Global dealer: USA

Doing more with less

The recent successes of California’s Express Office Products despite highly unfavourable local market conditions highlight the ability of small businesses to adapt quickly. OPI spoke to owner and President Jerry Bircher.

California’s economy slumped during the global economic crisis of 2008 and 2009 and still faces many challenges today – unemployment of around 12% and a $10 billion budget deficit to name just two.

Like most other businesses in the state, Express Office Products was hit hard. However,

2010 was a stellar year for the 28-year-old firm, with 30% top-line growth and pre-tax net income soaring 65%. Seven months into 2011, owner Jerry Bircher says that the dealership is on track to achieve sales growth in excess of 15% again this year.

The interesting thing is that this rapid sales growth has been achieved without increasing staff levels.

“We’ve learned to do more with fewer people,” states Bircher, who adds that he was forced to lay off staff in 2008 as sales slumped by 20%.

Express is not alone in improving its productivity, and this trend for individual businesses is one reason why unemployment has remained such a problem; in fact, in the Sacramento area, where Express is based, unemployment – at 13% – is higher than the state average.

“Companies are more efficient now and this means that customers are consuming less per employee than they were before.”

With this drop in consumption, Bircher says that he embarked on a major account acquisition programme in 2009 to reverse the downward sales trend.

“Whether you like it or not, you’re always going to be losing accounts. If you’re not going after new accounts, you may as well be out of the game.”

Bircher pulled all his outside sales staff back in house and started a lead-generation and appointment-setting programme for companies with more than ten employees. Reps would only visit a customer if they had already set up an appointment.

The move paid immediate dividends; in 2009 Express was picking up an average of 38 new customers a month and sales increased by 12%. The trend continued in 2010 as almost 480 new customers were acquired.

“Those same accounts, plus the 220 or so that we’ve added so far this year, represent about $1.2 million in annual business,” he notes.

Wholesaler support

Bircher points to the support of the dealer’s first-call wholesaler SP Richards as a key factor in the new account acquisition success.

“When they saw what we were trying to do they asked how they could help. Their acquisition and retention tools and MyAnalyst information tool have helped tremendously. As a result we’re able to go back to customers and show them what their purchasing habits are. Category-wise we help them analyse their purchases, make suggestions about alternative products or even question why they’re using certain products at all.”

This consultative approach is nothing new for Bircher. Early on, Express introduced management usage reports so that customers could review what was being purchased monthly.

“These reports end with ‘Reviewed by …’ so that someone is accountable for the purchases. I believe that people do what they’re inspected to do, not what they’re expected to do, and a simple thing like these reports actually does reduce consumption. And customers are happy when they can see that you are saving them money.”

Despite adding more than 1,000 new accounts in the last two years, Bircher says that Express has been careful about not taking risks with bad debt.

“We do our homework on a new customer to ensure that they are in a stable financial situation,” he states, adding that the Hoovers business information resource provided through SP Richards has been especially useful.

Small business base

The key customer base of Express is, and always has been, smaller accounts – 80% of business is done with companies that have ten or fewer employees. Bircher started the business in 1983 as a route sales operation with just himself and one truck, going door to door in the strip malls rather than the big industrial areas. The business plan was to do this for three years to build a base of small businesses before adding an outside sales rep to target bigger accounts. Things went according to plan and, after five years, Bircher abandoned the truck model altogether and moved to a reps-only model.

Bircher says that the goal has always been to keep the business to a manageable size. Today, there are still only nine employees, plus Bircher himself and his wife Gayle who handles the operational side of things and has played a key role in the development of Express’s public sector business, which accounts for around 30% of sales.

Express was an early adopter of TriMega’s Point Nationwide initiative and Bircher says he is now starting to see the benefits of the TCPN cooperative contract award.

“Many smaller public sector agencies such as schools have been forced to reduce their purchasing teams and just don’t have the resources to go out and bid contracts,” he notes. “That’s why it’s so important to be able to offer this kind of piggyback arrangement.”

Express is also enjoying success with the California state contract, awarded earlier this year to independent dealer NOSI. The 2,000-product core list on the contract is quite narrow and there is an ‘off-ramp’ option that allows small businesses to compete on the contract.

Bircher himself has been instrumental in helping the lot of small businesses in California. He is currently Chair of the California Small Business Association, an organisation he has been involved with since the problem of small business pass-throughs on the local state contract grabbed his attention about four years ago.

He is leading efforts to ensure that all small businesses – not just office suppliers – have better access to the $9 billion in business that the state’s Department of General Services awards each year. A bill that would make it procurement law for state departments to channel at least 25% of their business through small businesses is due for its final reading in the California State Legislature and Bircher is hopeful that it will be passed and captured into law this year.

Aiming for big box business

Most of the new business that Express is going after – and winning – is smaller accounts that previously used the big boxes, according to Bircher. He sees a “tremendous opportunity” as big boxes – with their large overheads and advertising expenditure – struggle with the tough economy, leading to a drop off in service levels and an increase in prices.

He believes that there is still a misconception amongst business customers that big boxes must be cheaper than local resellers.

“All of them want to make themselves appear to be the low price leader, but it simply isn’t true,” he argues. “There’s nothing we like more than walking into a business that is purchasing from a big box website.”

He cites an example of an Avery product with a list price of around $34 that is currently available at $42.99 on one of the big box websites.

“It’s very disappointing what is happening with the ‘smoke and mirrors’ pricing structure at the big boxes and the fact they don’t use list price on their sites anymore. We sell that product for $19.99, and something like that is a real eye-opener for customers.”

Bircher has kept pricing consistent by developing an eight-column matrix pricing structure based on a customer’s volume.

“When a customer’s spend goes up they move to a different pricing structure. I try to be fair about that.”

On a typical day over 60% of Express’ orders come via the internet. Interestingly, the company has been using the same proprietary back-office system since 1987. The Birchers both have a background in computing so have been able to update and maintain the system themselves.

“Eventually we’ll have to look at something, but so far we haven’t found anything that compares with the information and flexibility we have,” says Bircher. “I pay no maintenance fees and no computer fees. It would have to be a pretty good system for me to want to change.”

Any systems providers out there fancy a challenge?

Keywords: Express, Office, Products, California, dealer, supplies, item