PAUL STEFFENSEN and ANDREAS MIKKELSON : Matching Wares, Market : Georg Jensen Is Different Things to Different People
One of the newest gilt-edged names to arrive on the Orange County retail scene is Georg Jensen, a Danish manufacturer and retailer of decorative arts items. The Georg Jensen store at South Coast Plaza--its only one on the West Coast--is in the company of such flashy international retailers as Louis Vuitton, Gucci and Ralph Lauren.
Georg Jensen is part of Scandinavia’s largest decorative arts company, the Royal Copenhagen Group, the entity created in the mid-1980s with the merger of four Danish companies--Royal Copenhagen Porcelain, Holmegaard Glassworks, Bing & Grondahl Porcelain and Georg Jensen Silversmiths. The Costa Mesa store, which opened last month, carries merchandise from all companies in the group. By far, the most opulent item is the store’s elaborate Flora Danica table setting. The hand-painted, hand-molded china was originally created for Empress Catherine of Russia and retails at $2,500 for a five-piece place setting. (Christmas shoppers take note: Delivery time is one to two years for a complete set.)
Two Royal Copenhagen executives talked with Times staff writer Mary Ann Galante on a recent visit to Orange County. Paul B. Steffensen, 57, is president of Royal Copenhagen Inc., the American subsidiary based in White Plains, N.Y.; Andreas Mikkelson is design director for Royal Copenhagen in Denmark. They discussed why Georg Jensen chose Orange County, the differences between American and European consumers, and the problems encountered by a Danish manufacturer in opening retail outlets abroad.
Q. Why did you choose Orange County--rather than Rodeo Drive or San Francisco--for your first California location?
A. Steffensen: Our research showed that the people in Southern California--and in Orange County--seemed to be precisely our customers. The actual site is very important. Location is the key. At South Coast Plaza, the proximity to Tiffany & Co. and Nordstrom was an important factor in choosing this location.
Q. What do you anticipate for sales per square foot at the Costa Mesa store?
A. Steffensen: The sales target for the first year is $780 per square foot. We have a 20% increase scheduled by the second year. The third year is projected at 30% over the first year.
Q. Where is the merchandise manufactured?
A. Mikkelson: Only in Copenhagen.
Q. How much of the market do you anticipate will be in the United States?
A. Steffensen: Hopefully, about 12% within two years. Right now, it’s about 8%.
Q. Where is the merchandise sold now?
A. Steffensen: Denmark, of course, but all over the world, really. Japan is one of our bigger markets, for silver. So is England--we have had a store in London since 1912.
Q. How long ago did the company enter the U.S. market.
A. Steffensen: Copenhagen and Georg Jensen have been in America since 1923, which was when the first retail store came to New York--that was Georg Jensen.
Since then, development has been rather slow because we are not retailers that are going to have 5,000 stores. We don’t want or need that. It was not until this May that we opened up a second Georg Jensen store, which is in Chicago.
Q. You’re a comparative latecomer to the U.S. market. Why was the decision made to open the Chicago store?
A. Steffensen: The decision to open our own stores really came about three years ago when the companies Royal Copenhagen and Bing & Grondahl were merged into one. (Editor’s note: Denmark’s two major industrial art companies--Royal Copenhagen and Bing & Grondahl--merged in 1986.) We got new management. Then (the decision was made) to take a look at the world market and establish Georg Jensen stores in the major trading areas.
But we’re not going to have 500 Georg Jensen stores, for example, in America. The objective is to be represented, say, with the store at South Coast Plaza. We also, of course, will have a store in Beverly Hills--possibly within the next six to eight months, and maybe another one in San Francisco. That could well be all the stores in California for a while.
We do not want to have a store in each corner, because Georg Jensen is not just for everybody. Our distribution is going to be selective.
Q. How many stores do you envision in the United States within five years.
A. Steffensen: Twelve stores. Maybe only two in New York. Then Washington, Boston, maybe Atlanta and Minneapolis. It’s not the objective to take business away from established retailers. It’s more a question of supporting them. Wherever we open up a store, we have found that business in general has increased.
