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Bakos Brothers: Ryan Bakos
The Bakos Brothers decorating Centre – an eye-catching corner property in Dunkeld, Johannesburg, is a well known landmark. It offers decorating, design, planning and furnishing services, and also serves as the headquarters for the family-owned furniture business which has showrooms in Sandton City, Design Quarter Fourways, Pretoria and Nelspruit. Several more are in the pipeline following a total refurbishment of the company by Ryan Bakos, the young and super-energetic new face of the iconic luxury furniture brand.
The first Bakos Brothers retail store opened its doors in 1971, in Rissik Street, Johannesburg. Of Lebanese descent, the brothers – Norman, Tyrone, Dennis, Bernard and Donald – came from a family with a strong entrepreneurial background and a couple of them had already owned their own furniture shops when they decided to pool their skills and resources to create a store that sold elegant pieces to an upmarket clientele and focused strongly on customer service finesse. The brothers’ hard work and commitment to the company saw them launching a second store two years later, also in the CBD. When television was introduced to the country in 1976, they spotted the gap in the market and Bakos Brothers became South Africa’s number one television retailer.
They sourced fine furniture from around the world, giving discerning consumers access to international designs and trends. That immediately differentiated the experience of shopping at the plush store, setting the business apart long before brand awareness became the marketing catchphrase that it is today. Bakos Brothers was synonymous with opulent living and gave South Africans a taste of what has since become known as lifestyle furniture and design.
The company also diversified into property development. In 1977, the brothers built a modern shopping centre in Nelspruit. A first for the town, the project was spearheaded by Dennis Bakos, the eldest of the five, and father to Ryan, who was destined to take over the reins from childhood.
A family tradition
By 2008, the brothers were confident that Ryan was old enough and experienced enough in the workings of the business to assume the role of leader. They realised it was time to inject new energy into the business, and Ryan was ready. It’s a job he says he was groomed for from the time he learnt to walk and talk.
“My uncles are conservative and traditionalist. The company consisted of three stores, a small staff, ancient systems and a real mom and pop attitude. Information flow was non-existent. It was hard to determine stock levels and find price lists. The things they excelled at were an eye for quality and superb salesmanship, but we needed to reinvent the Bakos Brothers brand to enable the business to grow in what has become an intensely competitive market. Luckily, I have always been more interested in back-end systems than the front-end. My experience with etailer eDreams had given me a huge insight into information systems, and I started to apply those learnings from the day I walked in.”
Never a good student, Ryan completed school in 1998. He had failed standard eight and was only too keen to matriculate and get his formal education over and done with. Interestingly, not one of the brothers who started Bakos matriculated, and Ryan’s own brother Sheldon is the only man in the family to have a degree. After school, Ryan went straight on to join the commercial and retail property side of the family business, working alongside his father. In 2000, he moved into furniture retail where he spent two years as a salesman, also delivering furniture and doing lots of manual labour in the warehouse. “Working anywhere else was never an option for me,” he says. “The business is as much a part of our family as we are of it.”
Profiting from outside experience
It’s well known in the business world that family-owned companies often suffer when the reins are handed over by the founder to the next generation. The founders work hard and build a business, the children take it over and are poorly prepared to manage and make it grow but they enjoy the wealth, and the grandchildren inherit a dead business and an empty bank account. Ryan and his family were determined that would not be the case.
At 21, he was encouraged to take a gap year and went to London where he waited tables and then backpacked around Europe. On his return to South Africa, he went back into the retail side in sales for two years and then moved into property for another five years. He became a property manager and – with responsibilities to both the landlord and the tenants – he got the opportunity to grow his real estate knowledge and combine this with management skills.
As a sideline, in 2003 he and a friend started a mail order company that imported consumer products from overseas. That became eDreams, a hugely successful and popular online shopping site in which Ryan continues to have an interest. It’s a business venture that gave him profound insight into what it takes to systematise operations.
“eDreams taught me a great amount about the importance of sophisticated functionality and the availability of information,” he says. “We spent nearly two years developing the website and today it is able to handle thousands of orders at any given time with just six staff. It was an excellent training ground for what happened next.”
