentation hall solutions, cafeteria and restaurant equipment. The production facility for office furniture is located in the city of Sliven and, says Raichev, “makes us flexible in terms of manufacturing lead times and confident in terms of quality control”.

International outlook

It is this international outlook, combined with the financial backing of a sizeable and strong ‘parent’ that has contributed to Office 1’s sophisticated logistics operation, its technology-savvy approach and its full-on foray into e-commerce. While in some countries perhaps its web offering hasn’t taken off as much as the company would have liked, e-commerce now accounts for 30% of overall sales and has become an important part of Office 1 Bulgaria.

Says Raichev: “E-commerce has become a very important channel for us and our Bulgarian team here works very closely with the Office 1 European HQ staff, especially as regards developing our web store front and initiating and pushing through our marketing activities. They have built up a strong knowledge base in this channel over the years and are a great help with our online business.”

Technology investments

The Bulgarian business, led by Panda Coop, has also been at the forefront of other technology issues, often being first to market with new solutions, as Raichev points out: “Our web-based corporate customer order control and management system has been the first of its kind in our industry in Bulgaria and it has saved us time, effort and financial resources. It enables us to precisely monitor and control the costs and processes related to the purchasing needs of our customers, at the same time being in accordance with their management structure and confidentiality requirements. It uses various access levels and authorisations, sets up buying limit controls, determines ordering cycles and payment terms, and provides multiple reports available both to our sales teams and the customers themselves.”

Going forward, a true multichannel approach is what ultimately lies ahead for Office 1 Bulgaria, but in the meantime Raichev is happy with the company’s performance in often tough circumstances. He concludes: “We have been resilient in facing the challenges provoked by the dire global economic landscape as well as the particularly difficult national situation over the past few years, but we now have a profitable and stable business.

“Maintaining and developing this position will involve a huge amount of work and require a continuous focus on the most basic things in business – efficiency and profitability. The task is to work on further developing our e-commerce sales channel and consolidating this with all other channels we use"