Homing in: The state of the SOHO market

With technology as the great enabler, the number of home- and teleworking people is soaring. But where do they buy their office products; where are the opportunities?

At the height of the worldwide financial crisis in 2008/9, statisticians in various guises couldn’t publish enough information on the number of people setting up their own small businesses (often as a result of their former employers going bust), teleworking or simply working from home in their strive for a better work/life balance.

According to an independent study conducted by Bain Capital in 2010, for example, the home organisation market is a $21 billion business in the US. The country’s Bureau of Labor Statistics data estimated the number of people working from home at nearly 24 million in 2010, with almost 20 million home-based businesses in the US.

More up-to-date 2012 figures, meanwhile, suggest that “the overall spending trend in SOHO will see a 20% increase over the next five years”, says In-stat Analyst Greg Potter.

As a general rule, reliable data is hard to come by, however, as the SOHO market is a demographic difficult to define as well as capture as circumstances vary considerably. Many so-called SOHO workers are simply employees of any-size companies that work from home some or all of the time; some have set up their own business but are so small – often one-man bands – that they fail to really register on any grand scale in the statistics; many home workers, particularly women, are also part of large-scale franchising schemes. Mobile workers – those with no permanent base – are another group that sits uncomfortably within the SOHO segment. 

Home organisation

All that said, many of these groups are decision-makers when it comes to office products purchases in the widest sense of the word. From desk accessories over technology products and consumables to furniture, manufacturers in the most captive SOHO markets – the US and Western Europe for now – spend much time and money on specifically targeting that sector with fashionable as well as practical products.

Mail order giants such as Viking and large-scale retail outfits such as Staples, Office Depot and OfficeMax have for many years made it their remit to target this customer segment. And while they now face the most ferocious competition from online operators – OP specific as well as from the likes of the mighty Amazon – they are trying hard to hold on to this client base. Particularly the OP superstores with their much documented challenges are keen to increase value-added offerings including copy and print centres plus a host of technology services in order to get consumers through their doors.

In an effort to add another string to its bow, Staples North America in February debuted the Martha Stewart Home Office with Avery product line that was created by Martha Stewart Living Omnimedia and the Office and Consumer Products Group of Avery Dennison. More than 300 products from multiple categories are now available exclusively in Staples’ North American stores and from Staples.com. 

With Martha Stewart-branded media properties reaching 37 million US women a month, teaming up with the American icon looks a smart move for Staples and Avery as they look to tap into the ever-growing home office market.

Staples spokesperson Carrie McElwee says: “Martha Stewart has been inspiring consumers with her hallmark style, ideas and products for years and the Martha Stewart Home Office with Avery product line differentiates Staples in the marketplace and fills a void with beautiful, innovative organisational products designed for the home or home office. The majority of Staples customers are women who find the innovation and style appealing for their home or home office.”  

And while product prices are important – Staples’ new Martha Stewart/Avery line retails at a fairly low $1.99-$16.99 – it’s repeat purchases and customer retention that are most important. 

Customer retention

However, repeat purchases are hard to gauge in the quagmire that can be the SOHO sector. Chris Collinson, Managing Director of Superstat, refers to the UK dealer group’s online initiative SupermarketOnline which specifically targets that customer segment. “We get a mixture of orders going to people’s homes and it’s very difficult to distinguish between them. ‘A’ is somebody who wants ten reams of paper for little Johnny in his bedroom, while ‘B’ is someone who is genuinely working from home in a commercial environment. 

“Ten reams of paper for little Johnny doesn’t do me any good at all. It’s more hassle than it’s worth and I’ve probably paid via pay-per-click quite a lot of money to get that order and I will never be able to turn it into a commercial account. Don’t get me wrong, I am happy with just reams of paper as long as they’re for, say, the Procter & Gamble sales rep who’s working from home, because next week he’s going to order some more stuff and the week after that some more. 

“That’s how we build our business – the first order is not very profitable for us by way of how it’s generated, but we bank on the fact that we can then turn that into a regular order of products and that’s where we can make something out of it.”

Paper and, of course, consumables are two of the most frequent repeat purchases. SupermarketOnline – and many small-scale independent retailers for that matter – suffers on the consumables side as web-based companies in particular are so fiercely competitive on price. Superstat’s 20 SupermarketOnline dealers (out of a total of 120 Superstat dealers) therefore have a hard time getting a sizeable chunk of the pie.

Enabling technology

Most would agree that it’s developments in office and communication technology that have been instrumental in fostering the significant rise in telecommuters, home workers and mobile workers over the past years. As the use of smartphones and tablets, for example, grows – Forrester Research predicts that 112 million US citizens, ie a third of the country’s adult population, will own a tablet computer by 2016 – so will the technology that enables seamless communication from any destination. 

Cloud computing is already responsible for many people’s ability to work from home and now employees are demanding access to all manner of information from their mobile devices, including cloud-based mobile email programmes. Likewise, people now expect to be able to wirelessly print and scan documents from their mobile devices. 

