4, boulevard Rochechouart
A Parisian legend, Tati SA is on its way to becoming a worldwide name. Since the mid-1990s the operator of 14 discount retail stores in France--including its flagship store on the boulevard Rochechouart in Paris--has engaged in an ambitious international expansion, bringing the Tati name to countries including South Africa, Lebanon, Germany, Switzerland, and Israel. The opening of a Tati store on New York's Fifth Avenue in April 1998 marked the company's first entry into the United States. Tati also plans to enter Turkey, Cameroon, the Ivory Coast, and Poland, among other markets, before the turn of the century. In addition to the clothing-oriented Tati stores, the company has begun developing a network of smaller Tati Or stores, bringing its discount concept to the jewelry shopper. While Tati's expansion within France is entirely funded by the company's own resources, its international stores are operated, typically, in local partnerships or as franchises.
Tati is credited with inventing the discount shopping concept, at least in France. Under the slogan "Les Plus Bas Prix" (the lowest prices), the company has long served the clothing and accessories needs of the economically disadvantaged. Yet, especially since the extended recession of the 1990s, the company has attracted a loyal clientele among all seeking the company's wide assortment of low-priced clothing and other items, ranging from stockings for less than FFr 2 (less than US $ .50) per piece to jeans for FFr 39 (US $7) to men's suits for less than $100 and wedding gowns ranging from FFr 390 to FFr 2,000 (US $60 to $400). Although Tati continues to fill its bins with remaindered and discontinued items, since the rising importance of "just-in-time" manufacturing among the French and world garment industries, the company also has turned more directly to manufacturers for the company's own line of clothing and accessories. The Tati Or represents an expansion of the discount concept to the jewelry shopper; the company also has plans to expand into eyewear, handbags, and other items. A disposable camera, packaged in Tati's trademark Vichy pink, white, and blue, was introduced in 1997. The company's margins on its sales range, typically, between two and seven percent--down from nearly 20 percent before the 1990s.
Plans to bring Tati public have been pushed back to the turn of the century after crossing a difficult period in the mid-1990s. Yet the company has long prided itself on funding its domestic expansion entirely from its own resources, although the opening of its international branches usually take the form of either partnerships or franchise agreements with local businesses. Tati remains under control of the founding Ouaki family, with Fabien Ouaki, the founder's son, personally controlling some 30 percent of the company. Leadership of the company is directed by President Eléonore Ouaki, widow of the founder, and by Fabien Ouaki.
Tunisien Origins in the 1940s
Jules Ouaki had been a saddle maker in his native Tunis--his passion for horses later would establish a family tradition of raising and racing thoroughbred horses--who traveled yearly to France to purchase leftover leather stock from shoemakers around the Montpellier region on the Mediterranean coast. Ouaki's career was interrupted during the Second World War, when Ouaki joined the Free French Forces led by Charles de Gaulle. The end of the war left Ouaki with the necessity of feeding his family of eight brothers and sisters, leading to a decision to emigrate to France.
Installed in Paris, Ouaki formed a partnership with another merchant, opening a small grocery-general merchandise shop on the boulevard Rochechouart in Paris's ninth arrondissement. The partners opened a second store, further south in Paris, on the avenue du General Leclerc, in the 14th arrondissement. The partnership quickly ruptured, however. Ouaki sought to expand the Rochechouart store, while his partner preferred to remain in the General Leclerc store. Dissolving the partnership, Ouaki kept the Rochechouart store; some 50 years later the Ouaki family would regain the original 14th arrondissement store with the opening of a new Tati Or branch. Ouaki originally chose his mother's name, Tita, for his store. By the time he discovered that that name had already been taken, he had already had the store's sign made up. Instead, Ouaki switched the letters to form the new name, Tati.
