Whose job is it anyway?

Dealer groups are dead, wholesalers are out of touch; do you agree? Felicity Francis plays devil's advocate in a debate focused on evolving roles, and addresses the UK industry in the first of two articles.


According to the head of a prominent UK reseller: “Dealer groups are an ugly wart on the side of wholesalers.” This opinion certainly lies far to one end of the debate surrounding the roles of dealer groups in the UK; groups are creaming off margin by offering services that aren’t necessary or that are offered elsewhere. 

At the other end of the argument is the equally strong opinion that dealer groups are of vital importance, using their independent support to mediate between dealers, wholesalers and manufacturers to allow products to flow through the supply chain.  

So who’s right? To an outsider, it’s becoming increasingly difficult to understand why there are so many layers in the office products supply chain. The diagram below illustrates one view of the channel, and just how many layers of ownership or control that a product can travel through to reach the end-user. And there is clear overlap between wholesaler and dealer group services. If a wholesaler offers services such as marketing – perhaps for free in return for loyal spend – are group benefits such as networking or independent mediation enough to please members? On the contrary, do wholesalers do a good enough job at supporting dealers to take away the need for groups?

The OP channel

The debate surrounding who should be doing which job in the OP supply chain was the focus of a panel discussion during OPI’s recent European Forum, and it isn’t new. In the UK the discussion can be heard in almost every organisation – the US industry, which is going through an equally thorny period, will be the focus of part two of this article in February’s OPI

“This topic grows in scale when margins are under pressure as many begin to question the value the groups offer within the distribution chain,” says Kim Gladstone, Head of Business Development at XPD, which owns three dealer groups. “Historically some trade organisations made a lot of money for doing very little. But all parties within the chain need to take stock and review what they do, the benefits enjoyed by the recipients, and why they do it.”

According to a recent poll on opi.net, 89% of readers believe we are seeing a major shift in the relationships between wholesalers, dealer groups, dealers and suppliers. The question that is becoming more pressing as the tough economy tightens its grip on business strategy: is there really enough margin left in the channel for all these players to operate profitably? 

The dealer group debate

The UK has a very high number of dealer groups. In contrast to the US industry where there are two main large groups, as well as more specialist groups such as Pinnacle, in the UK most people settle on nine as the figure. Do they really offer diverse enough services to each have a different attraction?

“Some dealer groups have a very unique offering,” says Alan Ball, CEO of Spicers UK & Ireland. “Various groups have certain nuances that add value in their own right. Although as margin tightens I’d question if some can survive going forward.”

In a recent Big Interview, Aidan McDonough, head of dealer group Integra, said that consolidation is necessary; perhaps 2013 will be the year that some UK groups join together. When asked if there are too many, Steve Harrop, CEO of Office Friendly, says: “It depends on what they’re offering and whether it’s a viable return on investment. In total, we’ve given cash returns of £6.5 million ($10.5 million) back to dealers, which has cost them £1.8 million. That’s a pretty good return on investment with some exciting sales and marketing programmes.”

Going back to the industry member who made the “warts” comment, he adds: “I don’t know why wholesalers don’t just buy dealer groups.” There’s been a rumour circulating that Spicers has become interested in acquiring one of the dealer groups, though Ball was quick to put this down to speculation: “What would the value of buying a buying group be? It’s not guaranteed turnover as dealers only have a yearly membership.”

Getting down to the question whether there should be any at all, among dealers that OPI spoke to there are murmurs of dissatisfaction with groups’ “scattergun” approach to working with all suppliers, rather than focusing on getting great deals with a few. There are reports of “dealer apathy” and a growing lack of interest in groups, and if wholesalers continue to increase their support offerings in order to win customers from each other some may stray from membership. A lot of what dealers value about their membership is networking, and if money’s tight that may become a nice-to-have rather than a necessity. It’s a mercenary world out there and loyalties are pretty thin. 

There are reports from vendors that more dealers want to establish their own relationships with manufacturers, though this would take more resource for everyone. Gordon Christiansen, CEO of Colway which owns London dealer RED BOX – not part of a group because it is “self-reliant on a lot of the value added services” – raises an interesting point: “I understand that most dealer group incomes accrue from manufacturer and wholesaler soft margins, a little bit out of sight, out of mind. I wonder what would happen if the soft margins were taken away and resellers paid a (much) larger fee?”

Strong support

The words “independent” and “intermediary” often spring up in support of dealer groups. “It’s a lonely world out there when you don’t know who to trust,” one dealer said to OPI when asked about how he values his group.

Robert Baldrey, CEO of Vasanta Group which owns wholesaler VOW, certainly believes groups are still as important as wholesalers: “Dealer groups are still big customers of wholesalers and offer services that we don’t. There are inevitably some services that we both do, but dealers still value their independent support and the networking that comes with it. To what extent they still have value as purchasing conglomerates I don’t know, as their real value comes from helping dealers to sell more, such as through marketing.”

When asked whether Spicers and VOW threaten their services through duplication, the answer from groups is a resounding “no”. “As a dealer group, XPD considers its relationship with its wholesale partners of critical importance, not as competition,” says David Langdown, Managing Director of XPD.