As such, it’s technology products and their accessories that have such a bright future for the SOHO and even more generally the ‘mobile’ environment. Indeed, Phil Jones, Deputy Managing Director of electronics manufacturing company Brother and its UK Country Head, believes that the trend for ‘location independent working’ is becoming more prominent and as such the need exists for ever more enabling supportive technologies.

That said, Jones emphasises the importance of the SOHO market for the company – especially on the consumables side – and within that sector the need for comprehensive retail support. 

He says: “About three years ago we undertook a major piece of analysis in the UK where we tried to establish where, geographically-speaking, the hotspots for SOHO workers were. Do we have consumables available within a short drive of these major hotspots? Or do we have somebody on the street locally that we could work with? 

“We developed a heat map of the entire UK based on our analysis, which we then overlaid with our sales data. The output was amazing because we realised that we simply didn’t have anywhere near the number of what we call glass-fronts in those areas.  

“The result was the creation of our BAIR programme – the Brother Accredited Independent Reseller. Based upon the data we collated we now have over 500 resellers across the country, ensuring that when somebody works from home our products and consumables, paper and things like that are always within easy driving distance, ie within reach of that target market.” 

Retailers and web-based companies – and often a combination of both – are by and large the most important ports of call for SOHO workers. By their own admission, B2B-orientated independent dealers – like the majority of Superstat’s members and all of AOPD’s dealers – are after bigger fish and would typically target larger accounts. 

As US dealer group TriMega conceded recently when it decided to close down its SmartXpress B2C e-commerce programme after just over 12 months, the capital, time and resources needed to succeed in the B2C (specifically online) space was more than the predicted results would justify.

Those with a B2C presence already, meanwhile, see a promising audience in the SOHO customer. Francesco Villa at Italian retail franchise chain Gruppo Buffetti, in fact, is putting almost all his eggs in the SOHO basket. “The SOHO market looks for efficiency – of course they pay attention to price but as they buy fewer products they are more willing to spend a little more,” he says. 

And with the Italian economy in dire straits and high unemployment levels, the small business sector is only going to grow, he adds. “With high unemployment levels, where will people start to go if they can’t get a job? They’ll get a VAT number and go freelance.”

Upsurge in furniture

As far as Buffetti is concerned, the chain’s immediate focus is on office furniture for the SOHO market. 

In Germany too, manufacturers and resellers of office furniture are finally upbeat again after a positive 2011, following several worrying years since the record year of 2008. And that is also in good part due to changing working habits, with particularly big demand for high-quality, flexible and adaptable office furniture.

According to the BSO Verband Büro-, Sitz- und Objektmöbel in Germany (Association of Office, Seating and Contract Furniture Manufacturers), overall revenues in the sector grew by 15.8% in 2011 to a total category size of 12.13 billion ($2.8 billion). And while the national market was doing well in 2011 with an increase for furniture manufacturers of 14.4%, it was the export market that was performing even better, with a growth of 19%. Particularly Northern European countries, Switzerland and the Middle East were keen on ‘Made in Germany’ furniture, while Spain and Italy were – perhaps unsurprisingly – more restrained in their appetite for up-market office and home office furniture.

Creating furniture that fits both into an office setting with all the functionality that this requires but also looks appealing in a ‘home’ environment remains a challenge. Most dealers and retailers only have a fairly limited range in that product category, often due to space restrictions. 

Indeed, a somewhat unexpected candidate is becoming quite a formidable player in this segment. According to an OPI source from Germany, IKEA is making great waves in office furniture sales in the country and is a company that really understands the connection between the home and the office – often located in the same room.

The largest furniture retailer in the world, IKEA’s office furniture category alone allegedly generated approximately 115 million in sales in 2011 – just in the German market.

Playing to strengths

For the average B2C and SOHO-focused independent, it’s mostly a case of having a good all-round selection of products rather than specialising in any one category. 

UK-based Osborne Stationers is a 20-store strong retail chain that is very much geared to the SOHO sector. Osborne’s route to market is solely through its stores where it sells everything from inkjet cartridges over stationery to smartphone holders and laptop cases. 

Says Managing Director John Waits: “We’re targeting end-consumers and people working from home or in small offices who are either too small to be called on by reps or who simply prefer to buy from a local operator rather than one of the national suppliers. We essentially live off the bits that independent dealers either don’t want to supply, can’t supply or can’t supply quickly enough. 

“One of our strengths is that we’re very price-competitive which has become so important now that people are looking so closely at their ‘stationery’ spend and becoming very cute about how they buy.” 

Coming to a locker near you…

Many a home worker or small business owner will tell you how frustrating it is to wait for delivery of much needed cartridges, paper, stationery or, in fact, any other non-OP related product; you don’t exactly know when it’s going to arrive and you have to go out for a meeting, see a customer or both. The most specific timing you’re likely to get even from a dealer is probably am or pm (only grocery stores tend to specify down to the hour).

