EQ3 banks on reputation for Canadian quality

Determined to bring modern design to Canadian homes, Peter Tielmann has guided furniture retailer EQ3 since it was launched in Winnipeg in 2001. Born in Germany and armed with a degree in architecture from the University of Cologne and another in business economics, the 42-year-old has, in almost a decade at the helm, expanded the business to 12 stores across North America, and others worldwide, as far afield as Bahrain. EQ3 products are also sold in more than 50 “gallery” type locations in Hudson’s Bay Co. stores and elsewhere.

Photo: The Globe and Mail

Under Tielmann’s watch, the company, described by the Miami Herald as lying somewhere between IKEA and the higher-priced Conran/Habitat stores, has created a niche by playing the patriotism card. It has built its reputation on being made in Canada, from its $699 sofas upholstered in 100 different fabrics and leathers to its $174 small-space wood coffee tables with hidden storage.

The name EQ3? It stands for Emotional Quotient Cubed. “The cube represents the home,” he says.

Why did you start expanding EQ3 outside Canada?

EQ3 was introduced in 2001 to the U.S. and Canadian markets simultaneously. We saw an underserved market opportunity in our particular style and price range. We used the largest North American furniture exhibition – the International Home Furnishings Show in High Point, N.C.—as the vehicle to launch the product line with immediate acceptance of retailers on both sides of the border. Later, we established licensed stores and galleries in countries beyond the United States, which include Mexico, as well as multiple countries in the Caribbean, South America, Asia and the Middle East.

How do you handle distribution?

In Canada, distribution is handled primarily via retail stores and via galleries on retail floors of some strategic retail partners, for instance the Hudson’s Bay Company. With the exception of one store in San Francisco, the U.S. distribution model outside Canada is handled primarily through a wholesale relationship with retail partners or through franchised and licensed EQ3 stores.

Tell us about some of the challenges associated with international expansion.

Franchising or licensing arrangements in other countries are particularly challenging. It starts with registering the name in all those countries one thinks one ever will go into. This is to prevent someone else registering the name, which can be trouble.

Last year, we started negotiations with a potential franchise partner in China. Once in China, however, we found out that someone had copied our entire concept along with our name and even some of the products. They had opened six stores in southern China under our flag. Fortunately, we had registered our name in China just a year prior. Our lawyers were able to work with local Chinese lawyers and close the copied stores.

With EQ3 now around the world, do you travel much?

I travel more than 50% of my time to both countries where we manufacture and where we market. Although we try to manufacture as much as possible in Canada—over 50% of everything we sell is, in fact, made in Canada in our own factories—there are many products we cannot produce in Canada. And so we now have our own factory in Indonesia and partner with factories in China, Vietnam, Thailand, Indonesia, India and Portugal.

Our markets outside Canada are the U.S., Mexico, multiple countries in central and South America, Asia and the Middle East. My team and I travel to all these places, attending shows and meeting with designers in multiple European countries including Germany, Sweden and Italy.

Do you partner with local designers and distributors?

We have designers on staff and partner with freelance designers from Europe, the U.S., Canada and Asia. Our distribution is handled through our own stores, both franchised and licensed locations, as well as through wholesale to retail partners in countries mentioned above.

Does a strong Canadian dollar hurt or hinder?

The strong Canadian dollar was a big problem for us when the currency shifted some years ago. Now however we have adjusted.

How do you handle local hiring?

At the higher management level, we work with search firms to find new employees. We then have those managers follow our internally developed strategic hiring/training programs to acquire and develop appropriate hires.

What advice do you have for other companies wanting to expand outside Canada?

Don’t get carried away with initial success—the follow-through and the perseverance over time is critical. We achieved immediate acceptance at the very first showing of EQ3 during the furniture show in the U.S. But we never took that for granted. We built the company slowly over time. Taking it slow ensures the foundation of any business is profitable.

This interview has been edited and condensed