But when he took over, it was not an easy period for the company. The recession was in full swing, margins were tight, and cheaper competitors had popped up all over the country. However, Ryan believes that what kept the business alive over four decades and through so many changes in fashion and style is family. “The difference between us and everybody else is that we remain a family business. My uncles come to work every morning and they open up the stores. They really are the greatest salesmen. Nothing can compete with that. It’s a great company to work for as that family ethos is pervasive. The environment is warm and friendly, and not at all corporate. Even though we now have commercial systems and processes in place, the atmosphere remains the same, and customers feel it too. If there is ever a problem, the customer can get hold of a Bakos to sort it out for them – they will not be sent from manager to manager. That’s because the brothers started the business from scratch. They drove around delivering couches – that service culture remains. It’s an essential part of our training programme; all our salespeople learn how to treat the customer the Bakos way.” Under Ryan’s leadership, the Bakos Brothers brand has undergone considerable changes, and it’s behind the scenes that some of the most innovative modifications have taken place, with Ryan revitalising the business and preparing the company for major growth into the second decade of the millennium.
“When I was appointed CEO, my goals were to revitalise the business, leveraging all the good, solid, family values that were in place, while at the same time overhauling all the systems and processes that would hamper growth. My uncles had not been interested in expansion, but I made them realise that it would be the best way forward for the business as we needed greater visibility if we wanted to remain competitive.
On the question of trust, Ryan points out that the brothers took no convincing when it came to making him CEO. That was how he in turn encouraged them to let him implement the changes to the business, the results of which are clearly evident in the figures, with turnover in the nine digits.
“Trust and support make all the difference in a family business,” he says. “The five brothers have worked together for so long and I grew up as their son. They have always had conviction in my desire to do the best for the business. In any family concern, the older generation must be prepared to let go and to have faith in the youngsters. Change is fundamental to growth. Less than five years ago the company was still run on carbon paper copies. Today we are geared up for national expansion.”
Reinvention in the midst of the downturn
Ryan’s decision to open a 4 500m2 factory in Wynberg at a time when the market was in severe downturn – employment in the furniture manufacturing industry had dropped by 11% to less than 40 000 by 2009 – was a brave move. It has helped the company to take on larger competitors, adjust its pricing and cut out the middlemen.
Up until then, Bakos Brothers had been a focused retail company that bought from local manufacturers and imported most of its sofas. They were buying expensive fabrics and couches from suppliers, all of whom had their own margins. The only way to bring costs down was to start making their own furniture.
Ryan notes that he was astonished by how many furniture companies were wiped out by the recession. “I know of seven major factories and retailers that have disappeared. The closure of these businesses worked to our advantage, with the company sourcing both skilled employees and relatively new equipment from the defunct factories.”
The factory now provides work for 160 people and the company buys fabrics and leather in bulk, direct from the wholesalers. This has made it possible to bring down the tag of a couch from about R40 000 to R 9 000. The showrooms have been redesigned to feature both ranges – top-end and more affordable.
The company also brought on board Gerald Yosh, a legend in the local furniture business who is now in his 70s, to head the manufacturing division and assist with design. “You can feel the presence of genius when you are around him,” says Ryan. “He has so much experience and knowledge and he’s also helping us to bring in even more business. We meet every day and speak constantly.”
Expanding market share
The establishment of the factory is enabling the company to grow its national footprint. From appealing to just 2% of the market previously, it’s expanding rapidly. In 2009, a new store was opened in Nelspruit. This was a first for the business which had operated solely in Gauteng up to then. “The store was a tester to see how efficiently we could control a business remotely. We got our managers involved in the project and it has really taken off. I’m pleased about that. I grew up in Nelspruit and my family has had a long history there so it was important for me to get it right.”
But Ryan notes that the store did have a few teething problems at first. Ironically, these difficulties helped to pave the way for the business’s ongoing transformation. “The store struggled when it first opened because of the cost of the high-end items. That’s when I realised that to really boost turnover across the entire company, we needed vertical integration.”
Manufacturing locally also means the company is able to fulfil orders far more quickly, as customers do not have to wait for items to be imported.
“With the opening of our own factory and our control of the manufacturing process, we have brought down the cost of our sofas dramatically. We still provide exceptional quality. Our frames and raw materials are of the highest specs, and we buy only the best fabrics and leathers. But because we’ve brought everything in-house, we are able to offer the same quality at a far more affordable price. The strength of the rand has also worked in our favour as this has lowered the cost of the fabrics we do import.”
At the same time, Ryan saw the need to introduce more budget lines of furniture items. He says this will not impact the perception of the store as a high-end retailer. Although he considered launching a separate label for the more affordable range, he decided against it as he felt there was no need to dilute the brand.
“The exclusive, top-end lines are still at the core of the business, it’s just that we now offer a large range of more affordable items too. This has grown our customer base radically along with the marketing drive as people want to own a Bakos Brothers item. Whether you want a four-metre mahogany dining table or a less ostentatious item, we can provide both. It wasn’t necessary to introduce a second brand, because both price points appeal to the same market. The brand is aspirational. It’s this mix of products that has enabled the new Nelspruit store to flourish, and that’s the strategy we have adopted for the rollout of our other stores through 2011.”