Q. How much do sales typically go up?
A. Steffensen: It’s difficult to say, but you can often double in an area over a three-year period.
Q. When you do open your own stores, will other retailers still carry the merchandise?
A. Steffensen: Hopefully.
Q. Will the price still be the same?
A. Steffensen: We have a suggested retail price, and we will always stick with that. A far as we’re concerned, there will be no discounting.
Q. How did the valuation of the dollar affect the decision to enter the U.S. market? Was that a factor?
A. Steffensen: No, because we looked at this as a long-range project. If the dollar is high in America, it may be lower in Japan or Germany because we an international company. So we can’t necessarily say that because the dollar’s so high, we don’t want to do it now.
Q. Would fluctuations in the dollar affect prices on the retail level?
A. Steffensen: It might, although usually we don’t change our prices daily. We usually change them only once a year. And therefore it could affect us negatively for a period of time. But then again, it hopefully will even out.
Q. Might having more retail stores in America cause you to change the prices more often--perhaps quarterly?
A. Steffensen: Possibly, but doubtful. We don’t think there’s a need for it. It’s very expensive to change prices.
Q. Are most of your customers women?
A. Steffensen: Yes. In Costa Mesa, we think they are going to be aged 35 to about 50.
Q. Is there a need to differentiate how you will try to make the product appeal to the American market, as opposed to the European consumer.
A. Steffensen: We don’t know for sure. But we think that our international Georg Jensen clientele will appreciate the same way of presenting the merchandise, whether they live in Southern California or in New York. There might be a slight difference in products in the different markets. There are indications that a typical Jensen customer in this area will be slightly different from in Beverly Hills. We believe that this customer is probably slightly younger.
That means we would put a little more emphasis on contemporary pieces here, for example, than the very traditional pieces. In flatware, for instance, the more modern and less ornate pieces will do better here.
Q. What do you think will sell best in the South Coast Plaza store, compared with the New York store.
A. Steffensen: I think jewelry will do well here because it has not really been exposed here before.
Q. Is there a difference between merchandise in the United States and in the European market?
A. Steffensen: Absolutely. In porcelain, for example, we make four dinner plate sizes. The dinner plate in America tends to be larger because of the way we eat the steak, for instance. In Europe, where they usually have smaller portions, you make the plate smaller so that the meat doesn’t look too small. In America, you buy five-piece plate settings. In Europe they don’t know what it is.
You try to adapt a product to the marketplace.
In Italy, naturally, they want more demitasse than here. Therefore, in one pattern alone, we have two different sizes and shapes of small demitasse cups. Our sale of coffee pots is not as strong here as it is in Europe. Soup tureens are very strong here.
Q. In which countries do you sell best?
A. Steffensen: Sweden, Germany, Italy, and Denmark of course.
Q. What effect would a weak dollar have on operating expenses.
A. Steffensen: Since we’re operating in America, very little effect because we pay our bills in dollars in America. So the daily operation of a weak or strong dollar really has no impact. But a strong dollar does help us buy products at a lower price.
When the American operation buys a product in Denmark--and the dollar is strong--then, of course, you pay less for it because the Danish krone and the dollar are not necessarily fluctuating the same way. If it’s the other way around, and the dollar is down, then of course, you’re going to pay more for it from the manufacturer.
We have no control over the fluctuation of the dollar. But usually when we start a year, we estimate the value of the dollar. And then we set our prices based on that. Sometimes we win, sometimes we lose.
Q. You hear about people flying to Europe, for example, to buy a Burberry’s coat. Might it be worth it, after a certain level, to go to Europe to buy your merchandise?
A. Steffensen: Yes, absolutely. The reason is this: it costs money to bring the product to America and to pay duty on it. Therefore, you can figure on an average that a product in Europe costs 20% less than it is here, maybe more sometimes. If you’re going to spend $20,000 and a trip costs you $3,000, you’re saving $1,000.