Ouaki had not forgotten his Tunisien origins. Equally inspired by Paris's Saint Pierre flea market, Ouaki's store would capture much of the flair of the Arab world souk, or marketplace, appealing to the quarter's large and generally poor immigrant population. Ouaki would become credited with bringing the discount concept to France, scouring the city's garment district for unsold and cut out items to support his slogan: "Les Plus Bas Prix." Ouaki soon introduced other innovative selling techniques. For one, he was among the first to introduce mannequins to display the store's clothing items, using the store's display windows to attract customers. A more important innovation was the introduction of bins to hold the various items, set out directly on the selling floor--at a time when the retail industry had not yet discovered the self-service concept. The bins encouraged Tati customers to inspect the products themselves. Another important innovation was Ouaki's policy of displaying prices of the items in each bin. As Fabien Ouaki would tell Elle magazine, Jules Ouaki "pulverized the three commercial barriers: the display window, the salesperson, and the consumer, especially since the latter's budget was modest. My father was sensitive to the shame of the poor, who didn't dare ask for a price for fear of being humiliated." Tati's insistence on low prices would enable generations to clothe the entire family.
Ouaki's formula was a success; before long Tati began stretching farther along the block, as Ouaki bought up the neighboring stores and small hotels. Funds for the company's expansion came only from its own resources, to the point where Tati was able to avoid any debt throughout its continuing history. The expanded selling space enabled Ouaki to develop separate men's, women's, and children's departments in each new storefront. Tati's expansion would bring much of the Ouaki family into the company, with each new employee required to spend time working on the sales floor before earning a promotion. In later years that tradition would continue, with as much as 85 percent of the company's executive and purchasing staff coming from its retail floor. The famed Tati color scheme--a Vichy pink and white checkerboard with blue lettering--also made its appearance. The store's location also proved strategic; located near the Barbès-Rochechouart metro station, as the metro emerged from the subway into its elevated extension, the Tati sign was one of the first things passengers would see. In terms of marketing, however, Ouaki long would avoid any type of direct advertising techniques. Meanwhile, the company's purchasing activities remained a matter of instinct and experience gained by the company's closeness to its customers.
As such, many of Tati's items would become store mainstays that remained unchanged from the 1950s. For example, in the late 1990s the company continued to sell as many as five million pairs of stockings each year, at a price of FFr 2.90 per pair. The company also became a popular source for wedding gowns, which would maintain sales in the tens of thousands each year and give the company some 11 percent of that market. Tati's flair for purchasing enabled the company to offer low prices, without sacrificing too much on quality, while maintaining margins as high as 20 percent. The prospering Ouaki soon returned to his passion for the horses, raising thoroughbreds, with the jockeys' uniforms bearing Tati's trademark color pattern.
Changing the Guard in the 1990s
Jules Ouaki died in 1982, leaving his company divided equally among his six children and designating oldest son Gregory as his successor. Gregory Ouaki died, however, the following year, launching the family--including uncles and cousins--on an internal power struggle that would last into the following decade. In the meantime, Ouaki's widow, Eléonore, took over the company's leadership, maintaining the successful formula established by her husband. By the end of the 1980s Tati's revenues were nearing FFr 2 billion per year. By then the Tati empire was growing beyond Paris. With new stores opening in other Paris neighborhoods, the company began extending throughout France, with stores in Lille, Lyon, Nancy, Rouen, Nice, Montpellier, and Le Havre. Each store would maintain the Tati formula of locating in the urban center--at a time when the hypermarket boom was taking over the suburban districts.
The pressure to find a successor continued to mount, as did the bitterness within the family. In 1992 the family regrouped its interests into a holding company, Cofitel SA, controlling Textile Diffusion, which in turn operated the Tati stores. At the same time Eléonore Ouaki designated son Fabien Ouaki as successor to the company's leadership. Known as the family's "black sheep," Fabien Ouaki had been all but disinherited by his father, after leaving the family business at the age of 17 for a stint in England, a career in radio and as a drummer for a rock band, then converting from Judaism to Buddhism. Yet Fabien Ouaki would prove very much his father's son, with a strong feeling for the Tati culture--and for his father's passion for thoroughbred racing.
Throughout the 1990s Fabien Ouaki would gain control of the family company, increasing his holding to some 60 percent, including the parts ceded to him by his mother. The opening of new Tati stores and warehouses throughout France created new positions for the other members of the family, so that by the mid-1990s the company's leadership was firmly grouped under Fabien and Eléonore Ouaki. The changing economy, with a recession that would become an extended economic crisis in France through the middle of the decade, brought new opportunities to the company. Whereas its traditional customer base had been the urban poor, Tati now found new customers among higher-income populations pressured by the recession. Tati soon developed a certain fashionableness not only among Parisian youth, but among members of the jet set as well, even attracting designers such as Azzedine Alaïa to create fashions for the Tati stores.
