TIM during the pandemic. Krzysztof Folta: “We are facing an opportunity we have never had before”
– For entrepreneurs, the most important now are the safety and the possibility to reach customers. We allow these two goals to be achieved. This is why I believe in the coming months we will dynamically be increasing the number of customers, distributors and the assortment in our store – says Krzysztof Folta, the President of TIM SA. – Throughout its entire history, TIM has come out stronger from every recession – he reminds.
During the last teleconference on the results, in response to a question about the forecasts you took a glass ball in your hand…
– (laughing) Today it’s a very helpful tool.
However, just over a year ago you stated that at the end of 2019 the economic growth in Poland would start to slow down. You weren’t wrong.
– Only back then nobody predicted the strike of the coronavirus pandemic, the lockdown of several billion people around the world and finally the oil prices down to the levels below zero The year 2019 is already prehistory and the first quarter of 2020 is history.
And is there anything that can be predicted?
– As of the third quarter the construction industry may be facing rapid braking. As for now, companies are still implementing contracts planned for the first six months of the year. They are not signing new ones as they are waiting for the situation to develop. Everyone is hoping more public investments are to emerge which, during the slowdown, normally save the economy.
Are you worried about this blow striking the construction industry?
– I am not saying that as a company we are a “green island” but for the last five years we have been intensively implementing the plan of becoming independent of the economic situation in the construction industry. During that time we have built a strong position in the e-commerce and logistics industry – our warehouse managed by 3LP operates, among others, for such entities as Oponeo.pl or Ikea. We avail of all the necessary tools to invite distributors from a number of industries who would like to sell their products in our store to cooperation.
Opening the TIM sales platform to companies which have not, so far, been selling their products online is an idea that you have just implemented. What are the first effects?
– Interest in cooperation with us is really big. Companies have been given an option to put their products into the TIM.pl store – they are determining prices, preparing product descriptions, etc. Later, they realise the deliveries themselves. This is how we expand the range of offer in the store without having to involve capital or increase logistics costs.
So, current pandemic situation may as well turn out to be conducive to TIM’s development
– For entrepreneurs, the most important are now the safety and the possibility to reach customers. We allow these two goals to be achieved. That is why I believe in the coming months we will dynamically be increasing the number of customers, distributors and the assortment in our store – says Krzysztof Folta, the President of TIM SA.
What would happen if five years ago TIM had not decided to enter into e-commerce?
– We would now be fighting to survive trying to stop sales declines. This can be observed by comparing TIM to the rest of the entities affiliated to the Association of Employers of Electrical Devices Distribution (SHE). At the end of March 2020 – counting cumulatively from the beginning of 2019 – the sales at TIM were 8.2% y/y higher, whereas the others saw an average drop by 0.2% y/y. I assume this dissonance will increase.
I understand that despite the coming recession in the economy, you are going to maintain the plan for the TIM Group to achieve the annual revenues at the level of PLN 1 billion by the end of 2021 against PLN 890 million in 2019
Is TIM, in this situation, going to benefit from the proposals contained in the government’s “anti-crisis shield”?
– I would rather not test the conditions in which we will be starting to meet the eligibility criteria for the support. We’ve had a record year. We have more than met the analysts’ forecasts. In addition, throughout its entire history, TIM has come out stronger from every recession.
How many economic recessions has TIM already been through?
– This one will be the fourth. My worst recollection is the collapse in the construction industry in 2001 when TIM virtually found itself on the verge of bankruptcy. I have the feeling that the employees who had survived that difficult time with me, approached the later change of the business model to e-commerce full of faith and are now also undisturbed.
What do recessions teach?
– First of all, that in an organization there must be one decision-making centre which in a simple and clear manner shows the direction we are heading. This requires permanent communication with employees.
During the last video conference on the results you thanked them several times for their commitment.
– Because I know perfectly well that it is a very difficult time for everyone. We have quickly switched to working from home but most people have to look after their children at the same time and we are simply all afraid of our health. Practically every day I’m having teleconferences with employees.
I want everyone to feel we are a strong team which is additionally able to, for example, be engaged in local volunteer campaigns as part of our corporate social responsibility project “TIM pro”.
Not everyone, however, could switch to the remote working mode. The 3LP warehouse must work full steam.
– It’s true. There, we have provided employees with unlimited access to personal protective equipment: disinfectants, visor shields, gloves. They abound in them. Additionally, we have changed the system of work in order to allow people to keep safe distance and, for example, introduced more breakfast breaks.
Is the risk of employee getting infected currently the TIM’s weakest point?
– This is why we are doing everything to minimize this risk.
And the risk of breaking the supply chains?
– We already started to increase our stocks at the time when it commonly seemed the coronavirus would not cause such havoc in the European economy. We are ready to ensure continuity of deliveries to customers even if the pandemic period is prolonged
You seem very calm.
– Because I know our business model is working. I like the saying when a typhoon is approaching, some put up walls and others – sails. TIM does the latter. What’s more, something tells me we’ll catch the wind in our sails.
Recently, also the Warren Buffett’s words saying that it is only when the tide goes out that you learn who has been swimming naked.
– There’s much truth in them. But let’s be honest – the recession will drag along a lot of dramas. Companies that got financed with high indebtedness and operate in the sectors most severely affected by the pandemic will suffer. Others are in total panic. They don’t know what to do. Fortunately, this problem is non-existent for us. We also have a clear message for potential new partners: you are welcome to visit us We are a strong and reliable e-commerce industry entity. It is worth working with us.
So far the exchange rates of TIM on the Stock Exchange has protected itself against apparent declines. Meanwhile, market participants in recent months may have been wondering if you were looking for a partner investor?
– The review of strategic options has been completed. We are implementing our strategy without changes. TIM has four basic stakeholder groups: shareholders, employees, suppliers, customers. My role as the president is to make each group satisfied in the long run. Shareholders have already received a dividend for 2019, employers have the best possible working and remuneration conditions created Suppliers are invited to develop together with TIM and customers thanks to our business model can take care of safety by way of implementing the slogan #stayhome.
Currently, TIM is implementing approximately 70% of the sales via the Internet. Is this indicator to grow yet?
– I’m satisfied with this level. We operate in a hybrid model (Internet plus traditional sales). This allows us to handle thousands of orders per day while maintaining the possibility for a real contact with people We want to focus on acquiring new customers and constant building of the business that will be resistant to crises.
Still, TIM is constantly perceived through the prism of the industry (electrotechnical materials wholesaler) rather than the business model (e-commerce).
– Indeed, analysts have labelled us in the construction industry, not even noticing the potential of the company 3LP. However, this does not change the fact that looking through the prism of our business model, we are facing an opportunity we have never had before. If we take it, we will come out of the recession very strong.