Joint Venture Charts Ambitious Course

Home Channel News, Nov 9, 1998

Bogota, Colombia -- In a bid to become South America's first pancontinental home improvement retailer, Chile-based dealer Sodimac has formed a joint-venture partnership with one of Colombia's main tile makers and begun building a network of stores.

The partnership blends Sodimac's retail experience and heft with the financial and market resources of Organization Corona, a 116-year-old family-owned group of businesses whose major activity is the production of tiles, porcelain products and plumbing fixtures.

The venture's roots go back to 1992, when Corona began selling product seconds out of an existing warehouse in Bogota, Colombia's capital and largest city. Based on that experience, the company decided to further explore the retail arena, and in 1993 it entered into an informal alliance with Sodimac, whose Chilean owners, the Del Rio family, were longtime importers of Corona's products. The fledgling partnership opened a second Bogota store in 1994 and, following the resultant success, evolved into a formal joint venture, with Corona as the majority partner, in January 1997.

Since then, the partnership has opened two more stores, both in Bogota, the most recent in May 1998.

"The idea," according to Jaime Zawadzki, the company's top executive in Colombia, "is to keep growing."

Five more store openings are planned for 1999 -- three traditional warehouse home centers and two contractor-oriented drive-through yards based on Sodimac's Constructor store concept in Chile. Both Constructor units will be in Bogota, but two of the home centers will be outside of the capital in Colombia's other principal cities, Cali and Medellin.

Also along Sodimac's Chilean model, the company intends to open hybrid home center/drive-through units in midsize cities. By the end of 2001, it hopes to have a stable of 20 stores -- at least one in every Colombian city with a population of more than 400,000 people.

Ultimately, Sodimac Corona will be responsible for expansion into Ecuador and Venezuela, as Sodimac looks to open stores throughout South America.

While Sodimac Corona enjoys a degree of operational independence from Sodimac, it is heavily influenced by its more experienced Chilean sibling.

"We want to operate as a chain," notes Zawadzki, Sodimac Corona's vp-merchandising and marketing. The company sources much of its product mix in conjunction with Sodimac but employs its own team of buyers, who are free to adapt that mix to local market conditions. For example, the Colombian stores, not surprisingly, sell more tile -- 28 percent of their total sales -- than their Chilean counterparts do. As a result of such merchandising freedom, some 73 percent of Sodimac Corona's products are either produced locally or imported by others. Zawadzki, however, says the dealer hopes to change that ratio. The ideal mix, he says, would be 40 percent imports, 60 percent domestic.

From a merchandising standpoint, the dealer aims to offer more product alternatives, in both style and price, than Colombian consumers are used to, and to introduce them to new items and ideas. In September, dozens of products -- from hammers to surge suppressors -- displayed on endcaps in the dealer's newest store boasted "only in Homecenter" tags. Located in a middle-to low-class portion of Bogota on a major avenue lined with specialty tile and hardware stores, the 6,000-square-meter (65,000-square-foot) unit serves a large number of contractor customers. As a result, it features products and services -- such as tool rental and an outside selling area for bulk building materials -- geared to their needs.

Now that Sodimac Corona has a beginning stable of stores open, Zawadzki says the company needs to concentrate on becoming more efficient, rationalizing its turnover and refining its merchandise mix.

AT A GLANCE

Company: Sodimac Corona

Headquarters: Bogota, Colombia

Stores: four

Skus: 26,008 registered; 20,000 active