The Electronic Retailing Association

'In the Hot Seat' Interview with Sandi Češko, Co-Founder of Studio Moderna

Sandi Češko, Co-Founder of Studio Moderna and now Chairman of the Board of Studio Moderna Group

Studio Moderna is the leading omnichannel, multi-brand and direct-to-consumer electronic retailer in Central & Eastern Europe, offering their customers choice and convenience. Wherever, however.

Studio Moderna has 21 local offices in CEE countries, 317m+ potential customers, 364 own retail stores, 240+ hours of DRTV commercials every day, handle 70m calls annually and have 280k website visitors per day.

Studio Moderna was established 25 years ago in a room of 8m2 with two students in a ‘call center’.

I doubt there will be many people reading this who don't know you, but please introduce yourself in your own words to the ERA Europe members.

Sandi Češko: I’m Slovenian, I’m a challenger by nature but I’m also pragmatic and often a perfectionist. I’m a passionate runner, mentor to young entrepreneurs and I love direct marketing and the magic of our DRTV or ‘moving pictures’.

How did you get into this business?

SČ: I started in politics during the big changes in the political and economic space. Revolutionary changes in politics stopped but a business revolution had just started so I jumped on this crazy trend. First with a computer company in the late 80’s. In 1991, I was introduced to Kosmodisk, an ergonomically designed belt that reduces the pain in the spine. I thought that this could only be a nice small business so I asked my partner, Livija, to take care of the business. This was such male cliché thinking, that I’m ashamed of it. I didn’t need to wait long for ‘justice’. Soon I realised that Livija was growing the Studio Moderna business faster than I was growing my computer business so I decided to join the winner(s).

Online is not the ultimate strategy anymore: the new game in retail is omni-channel in which each customer will choose its preferred channel for the retailer or the brand.

In 1994, we discovered the teleshopping industry that had its first European conference in London. We tried to sell Kosmodisk to American DRTV companies but instead of buying a Kosmodisk, they tried to sell us their products. My first reaction was negative, because the DRTV industry in Eastern Europe had a very bad reputation. In 1996 Ronald Lauder launched the first American TV station in Slovenia, so I finally decided to do a test. The push to go international came with the expansion of the Ronald Lauder’s media empire into Eastern Europe. We followed them in 1997 in Slovakia and Poland and we just didn’t stop entering new markets for the next ten years.

Is it true to say that, when Studio Moderna came to the market, it was seen as a bit of an underdog? Was it a disadvantage coming from Eastern Europe where all the big western companies e.g. Quantum, K-tell, TV Shop failed?

SČ: Absolutely. We started with teleshopping in 1996 in Slovenia, a market with 2 million people. At that time, there were many local teleshopping companies plus all the Western companies everywhere in Eastern Europe. It was not easy to get the distribution rights. Actually, I sold the first teleshopping product in 1994 in our magazine for healthy living. Erich Kupferberg from Emson sold me a hair removal product; some scissors and a ‘magic’ defrost tray. today’s world, only people who can stay on the top of the changes in technology, fast changing values and preferences, cultural and political turmoil, are guaranteed success.

What did you do differently? How did you win the trust of Eastern European consumers’ in such an untrusting market?

SČ: First, we had to be better than local companies. We achieved this by implementing the highest western standard in service. More difficult was to be better than western players. We did this with insourcing all services (call centers, warehouses, media buying, production, etc.) and with decentralization of the decision making process, leaving local managers to decide what they would sell. With this strategy, we earned trust from customers vs. local competitors and with better efficiency than the western competitors, we achieved higher customer satisfaction.

Studio Moderna is a huge company (based on the number of employees probably one of the biggest if not the biggest in the industry): please tell us about the company and how you are implementing multi-channel?

SČ: Our multi-channel strategy started in 2005 when we finished our main geographic expansion. Instead of growing by adding more countries, I thought that it would be better and more efficient to grow by adding more distribution channels. We were probably the first in the world with such a strong multi-channel strategy. We put customers in the centre and decided to service customers across all distribution channels instead of pushing the customer to come to our channel of choice. We are channel-agnostic and customer-centric.

