Business

Mexico's new furniture revolutionaries

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Media captionThe start-up firm winning over Mexico's furniture market

Have you heard the one about the Frenchman, the Dutchman and the Italian? They all moved to Mexico City to set up a furniture company, having never worked in the country before.

It was a big risk, but one that seems to have paid off.

After studying for an MBA at Harvard Business School, Philippe Cahuzac asked Dutch-born Hassan Yassine and Italian Raffaello Starace if they wanted to join him in setting up a business.

They had all met while working for online furniture company Oppa in Brazil, and when they decided to launch their own business, which they named Gaia, Mexico felt right.

"We are talking about a huge market - 120 million people," says Mr Cahuzac. "The average age is around 25 or 26, so in a few years those people will make the biggest furniture purchases ever."

Image caption Philippe Cahuzac says the firm aims to serve the middle market

Gaia's founders felt consumers in Mexico were faced with limited choices.

"The furniture market is broken," says Mr Cahuzac who explains that consumers are either price-driven at the lower end or furniture is inaccessible at the top-end.

"There's a huge gap in the middle that is not catered for, people wanting good quality products at fair prices - that's the problem we are solving."

And with online retail still in its infancy in Mexico, a website seemed the way to go.

Gaia made $5,000 (£3,200) in its first month. A year on, monthly sales are $500,000.

Made in Mexico

Mexico and Brazil may be the biggest economies in Latin America but they are very different.

"Brazilians are more used to buying online," says Mr Cahuzac. "In Mexico it's very new, the level of sophistication in Mexico is much lower than in Brazil."

The problem they face in Mexico is the mentality that products sold online have to be much cheaper than if you were to walk into a shop on the street.

"Mexican customers are demanding but at the same time if they like their experience, they are very loyal and speak well about you," he says. "So it's a high-risk, high-reward structure."

Image caption The majority of products Gaia sells are made in Mexico
Image caption Competition from China has made it hard for Mexican factories to compete
Image caption The Mexican factory Gaia uses to make most of its products has been in operation for forty years

In total, 70% of the furniture Gaia sells is produced in Mexico. That has helped keep prices low and made logistics easier. It is also creating jobs and boosting an industry that has been struggling.

Gaia works with a furniture factory that has been in operation for more than 40 years. Sergio Aguilar who owns it, says Mexico's furniture industry was plunged into crisis when China entered the World Trade Organisation in 2001.

"China really hit us," he says. "The competition between China and Mexico has been really tough."

But business is picking up with business from Gaia. Mr Aguilar has more than trebled his staff on Gaia's production line in the past six months.

Start-up struggles

For a young business, getting off the ground can be complicated, no more so than in hectic Mexico City.

Gaia struggled to find logistics providers to move large items such as beds and sideboards. In the end they had to do it in-house, buying in the trucks and hiring drivers.

Image caption The firm expects to treble its 35 employees over the next 12 months

"The other challenge is dealing with suppliers," says Mr Cahuzac. Half of his time is spent dealing with them, "making sure they are delivering on time, the quality is consistent and communication is good".

In 2014, Mexico ranked 103 out of 174 countries on fighting corruption, according to Transparency International. The firm has experienced this dishonesty first hand.

Mr Cahuzac was called by a local hospital for a meeting. They wanted Gaia to provide all their beds and benches and to overcharge them so they could make a quick buck using public funds.

"I said either I'm part of the answer or part of the problem, I am going to be part of the answer so I am going to leave the room now," he laughs. "You need to define how you are doing business and this is not exactly the way I do it."

The future

Gaia has grown from three to 35 employees in a year. In the next 12 months, the firm is aiming to nearly treble that number.

For that, they need more funds which have so far come from business angels, family and friends, as well as Mexican and US investors.

Gaia does have global ambitions - but for the next year or so, the focus is on Mexico City. With more than 20 million people living here, designers have plenty to keep themselves busy with, working on the latest products to hit the virtual shelves.

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