Mark Austen, CEO of dealer group Office Club, has a similar view. “The equilibrium of dealer groups, wholesalers and vendors in the UK has kept dealers’ market share higher than in almost any other developed country,” he says. “The raison d’être of a dealer group is different to that of a wholesaler, which exists to maximise its own profit. Dealer groups focus on vendors that bring profit to dealers. The better groups provide marketing material that uses a common theme for dealers, rather than, for example, an Avery leaflet that looks like an Avery leaflet.”

Going beyond marketing material, dealer groups provide varied services. For example, XPD, within its three dealer groups, has a top tier of elite members that receives one-to-one business consultancy support rather than marketing materials. Nectere, in contast, offers entire business management services aimed at small dealers, leaving the dealer to focus entirely on selling if they so wish. But offering these different levels of services doesn’t come easily, as Gladstone explains. 

“The biggest challenge for groups is offering the right level of customised service to their members who are developing at different speeds, looking to exit/acquire or diversify,” she says. “Groups therefore need to employ enough people and the right people who can take a consultative role on board to ensure we are truly effective and deliver returns.” 

Giving a final word in support of dealer groups, Simon Moate, CEO of office2office – whose Advantia/Truline model will be explored later – says: “I think the industry would be a sad place without them. Their role in the supply chain has got blurred and confused, but those that come forward and innovate are what the dealers need. Groups need to bring innovation to the table and help dealers sell more different things.”

The wholesaler debate

To open the conversation about what role wholesalers should play, Gladstone makes a good point: “The reseller channel has perhaps forgotten what the true definition of a wholesaler is.”

She continues: “How many or how much of the additional services or marketing offered to the resellers by wholesalers is being used? They needed it 20 years ago but generic solutions are not so attractive now. Useable, strategic solutions can only really be developed successfully when both parties have a detailed understanding of what each other is striving to achieve and can tailor something to suit. With increasingly limited sales resource this will be a challenge for the wholesaler, but working with groups, this level of tailoring can be achieved.”

Indeed many of the dealer groups, content as they are that their services aren’t threatened by what the wholesalers offer, believe the wholesalers need to change their focus in order to help dealers. 

Harrop says: “I would like the wholesalers to spend their marketing budget more effectively and to stop wasting cash as they aren’t close enough to consumers. Let the manufacturers push demand and let the dealers, ideally through the groups, pull it through. In my opinion neither wholesaler needs to put hard earned cash into poor quality promotions and too wide-reaching activities. There’s only so much the dealers can concentrate on.”

Colway’s Christiansen adds the dealer voice: “I believe wholesalers should focus their efforts on maximising the efficiency of product distribution rather than being quasi-dealer groups.”

Offering a contrast, Paul Musgrove, CEO of Nectere, says: “Inevitably there is a clash between the services supplied by wholesalers and dealer groups. However not all dealers are in a group and they do need these services from somewhere, as they cannot afford and do not have the skills to do these things themselves.”

Speaking up for the wholesalers’ predicament, Ball says: “If we take the services away the dealers complain, but wholesalers haven’t been offering them efficiently so dealers have gone to the buying groups. It’s a difficult situation to balance.”

Fairly or not, there is quite a lot of criticism echoing through the industry about the wholesalers’ distance from the dealer. Harrop says: “We spend in excess of £50 million a year with VOW but want more discussion and action. I would like a senior VOW person sitting in my offices joining up everything that’s not joined up.”

One example focuses on facilities management (FM), a growing opportunity for OP. The accusation is that wholesalers simply create a catalogue for FM products, rather than invest in the expertise needed and, through training, pass this knowledge on to dealers (but then one might argue that the dealer groups should offer the training…).

Ball again defends the wholesaler approach. “Both wholesalers have taken a lot of time and effort to employ people that are specialist in this sector,” he says. “Research has gone into what sells, and we have had some positive feedback from dealers that are finding it difficult to sell against own brand products.”

As a result Spicers is looking to develop a 5 Star equivalent product, which brings us to the next debate surrounding wholesalers: brands. 

Both Spicers and VOW are operating under venture capital owners with profit high on the agenda after a few years of uncertainty, and they are following diverging strategies. Spicers has been open about its new approach to doing business with vendors, which sparked a trend of wholesaler exclusives such as with the Pantum printer brand and ousting long-term supplier Pilot. Vendors that OPI has spoken to suggest that we have certainly not seen the end of this trend. Spicers is also sourcing more products from China and developing its 5 Star brand. VOW, on the other hand, is vocal about its strategy to continue supporting brands. 

Commenting on these strategies, one vendor told OPI: “Dealers are concerned that they are locked into deals with a wholesaler that doesn’t stock the brands anymore. But the marketing initiatives and so on offered by wholesalers make it difficult for dealers to go direct, as they are tied in.”

This could be a chance for dealer groups to step up. As Gladstone says: “The more there is uncertainty about the future of the market and the direction of the wholesalers, the more dealers seek independent advice about their own direction and that of others within the trade.”

