Fractured market brings business opportunities for Flamingo

Newsroom 04/02/2008 | 15:41

As of this year, Dragos Cinca, the former board president of Flamingo and founder of the company, has been replaced by Dragos Simion, who previously occupied the position of the board's vice-president. Simion was the architect of the company's stock exchange listing in 2005 and the one to establish the fusion between Flamingo International and Flanco.
“The current executive measures generated from our business strategy will prove themselves suitable to the company in 2008. As for Flanco, a merger means cutting costs by definition, both from the central management and the business itself – in our case, the store portfolio,” said Simion.
The current president of Flamingo sees a coincidence in the fact that the restructuring measures for the shop portfolio from 2006 overlapped with a bad year for financial results for the entire distribution market, which, in his opinion, made the losses look worse than they were. In 2007, Flamingo got back on the normal business track
with the completion of the post-merger consolidating process, Simion said.
As a financial strategy, the firm found a solution in outsourcing its management operations to German consulting company Candidus. “A year and a half before, the group's HQ numbered 380 staff, while at the moment, 110 personnel are managing the same tasks, by simplifying the management operations,” said Simion. Turning to the shops' internal management, Simion said the company had reduced HR costs by implementing specific indicators such as sales per employee and number of sqm managed by an employee, which brings transparency to the tracking statistics within the three divisions, Flanco, Flanco World and Flamingo shops. Simion says that the results of these measures are starting to bear fruit and the process will continue in 2008 as well.
In the middle of 2007, Flamingo was rumored to be interested in finding investors, but Simion does not consider it an appropriate time to discuss the topic, although the company's interest in signing such a transaction could be raised within three years. “Strategically speaking, the consolidation in the distribution division has to be seen as an opportunity, rather than an imminent necessity. Therefore, any possible transaction must be accepted if it leads to increase valued for the shareholders,” said Simion.
The changes within the company also involve the widely discussed intention of the company to sell the Otopeni HQ. The site might be sold in 2008, depending on the opportunities on the real estate market, according to Simion. The company has a plan B and the delay of the sale doesn't impact the company's ongoing development strategy, he added. The funds obtained from the potential sale will generate investments in new Flanco World shop openings and possibly, for launching pilot concept projects for the Flamingo Computers chain, meaning larger surfaced sale units compared to the current ones which deliver 800 to 1,000 sqm.
In terms of sales, Flamingo and Flanco are brands which are profitable, but the profit volumes are significantly surpassed by Flanco World, in Simion's opinion. “Flanco World takes the lead regarding the development strategies in terms of sale volumes and represents for the company, the concept store for the near future,” said Simion. He adds that the cost structure of this concept seem to prove more efficient than those of Flanco and Flamingo Computers. Regarding sales area, Flanco World makes up 50 percent of the group's entire retail area,
with 18 units opened at the end of 2007.
Simion sees multiple growth opportunities on the Romanian distribution market, defining it as a “still fractured market” with Flamingo taking advantage of this situation. “The tremendous increase in rent in the central stores or for the street locations is leading to a revision in the tenants' cost structures,” said Simion.
He sees more cost-effective accessibility within the retail commercial spaces which also provide strong client traffic. Simion says that Flamingo International will continue with its strategy of closing the shops which either don't prove or lose their financial viability in time.
At the same time, the company's sales strategies are looking towards the e-commerce market. It announced in Q4 of 2007 its intention to invest EUR 500,000 in an IBM WebSphere Commerce, an online sales platform, and by doing this, Flamingo has targeted the leader position on the e-sales market, as the general manager of Flamingo Jiri Rizek announced last year. From Simion's point of view, the e-commerce market has developed aggressively in terms of percentage, but not to reach a tremendous level at this time. “We must keep in mind that the entire e-commerce market cannot be understood as the retail segment, as the operators on the market are in fact managing a B2B platform,” concluded Simion.

By Magda Purice

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