Similar to the ‘order online, pick up in store’ concept that some supermarkets (Tesco) and electrical retailers (Best Buy) are now offering, Amazon has been trialing an answer to the problem with a slightly different twist. Last autumn, the online giant launched its Locker Delivery. 

In essence, instead of having a parcel delivered to your home or business address, customers select a locker location and pick up the package at a convenient time. Once the order is delivered to the locker, they will receive an email notification with a unique pick-up code. At the pick-up location, they put in the code and take their parcel from the designated locker.

So far, these Amazon facilities are available in the company’s hometown of Seattle, Washington, where the pick-up lockers are located in 7-Eleven stores, in New York and across several select locations (shopping centres, libraries, grocery stores) in London, UK. 

It’s undoubtedly still a work in progress. Not all products are eligible for pick-up lockers, for example; all orders must be fulfilled by Amazon rather than its marketplace sellers; and they also must be available for dispatch within 24 hours. As such, there’s plenty of scope for improvement, but the idea is great and entirely in line with today’s increasingly mobile workforce.   

Phil Jones, Deputy Managing Director of Brother and its UK Country Head, says: “We live in a convenience economy and it’s becoming really massive, particularly when so many people are working from home now. If you’re at home and can accept deliveries that’s cool, but small business owners need to be out, generating business, seeing customers…If you’re not there, however, you have the dreaded visit to the local post office with your collection card and ID. Delivery and convenience become key because it’s all about optimising our time.”

It’s clearly a concept that could work for the OP sector. Says Pete Howard, SVP and Head of Staples Online and Marketing in Europe: “Giving our customers the option of ordering online for pick-up in one of our stores is a big priority for us and will become available this year. In markets where we have an online business but no stores, we are also considering partner ‘pick-up’ locations, much like Amazon has done.”

UK dealer group Superstat, meanwhile, mainly through SupermarketOnline, is currently contemplating giving customers a delivery box that is lockable by code and only accessible by the dealer and customer. The idea is still in its infancy, but Managing Director Chris Collinson believes it’s worth investigating. “Only the dealer and the customer would have the combination which means you can deliver at any time and lock the products away in a safe box for recipients to come and collect whenever is convenient to them.”

It will be interesting to see if these projects become financially viable for those companies willing to take another step towards ultimate customer convenience. Here’s hoping…

Carrying the torch

What do the Olympic Games and office products have in common? Not very much would be most people’s immediate response. But perhaps it’s a little hasty to dismiss the connection wholeheartedly.

Thousands of employers – 22% of UK firms, according to a recent Cisco study – across London are adopting flexible working practices over a few weeks in the summer when millions of people will be descending on the capital for the Olympic Games and Paralympics and no doubt severely disrupting ordinary office life. 

As such, many more people will be working from home over the period in an effort to maintain productivity and reduce travel chaos. Will they as a result buy substantially more office products for the home? That’s unlikely, certainly with any significant impact on resellers. Delivery-based dealers may indeed curse the city for its jammed streets. But OP retailers across London, specifically those with add-on facilities such as copy and print centres, could potentially benefit from the sporting celebration as millions of visitors – thousands of reporters included – need to stock up on some basic supplies. Even established customers may prefer to stock up themselves rather than waiting for the aforementioned delivery van.

Staples, struggling as it is in the UK with its retail stores, is certainly keen on making the most of the opportunity as Amee Chande, SVP and Head of UK Retail/Online, points out: “As well as maximising the benefits that increased tourists will represent, we are looking to enable our customers to both celebrate and stay productive. We will be extending opening hours in key locations and promoting services such as copy and print or DHL for tourists and home workers alike. And to help everyone get into the spirit, Staples will provide everything one needs to throw an Olympic-themed party, including Union Jack branded hats, cups, plates and napkins, flags, bunting and even balloons!” 

That’s the spirit!

Mobile working in the US

82% of mobile workers purchase at least some workplace products online

38% always watch for deals, because they know what they want

11% of mobile workers tend to buy more than they intended to 

Over 70% of mobile workers go to a national discount or office supply retailer for workplace products 

The annual spend for a mobile worker mirrors a small business at less than $250 in each supplies category, though per capita spend is higher than those of workers in an office setting

Over 66% of the mobile worker’s purchasing is ‘buy what I need and get reimbursed’

Mobile working in Europe

60% of company IT decision-makers from five northern European countries believe the ability to work remotely increases productivity

56% of those surveyed – led by IT experts in Norway and the Netherlands – work one or more
 extra hours a day as a result of being able to work remotely

53% would rather earn less money and be able to work remotely than earn a higher salary and be office-based

51% of a company’s mobile workers use a smartphone as their primary communication device

21% of IT decision-makers say their company is completely unprepared for a “mobile and distributed” workforce

While Norway has the largest percentage of unprepared companies with 21%, it also has the highest proportion of firms with state-of-the-art IT support for a mobile and distributed workforce
 with 34%