Nothing gave such a strong confirmation of our strategy as a recent acquisition of Whole Foods by Amazon. Online is not the ultimate strategy anymore: the new game in retail is omni-channel in which each customer will choose its preferred channel for the retailer or the brand. We have to service customers wherever the customer wants us or needs us. The more touch points we master, the more likely it is that the customer will choose us.

Where do you see the specific strength of Studio Moderna? How do you view the development of the company in the past and what are your plans for the company in the future?

SČ: The key strength of Studio Moderna is in its intangible assets, especially people. We have built the company from zero to €400m in 2012 (at that time more than $500m) without raising any capital and all organic growth. I have invested in three main assets: 1) Talent, 2) IT to empower talent and 3) Innovations in terms of products and business models.

We have changed the business model almost every five years. We started in 1992 as a product driven company, like DRTV companies in the USA, in 1996 we became a retailer, a distributor for American DRTV products, in 2002 we launched Dormeo and our focus was on our own brands and in 2005 on multichannel to focus strongly on database marketing in 2010.

To stay on top – to paraphrase Gretzky, we have to figure out where the customer will be in the next phase. Our strength is to anticipate and to move faster than our competitors do. Many companies know what they have to do but their corporate culture does not allow them to make a necessary change, while our culture was never a barrier; on the contrary, it was our key asset and advantage. Top technologies and new business models are available to everyone today but the key difference is between the companies that have the talent who are on the cutting edge of those changes, and companies that are stuck in their corporate structures. In the old times, brands, the distribution platform, factories or patents were a company’s key assets, which had secured generations to live comfortably, but in today’s world, only people who can stay on the top of the changes in the technology, fast changing values and preferences, cultural and political turmoil are guaranteed success.

How do you see the future of the DRTV business and retail in general?

SČ: Although most people would not agree with me, I believe that there have never been better times for our industry. The DRTV paradigm/storytelling via moving pictures is in the centre of the advertising revolution. The old ‘push’ adverting model has been dying for a long time. The Internet opened the doors for a ‘pull’ advertising philosophy where communication starts by a customer searching for information. This is different from the push model where the customer is only hit and interrupted with information. When a customer is searching for information, he expects to get something relevant and something educational and not something flashy. This is the key strength of the DRTV communication, we just need to use it in combination with brands and not only with typical teleshopping products that come and go.

To win the new retail game you have to master two key elements: a new communication/ relationship model (based on a DRTV model) and the best execution/ logistic model to make promises happen as fast as possible.

We do not do any basic R&D but we review innovations ready for a production line. Then we go and play with these new ‘ingredients’ like kids play with Lego bricks. We always do this with calculators in our hands and customers in our minds.

What role will Eastern Europe play within the EU and what will be the impact of the non EU markets on Europe in general?

SČ: This is not my cup of tea. From the perspective of an entrepreneur, I see a lot of creative potential in Eastern Europe that has a much-improved opportunity inside a united Europe. With the integration process Western Europe did not get only new markets and cheaper labour but also new energy, which is often more passionate about the European values than the western population where those values were created. I am an optimist.

How do you see the market developing in Eastern Europe? / How would you describe the challenges of the retail market in Eastern Europe?

SČ: We still have good growth, distribution is fragmented, and hunger for consumer products is bigger than in the west, there’s a lot of potential for growth. For this reason, we are opening around 50 new shops per year of around 200m2.

Studio Moderna is a case study for the Harvard post graduate business school and you are a lecturer there. Is this something which you will do more of in future?

SČ: I was honored that we got a case study at HBS. It happened almost ten years ago and I have been visiting HBS every year since. I am invited to other universities in the USA and globally as well. In December, I will be presenting to the students at Columbia University. I give 50 - 100 hours per year to work with young entrepreneurs and NGO’s and I will definitely do this more every year.