By the beginning of the 1990s Tati's success led to a new problem--that of supplying its stores. With its sales booming, the company could no longer depend solely on cutouts and seasonal leftovers to fill its bins. At the same time Tati's traditional suppliers, chiefly the small manufacturers in the Parisian garment district, themselves pinched by the recession and growing competition from foreign manufacturers, had begun to adopt "just-in-time" manufacturing methods. Tati's supply of remainders, therefore, dwindled. In response, Tati was forced to begin developing its supply of made-to-order products, ordering directly from manufacturers, chiefly in the lower wage areas of the Far East and Northern Africa. Maintaining its commitment to its discount pricing policy, Tati was forced to cut its margins, which slipped to some seven percent and as low as three percent on some items.
Fabien Ouaki looked toward diversification for fuel for the company's continued growth. Yet these efforts proved more limited in their success. The company launched its own line of ready-to-wear clothing, "La Rue Est à Nous" (the street is ours), in the early 1990s and began opening a series of in-store boutiques in the Nouvelles Galeries department stores. By the mid-1990s disappointing sales forced the company to close these boutiques and consign its label to its own Tati stores. Equally unsuccessful was the launch of a perfume in 1994. On the bright side, however, the company's Tati Or stores, bringing the discount concept to jewelry, turned out to be more of a success. From the mid-1990s the company would begin developing the Tati Or concept into a national chain of retail stores and counters for such venues as airports.
The continued recession--and Tati's success--would give rise to a growing number of competitors on Tati's discount terrain. At the same time, with its margins slimmed, Tati was required to generate larger sales to generate the necessary economies of scale. But in the mid-1990s Tati was undergoing a crisis of its own. The outbreak of a veritable civil war in Algeria cut severely into Tati's Arab customers' confidence; that conflict would spill over into Paris, in the form of a series of terrorist bombings that traumatized the city. Then, in 1995, a train workers strike paralyzed the city's rapid transit system. For Tati, the period represented a dramatic loss in sales and profits; for the 1995/1996 period Tati would post the first loss in its history, of some FFr 35 million on sales that had dipped to FFr 1.4 billion. The company, which had expected to go public in the mid-1990s, was forced to push back its entry on the Paris stock exchange to the turn of the century.
In the meantime, Tati began developing a new direction for its expansion. With the domestic market increasingly crowded by competition and offering limited opportunities for new store openings, Tati began looking overseas. The first foreign Tati opened in early 1996 in South Africa's Cape Town, in a 50/50 partnership with that country's Pep, which owned some 1,000 retail stores throughout the country. That opening, however, was to be only the first of many. Tati unveiled an ambitious international expansion plan, with stores to open in Geneva and Beirut (marking the first foreign company to open a retail store in that city since the Lebanese civil war), as well as several stores in Israel and plans to enter Spain, Portugal, Australia, New Zealand, and others. Unlike the South African venture, however, the majority of new Tati stores would be operated as a franchise concept, with Tati providing the signage, store design and concepts, and products and a local partner providing the capital.
The company opened a Tati store in the Karnstadt area of Berlin, Germany in early 1997, testing that country's market for the eventual extension of the Tati concept throughout Germany. Tati stores opened as well in the Ivory Coast and Cameroon, and the company was engaged actively in negotiating new store openings in Turkey, Senegal, Gabon, Poland, and Estonia. In April 1998 Tati took its first step into the vast United States market, opening Tati Marriage on New York's Fifth Avenue. Representing an investment of some US $1 million, Tati would maintain an 85 percent share of the New York store, with a local partner holding the remaining 15 percent. The company expected to expand deeper into the United States should the New York launch prove successful, with an initial eye on the Miami market. By 1998 roughly ten percent of the company's revenues was generated outside of France.
Tati expected international sales to reach some 50 percent of yearly revenues by the turn of the century. In the meantime, the French economy's return to health in the late 1990s led to a new upswing in Tati's sales and profits. Whereas Jules Ouaki once dreamed of owning the entire block of the boulevard Rochechouart, son Fabien Ouaki now began to dream of expanding the Tati colors throughout the world.
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