José Ramón Alonso knows the furniture industry from the inside out – his family has been dedicated to this business for more than three decades. His grandfather began with the tradition, but it was his father, José María Alonso, who in 1989 founded the Arenteiro Muebles Group, aiming to offer its products and services to large chains and suppliers. Currently, its client portfolio is made up of Muebles Dico, Sears, Coppel, D’Europe, Elektra, and Liverpool.
In 2017, José Ramón Alonso decided to disrupt the whole family business, launching TuGow, an online store of ready-to-assemble furniture (RTA), a segment dominated in the international market by giants like IKEA, which opened its first store in Mexico on April 8, but with which Mexicans are still unfamiliar.
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The entrepreneur’s first step was to test the idea by offering the products of a French brand. The link to achieve this was his partner, Yannis Guillemet. Soon, José Ramón understood that the new business model particularly appealed to young people looking for practicality. E-commerce was also key to this new model.
In order to fully enter such a competitive industry, José Ramón combined his family experience with Guillemet’s knowledge in supplying. This made it easier for them to establish alliances with some of the most important factories in Europe regarding RTA furniture.
How TuGow works
The business model is simple: customers order items from TuGow’s online store; they receive everything at home and, following instructions, assemble the pieces themselves.
The characteristics that make this type of furniture unique are its ease of manufacture and low costs in the supply chain. Worldwide, the RTA segment is valued at $13 billion, according to Statista figures, and it is forecast to reach a value of $18.4 billion by 2025.
José Ramón Alonso recalls that when TuGow started, there was very little supply of furniture that would meet the needs of the new generations, “we sought to democratize design.”
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Currently, 70% of TuGow’s furniture is imported, but the entrepreneur assures that they also have a special interest in promoting the national industry and for this, they incorporated manufactured products with the Made in Mexico stamp through a factory that belongs to the family group. They bring most of their furniture from Europe because they are interested in staying at the forefront of design.
The response from customers has been extremely positive. According to Alonso, since its launch, TuGow has grown in triple digits every year. In addition, the company’s website registers 500,000 visits every month.
TuGow’s figures show the potential of a market that is still little explored and that, in order to grow, needs to break paradigms: 75% of Mexican consumers prefer to buy furniture and decorative objects in person, according to data from Zebras Technologies.
José Ramón also needed to break his own paradigms. “My grandfather and my father instilled in me the entrepreneurial culture, and I have been hungry to contribute and create more value to the family business. But, in the beginning, I was not familiar with the RTA segment or e-commerce. [What] I did know is that I wanted to leave my two cents in what they had built,” he shares.
How TuGow is competing with the e-commerce furniture giants
For the CEO of TuGow, the company’s biggest advantage is being born digital. This allowed it to be a pioneer in the RTA segment in Mexico when there were few competitors. The growth leap came, however, in the midst of the pandemic, when social isolation measures generated not only changes in terms of domestic spaces but also accelerated the adoption of new consumption habits.
Ángel Méndez, an expert in business and finance, says that this sector has experienced a boom in the last year due to the pandemic and the thousands of Mexicans who have been forced to work from home and turn dining rooms and bedrooms into offices. “The pandemic brought multiple changes to people’s lives, and companies like TuGow were among the few that managed to ride this wave of modernization. The biggest challenge will be to maintain this positive trend and continue to attract more customers in such a competitive market,” he adds.
For him, with the health crisis, e-commerce ceased to be an option to become a necessity. Entrepreneurs realized this; if they wanted to survive, they would have to migrate their businesses to the Internet. “Entrepreneurs understood that if they did not include e-commerce in their processes, they were destined to die. The process was much more complex for those who had not ventured into this sector, and that led them to make many mistakes, but the businesses that had already been digitized adapted very well or made adjustments in their logistics chain to meet the demand,” says Méndez.
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The Mexican Online Sales Association (AMVO) estimates that e-commerce reported an 81% growth in 2020, generating MXN 316 billion in sales, accounting for 9% of total retail sales in the country. By segment, the office furniture category grew 8% last year, according to the consultancy CBRE.
For José Ramón, another advantage of TuGow is the company’s shipping and delivery logistics scheme, dominated, in all stages, by the family group. In Mexico City and its surroundings, TuGow delivers parcels with its own fleet (recently, the company started delivering items in two days). Outside this region, orders are delivered by third-party carriers within 7 to 12 business days.
Currently, TuGow sells around 1,500 products a week and expects to double this number by the end of this year. “This crisis taught us that we must always be ready to reinvent ourselves. Our business model has the great advantage of adapting to trends, so we feel very solid, even though well-positioned competitors with very ambitious expectations are arriving in Mexico. We don’t just sell furniture; we bring solutions to our clients right at their doorstep.”
Translated by Fabiane Ziolla Menezes