Product Development surely plays a central role in Studio Moderna's success. Is this something which you get involved with personally? How does Studio Moderna decide in which products to invest, which to develop and launch?

SČ: This is my big passion. I call it ‘design thinking’. We are constantly in touch with many innovators and the R&D departments of our key suppliers. We do not do any basic R&D but we review innovations ready for a production line. Then we go and play with these new ‘ingredients’ like kids play with Lego bricks. We always do this with calculators in our hands and customers in our minds. We also make our customers a part of this process.

Dormeo, Sandi's favourite product: the established mattress brand Dormeo, celebrated 15 years in 2017.

Which Studio Moderna product has impressed you most and what was the first product you bought?

SČ: I was most impressed with our first product Kosmodisk, because I didn’t believe that it could reduce back pain until I had to use it. My favourite one is of course Dormeo, but also the folding bike although it was never a commercial success at least so far. I buy most of our products.

How do you know what your customers want? How do you stay close to them?

SČ: You just don’t know what customers will really want; I have learned this in my early days in the DRTV industry. We usually test products first in our shops in a real environment. Key is to stay close to our customers. I think that customers will become a part of our business process soon. We have made a first step by launching customer advisory boards where customers tell us what they like but more importantly, what they didn’t like and they also help us to develop new products.

What motivates you to go to work in the morning?

SČ: As Warren Buffet says, a true entrepreneur is like an artist painting the ceiling in the Sistine Chapel.

Is it true that you have never had a personal assistant or a secretary - everyone can walk straight into your office – why is this important to you?

SČ: Bureaucracy kills the dynamic; it is just a buffer in communication. I need to be exposed to my colleagues and not protected.

In her laudatio for you at the EMMA awards, Maja Umek thanked you for teaching her that arrogance has absolutely no place in the workplace. How did you yourself learn this and what is your personal philosophy with regard to business?

SČ: Maja has known me for a long time. She knew more about teleshopping by watching German TV programs than I did when we started with DRTV. I will tell you a small secret: my father established Studio Moderna in the late sixties so we are almost 50 years old. When my father passed away, we closed down the company and in 1992 I just used an old family brand which was still modern to start a new company. My father taught me that every work is honourable, also cleaning the streets, one just has to be more efficient than others and he also taught me not be arrogant and to rely upon farmer’s logic.

Editor's Note: 'Holacracy' is an approach which increases agility through distributed authority. In traditional organisations, managers loosely delegate authority, but ultimately, their decisions always trump those they manage and everybody knows it. In Holacracy, authority is truly distributed and decisions are made locally by the individual closest to the front line. Teams are self-organised: they’re given a purpose, but they decide internally how to best reach it. In this way, Holacracy increases a company’s capacity to adapt to changing conditions and avoids the autocratic micromanagement that slows everything down.

How would you describe the Studio Moderna corporate philosophy? Is this linked to your own philosophy? How is this lived by employees?

SČ: Corporate philosophy is different from entrepreneurial but with thousands of employees, this is necessary, at least at today’s level of corporate development. However, it is not a future anymore. I follow very closely the new trends of holacracy and I believe in it.

In June this year, you were honoured with the 2017 EMMA Award for Lifetime Achievement. Which of your achievements in your career are you most proud of and what do you personally hope to accomplish in the next five years?

SČ: I am proud of the team at Studio Moderna, our culture for the company and the great potential which the company has. I’m proud to be able to work with the best talents in our space and to earn their trust and passion for common goals. For SM these 25 years were just a preparation to get ready to play in the first league with the largest players globally. Personally, my focus today is global markets and some new industries.

What do you enjoy in your free time?

SČ: I like simplicity, nature and to have my private time with my family. Hobbies are very important, especially running for which I allocate daily at least 1,5 hours. I run every day minimum 15km.

'Entrepreneur' or 'Innovator'? How would you describe yourself?

SČ: Revolutionary

Sandi Češko was interviewed by Amanda Justice on behalf of ERA Europe, September 2017.