Bakos Brothers opens local factory

Bakos Brothers, the upmarket furniture retailer and interior designer, has opened a local factory to offer a wider variety of furniture at "significantly lower" prices to customers.

Ceo Ryan Bakos says the decision to open its own factory, at a time when local manufacturers are facing stiff competition from importers because of the strong rand, will help the company to "take on the big guys" and "offer the right range at the right price", while cutting out the middlemen it previously had to rely on.

"The industry has been hard hit by the recession, and a number of factories have closed down. It's a tough industry. I think we opened our factory at the right time, because there are a lot of discounts out there," says Bakos.

The factory, which has been running for three months, is in Johannesburg. It employs more than 160 people - mainly trained, but formerly unemployed artisans.

Data compiled by the Industrial Development Corporation (IDC) shows furniture imports increased by 13.1% in value to R1.5-billion in the first half of the year, compared to the first half of 2009, while exports have increased by 28.6% to R1.9-billion over the same period.

Yet employment in the furniture manufacturing industry dropped by 11% last year to less than 40000, the lowest level in at least six years.

By opening its own manufacturing facilities, the group has changed into a "factory with showrooms", says Bakos.

Currently up to 70% of its product range is locally manufactured, with imports coming mainly from Italy, China and Asia. All raw materials, with the exception of fabrics, are procured locally.

"(Manufacturing locally) helps us to offer variety. If I have to import sofas - take a couch, for example - you get numerous different combinations; for example a chair, a two-seater, a three-seater, a day bed on the left- or right-hand side. In all, you can get about 30 combinations.

''Now, if you want to sell that range in 10 colours, that's 300 couches (you have to import). We're selling it in a 100 different colours, so you're looking at 3000 couches. So you have a few thousand couches, but of only one model.

"If you're importing, you cannot offer the range and the variety as quickly as one who manufactures locally.

''Retailers often say: 'We can get anything you want, but we're going to import it.' And you end up waiting for months," Bakos said.

While the strong rand has hampered export sales, mainly to clients on the rest of the continent, it also helps to lower the cost of imported fabrics and other imported products, says Bakos.

While Bakos Brothers have some products in stock, it operates mainly on a made-to-order basis, with lead times of up to six weeks for custom-made couches.

"Prices have reduced drastically - we have cut out all the middlemen from raw material mark-ups to factory mark-ups. We're buying at cost and sell directly to the customer," he says.