Manufacturing

How "Made in Canada" Can Save You Money

This Winnipeg firm is taking on IKEA by making the most of local manufacturing

Written by PROFIT Staff

When the biggest player in your market is a byword for affordable quality and easy use, it’s hard to establish yourself as a credible alternative. But Peter Tielmann of EQ3 is not afraid to go toe-to-toe with IKEA.

Tielmann founded EQ3 in 2001 to fill a gap in the market: quality modern-looking furniture at a medium price-point. The company’s president and CEO acknowledges there’s some visual similarity between his products and those of the Swedish home-ware behemoth, but he’s confident that EQ3 has a brand identity all of its own. “From a kilometre away, they do look similar,” he says. “But when you get closer, there’s obviously a huge difference in the choice of materials and in how it’s built and how it’s made.”

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The furniture entrepreneur recently spoke to Canadian Business‘s Graham F. Scott about building his brand. Here are three key takeaways from their conversation:

Hometown discount

EQ3’s marketing touts its made-in-Winnipeg provenance, but Tielmann says manufacturing locally is about more than just a feel-good or patriotic ad storyline. “If the customer comes in and sees a sofa in black, we can offer that sofa in 120 other covers and multiple configurations and sizes, and they can get it delivered in three weeks,” he says. “We couldn’t do that if we were offshore.”

Offshoring production doesn’t generate enough in the way of savings to justify transportation delays and logistical hassles. “Sofas are very tough to ship around the world; they’re large pieces, and shipping becomes very expensive,” Tielmann explains.

Manufacturing in Winnipeg actually helps EQ3 control costs. “It allows us to save a lot of cash, because we don’t have to carry high inventories,” Tielmann says. “If you buy offshore, you have to pre-make everything, bring it here, keep it in stock and then sell it.”

That’s not to say that there’s no marketing dividend from local production. “It’s important to the consumer,” Tielmann says. “There are a lot of consumers within our segment who are well-educated and appreciate that the products are made locally so there is a much smaller carbon footprint.”

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Franchise wisely

EQ3 products were originally sold through multi-brand retailers like Sears Homelife. When the company was approached to license free-standing EQ3 outlets, Tielmann gave his approval. But the company bought back its Canadian franchises a few years later. “As time went on, we decided we wanted to control those stores, because the retailers were running the stores with our name on them,” he recalls. “We had a tough time to control that, and the brand was taking a beating.”

Controlling the brand was only part of the reason EQ3 chooses to run some outlets of its own. The company still licenses its brand for use outside the country, with franchises in Mexico, Central America and the Middle East. But the lessons Tielmann has learned from running his own stores have helped inform his relations with franchisees and the way he approaches the retail side of the business.

“We needed a place to develop our retail expertise and teach ourselves how to have a consistent appearance in the marketplace so that we could direct them in a strong way,” Tielmann says. “It was tough to require something from them that we didn’t do or didn’t know how to do ourselves.”

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Customers come first

Once the company had decided to execute some retail operations in-house, it had to go about opening physical locations. Tielmann admits EQ3 didn’t necessarily have the right idea straight away. “In many ways, we designed the store the way we liked it—which wasn’t necessarily conducive to how the customers would prefer to shop,” he says.

Tielmann was thinking like a manufacturer, not a retailer. The shop floor was originally designed to showcase each product, with plenty of empty space around it to maximize attention on the object itself. “In retail, it’s all about performance per square foot, so the stores need to be crowded,” Tielmann says. €˜So putting enough products on the floor to allow performance without making it look overstuffed was a big challenge for us.”

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Originally appeared on PROFITguide.com