Q. Is there a prestige associated with a European name that gives you an advantage over American competitors?
A. Steffensen: I don’t believe that because the Americans have a very good reputation, too. A company like Tiffany is very appreciated in Europe. They have shops in Germany, in Zurich. We are certainly competitors, but we are also adding to each other.
Q. Who are your main competitors in the United States among the domestic manufacturers?
A. Steffensen: Lenox,of course. It depends whether we’re talking crystal or flatware or porcelain. Tiffany is also a competitor in silver jewelry. I would include Lunt.
Q. There has been discussion of a single currency in the European community. How might that affect the company’s operations?
A. Steffensen: I think it would be to our advantage--in Europe and also internationally. I would prefer it, quite honestly, if we were buying in dollars--or a similar currency--and manufacturing in dollars. If we were all earning and spending the same currency, that would eliminate those large fluctuations.
A. Mikkelson: We wouldn’t need to fear exchange rates any longer.
Q. Would it affect sales?
A. Steffensen: I think so. Surely it would impact on profits because it would be easier to plan.
Mikkelson: You could control it. Now we can’t control it because you have no influence on the exchange rate.
Q. How much more competitive has it become here, say, in the past five years.
A. Steffensen: The competition increases substantially every day. I think people expect better products. The consumer is better educated. And if we do not live up to that expectation, we’ll fall behind. America is probably the most competitive marketplace in the world today--more so than Europe.
Q. Is the competition coming from domestic manufacturers and retailers or from those in Europe?
A. Steffensen: The American manufacturers have come a long way, in developing quality products and techniques that compete favorably with the Europeans. Lenox, for example, in the porcelain industry. You have lots of silver manufacturers--there is Wallace and Oneida. They make very good products. But it seems like the respect for silver has deteriorated to some extent because of the (discounting) price policies (those manufacturers) have been following. They discount. At Jensen, we have decided we would rather have an average everyday price.
Q. That would make it difficult to compete.
A. Steffensen: To some extent it does.
Q. Are American consumers less or more demanding than their European counterparts?
A. Steffensen: They are becoming more demanding. The knowledge level and the sophistication level has increased. The public travels more. The standard of living has increased. I think all these factors have impacted what they expect from us.
Q. Is there a difference in management techniques, between European companies and domestic firms?
A. Steffensen: I think there is. For example, the Europeans tend to take a longer view on profitability, for example. It seems like we plan five or 10 years out, whereas in this country, it’s more immediate--you must be profitable right away. Shareholders constantly put pressure on management here--they want return on investment. And they want it now. In Denmark, we usually can afford to take a longer view.
Q. What difficulties are there in expanding into the U.S. marketplace?
A. Steffensen: The problem we face is getting trained craftsmen in Denmark to produce what we need. Right now, we are trying to hire silversmiths in Norway, Sweden or Germany, and then move them to Denmark.
Q. What other difficulties are there in expanding into the American market?
A. Steffensen: Naturally, you have the financial risk every time you expand into a new territory. But this is a normal business operation. We do not see any real difficulties in expanding.
Q. Do you see a trend of more European manufacturers opening up retail stores in America?
A. Steffensen: Yes. For example, Chanel and Gucci have been successful. Louis Vuitton has made an inroad here. You see people like Wedgewood opening up stores in America. They do it because the specialty retailers are not nearly as prevalent as they were 10 years ago. There are a few stores left in Los Angeles, for example, such as Geary’s , which is a very good specialty store. But there are not many like Geary’s.
Therefore, some manufacturers are forced to go in and do it themselves.
Q. How much of a problem are imitations of your product?
A. Steffensen: It’s not a serious problem. We have, for example, encountered quite a few copies in our watch line. But the quality and the price brackets are different--they sell them for $25 and our watches are $700, for example. So it is more a nuisance than an economic problem.