A new model?

Whether or not they agree with the groups’ argument that they need to be more in touch with their dealer customers, both wholesalers agree that something needs to be done to make the channel more profitable.

Baldrey says: “There’s too much duplication of cost in the channel. We can’t continue with a model that was built 20 years ago in a time when everyone made more money. For example, why do vendors keep stock in their distribution centres? Why not send it straight to the wholesalers? And for dealers I believe the stockless model is where it has to go.” 

Stockless is one solution; Gladstone suggests another: “Perhaps wholesalers should consider a more specialised wholesale service, as both seek and expect 90% overall commitment on spend yet dealers need to diversify and specialise themselves in order to satisfy customers and develop in a declining market.”

All this debate and speculation is attracting new players. In April O
I interviewed Joe Hemani, the CEO of IT distributor Westcoast, who was candid about his intention to step into office products wholesaling, and OPI understands the distributor is set to introduce a core OP range in the new year. And another new player has been in the headlines recently: Beta. With its aim to launch an OP offering early in 2013, the EOS distributor is, to a certain extent, directly taking on VOW and Spicers. Beta’s model is based around offering the fastest-moving OP lines as a complement to its core EOS and audio/visual products. Read more on Beta’s initiative. 

Opinions about whether the distributor will be successful are mixed; some, including many vendors, welcome Beta as a new, lean alternative without the extra services such as marketing that VOW and Spicers offer – leaving these for the dealer groups to provide. Others believe that the tactic of only stocking the most popular products will mean that dealers will stick to their current wholesaler that offers full ranges, and that Beta won’t be able to make money if it has to slash margins by offering low prices. Either way, the new entrant is certainly getting the industry talking.

O2o’s Moate says: “Those entrants’ messages have got us all on edge, but whether they can perform on the level that [current UK distributors] have crafted is another matter.”

Moate has crafted a different model himself. In 2011 o2o set up Truline, a full logistics service for Advantia members including last-mile delivery. Members have access to fast-moving SKUs via Truline, and VOW fills in the gaps with next-day delivery on less frequently purchased items. According to Moate, Truline “is about enabling a stockless model quickly and efficiently”. From its own perspective, rather than attempt to compete in the SMB space, through its logistical service Truline partners with dealers, who already know their customers and are good at retaining relationships on a local level. While Truline got off to a slow start, judging by financial results, Moate now says the initiative is reaping rewards. 

Criticism of the Truline model focuses on whether it leaves enough space for the dealer to maintain its own brand. Christiansen says: “As all resellers look to take cost out of the supply chain there is an inevitability that our delivery services will look more and more the same. The Truline offer to Advantia members is interesting. One member has described it as ‘better than a courier company, not quite as good as your own drivers but good enough’. Resellers need to be very clear on what their point of differentiation is if they no longer have direct control over fulfilment – the online players like Euroffice understand this very well already.”

The subject of maintaining a dealers’ brand versus adopting a national brand, through partnerships with groups and wholesalers, will be explored in part two of this article. There are those that argue that it is down to dealers alone to bring the debate to a close, and support their own businesses. But we all know that it’s a tough world out there right now.  

Musgrove says: “In terms of strategy dealers certainly need help. The issue is where to get this help. In reality the problem for both dealer groups and wholesalers is they are not a dealer and do not have the experience to provide this help…Both are doing the best job they can but the model is broken.” 


  • Against a backdrop of economic uncertainty in mainland Europe, consolidation and market contraction are happening quickly. In France wholesaler Carpentras Sign is set to acquire RP Diffusion, a wholesaler as well as reseller with its 560-strong Rouge Papier store network. 
  • Germany’s model probably most closely resembles the UK and US, with two leading dealer groups, Soennecken and Büroring, more or less aligned to wholesalers PBS Deutschland and Spicers respectively. However, both groups have their own delivery and warehouse structures. 
  • Netherlands-based Quantore is a not-for-profit cooperative group owned by its members, and also a wholesaler. It believes that each business arm “strengthens the other”. Robert Driessen, Procurement Manager and Director at Quantore, says: “We follow a volume strategy and invest the money we earn with our warehouse into our dealers. And of course a dealer group with a warehouse is much more independent and powerful than one without.” 
  • Swedish dealer group RKV also has an import business in cooperation with the Nordic Office Alliance, in order to combine volumes of products under private brand. The cooperation is now looking to include brand name products. On the importance of dealer groups, Managing Director Stefan Sonesson says: “In the 
  • OP industry of today dealers face fierce competition from ‘the globals’ and also from local competitors. In that environment it is almost impossible as an independent dealer outside a dealer group… The tools and services we provide really need to add value. During recent years we have also worked hard at developing our relationship and cooperation with our suppliers – today we talk more in terms of partnership.”
  • One of the biggest questions surrounding wholesalers is where ADVEO is heading. The recently announced strategic plan from ADVEO will see its European businesses – Unipapel, Adimpo and Spicers Europe – all rolled up into one organisation, and it is also planning to extend its service offering. CEO Millán Álvarez-Miranda will be OPI’s Big Interview in February.