Next, Ryan took another unprecedented step for Bakos Brothers and radically increased the advertising budget – by 400%. “I was determined that we would advertise aggressively in the glossy magazines and in newspapers. Because of the slump, most companies were slashing their advertising budgets so we managed to get massive discounts. We got so much bang for our buck, it was amazing. Alongside the budget increase, the ads changed too. They had been the same for many years, and it was time to simplify the concepts and introduce clean lines and fresh designs, all more in line with the demands of the contemporary consumer and with what is happening in the furniture market.”
Ryan believes this spurt in visibility while other retailers were playing it safe played a major role in Bakos Brothers’ subsequent successes. The company’s exposure in the media increased by around 2 000% and turnover skyrocketed. Growth has since been posted at 17% year-on-year. “A downturn can provide great opportunities if you keep an eye out for them,” he says. “This massive advertising drive has positioned us upfront to take advantage of the slow but steady upturn.”
A fresh look at tired systems
Critical to the growth of the business was Ryan’s move to revitalise business systems across the company. “We implemented a totally new, cutting edge information systems infrastructure. The need for this type of system is glaringly obvious in any big company, but in an old-school family business it can be overlooked because ‘things have always been done in a certain way’ and the founders are familiar with that. Initially, my uncles took some convincing. This type of change is expensive and it can be invasive, but we started to see the benefits fairly quickly.”
“I started at ground level, ensuring that things like stock levels were right, the stock balanced, lead times were brought down, and price lists were all accurate. That gave everybody a window into the company, a 100% accurate picture of what was available, what we could and couldn’t sell, and what processes to follow in each case – all of which had previously been unavailable or hard to find.”
To make sure the systems were as perfect as possible, he walked around with booklets and asked employees to comment on what was working and what was not. He also held one-on-one interviews with staff, asking them what were the ten things they hated about their job. That was a smart move as they are on the ground every day. Incorporating their suggestions into the operational side of the business has helped to significantly boost turnover in the past two years, Ryan says.
“We found out what the problems were and fixed them. I have always believed that the best way to glean information from people is to speak to them directly – that is my style of doing things. We overhauled departments that had been undermanaged and spent a fortune on bringing in new management. We also asked our people what they loved about their work and made sure those aspects of the business remained intact. This gave us real insight. With all that information, we were able to take the weakest components of the business and make them strong. When the business started picking up, demand grew and so did stress levels. That gave us the opportunity to push out the bad eggs.”
Family businesses often have poor human resources systems in place, and Bakos Brothers was no exception. When Ryan took over, the HR department was weak and had to be completely revamped. On the topic of recruitment, he is adamant that he will not consider employing people who job hop, and will only look at CVs of those who have been in their current employment for five to ten years. “One thing I have learnt over the years is that loyal, stable and conservative employees are the ones who will be with you for a long time.”
Ryan also brought in experts to monitor the company’s carbon footprint. The company emits 100 tons of carbon every month, most of it from electricity consumption. It now offsets that by planting hundreds of trees in Johannesburg’s poorer suburbs. A lighting conversion programme to reduce consumption is also underway.
“I believe it is every person’s responsibility to adopt low-carbon practices, and businesses are made of people. Raising public awareness and encouraging choices that support ethical companies will result in pressure being felt by other suppliers to follow suit,” he says.
A new approach to leadership
Ryan’s not a great reader, but he takes his inspiration from others. He continues to be mentored by his father and uncles, all of whom are able to provide him with the advice and cautionary words that come with years of experience in the business.
He admits that it’s challenging to retain the feel of a family business, yet still function at a corporate level. One of the advantages is that he’s introduced some team activities for his people, such as ten pin bowling, beach volleyball and inspirational talks. There has to be a balance however, he says, between having a good time at work and doing the work properly. “My message to the staff is simply, ‘Love your job and obey the rules’. I believe we have managed to retain a very positive energy in the business because of that.”
He believes in leading by example, which is not difficult for someone who has taken on just about every role in the business over the years. On a typical day, he gets to the factory at seven, checks on production and quality control, and also sees that the floors and the bathrooms are clean. From there he visits the warehouse, and then goes to his office to monitor the finances and payments. He’s putting in the hours, but he says that if you love what you do you never have to work.
“I’ve been in it for so long that I can do anything and everything. That is essential if you want to build a strong company. You have to know how things are done. My staff have photos of me working on the factory floor. It’s fun to build a couch.”