Even futurists can get it wrong when it comes to predicting what the game-changing shifts are that will change our world. But there are some trends that are fairly reliable if you put them under a wide enough umbrella – the growth of ever more powerful technology, for example, customer buying habits or changes in the way we work. Drilling down into specifics is a little trickier, but last year already set the wheels in motion to make some reasonable forecasts for 2019.
The OP sector is well-acquainted with disruption, having to deal with it on a near-constant basis due to microlevel industry topics such as consolidation, cost reduction, supply chain management and margin pressures. These are perennial issues. The OPI Advisory Committee threw a number of others into the mix for 2018/19 including the viability of the current business models of European wholesalers and traditional buying groups, the number of new buying channels, and continued price hikes, particularly for copy paper. Of course, Amazon Business must be mentioned, not only because of its rapid growth and launch into new countries, but its courting of dealers and significantly, chasing government and enterprise contracts (see Hot Topic, OPI December/January 2019).
There’s also no escaping the reality that the office supplies sector has the added pressure of having to continuously adapt its business to accommodate shifts in the workplace, which are influenced by some of the most fundamental global changes that affect how we work and live.
To look forward, one must also look back. 2018 saw industry consolidation ramp up considerably, with Staples Inc and Office Depot in the US snapping up large independent dealers between them. Elsewhere, the UK’s Complete Business Solutions finalised a number of acquisitions over the year, making it one of the country’s largest resellers. The long-running saga in Australia and New Zealand between Platinum Equity, OfficeMax and Winc, meanwhile, was finally resolved in July, while Australian reseller Complete Office Supplies bought Lyreco Australia.
But it was the news from the US involving the merger of the two biggest wholesalers Essendant and SP Richards that had many in the industry rattled. Subsequent revelations detailing an eventually successful bid for Essendant by Staples Inc escalated concern. And now the industry is on tenterhooks waiting to see what will transpire when the deal goes through – barring any regulatory surprises, of course. As a result of all this, the Essendant/SP Richards/Staples Inc saga dominated OP headlines for much of last year, while the continued woes of European wholesaler ADVEO dominated opi.net news for the latter part of 2018.
2019 will see a continuation of Staples/Essendant, and ADVEO stories. As this feature was being written, news had just come in regarding a delay in the Staples Inc purchase of Essendant due to the US government shutdown which had impacted the work of the Federal Trade Commission. Essendant CEO Ric Philips did say, however, that he was confident the deal would still be finalised in Q1.
An update on ADVEO saw a private equity firm acquire the wholesaler’s operations in France, Italy and Belgium. And in mid-January, US dealer groups Independent Suppliers Group, Pinnacle Affiliates and TriMega Purchasing Association announced a Letter of Intent to consolidate into one organisation. If the rest of 2019 continues the way the year has started, the sector is in for a roller-coaster of a ride.
The following represent a snapshot of the trends that are most likely to exert a significant influence on the business supplies industry over the coming year and beyond. While they will already be familiar to OPI readers, this is the year they will really have an impact on our lives.
Deal or no deal?
It would be completely remiss to discuss 2019 and not reference Brexit. Attempting to keep up with the rapidly changing negotiations and UK government plans is impossible here, but as OPI went to press, there was still no clarity on what the final outcome will be, only that a no-deal Brexit was still on the cards with parliament still to vote on Theresa May’s deal.
The two-year chain of events has taken its toll on many businesses, especially in terms of preparations for a potential no deal. Whatever the outcome, there are likely to be major implications, not just for the UK but for any trading partner. In a no-deal scenario, the UK will leave the European Union on 29 March without a trade deal, reverting immediately to World Trade Organisation rules.
The UK government has been busy releasing ‘what to do if’ documents in the event of a no deal, including how to deal with imports and exports, new customs procedures, and retesting products for EU compliance as UK-based bodies will no longer be recognised on the EU-recognised conformity assessment list. There are also customs tariffs and VAT on EU-imported goods to contend with, and for any businesses thinking about mergers and acquisitions, they will have to comply with both the UK and European rulebooks. And this is just the start.
While the adage ‘preparation is key’ is usually sage advice, in this case it is a moot point as no one knows what to prepare for until all the political wrangling is done. The world may find out on 29 March, but then again, it may not. OPI will cover the impact of Brexit on the OP industry in depth as and when the UK leaves the EU.
The stand-off between the world’s two superpowers – the US and China – has already led to tariffs being slapped on billions of dollars of imports in both countries, leading to market volatility and concerns for the global economy. At the time of writing, meetings were taking place between the two countries over the continued trade war. The talks were the first to take place in 2019 after a 90-day truce was called in December last year. By all accounts, the talks went well. Let’s hope it stays that way, although President Trump currently has his hands full with a protracted government shutdown, with no end in sight.
Over the past few months, the US OP industry has voiced its concern over the tariffs (see Hot Topic, OPI November 2018), and if a new deal isn’t reached before 1 March, Trump will go through with raising tariffs on a further $200 billion worth of Chinese goods by another 15%, taking the total tariff to 25%. The prospect of these new tariffs being implemented is a concern not just for US and China, but threatens the health of the global economy, with fears being voiced already over a worldwide economic slowdown.
While Brexit and the tariff war have stirred up political and economic strife, 2018 was the year the global public rose up and demanded that something be done to stop single-use plastic clogging up landfills and polluting the oceans. Many large corporations have already taken action and announced steps to reduce the use of single-use plastic.
As the media hype went into overdrive on this particular issue, sustainability as a whole became a key phrase in the corporate business world. And this year, environmental awareness is likely to filter down to SMBs and they will be expected to seriously commit to some form of ongoing sustainability. Whereas ‘green’ up to now was a ‘nice to have’ and often used as a branding and marketing tool, it has become a ‘must-have’, and for good reason. The Intergovernmental Panel on Climate Change proffered stark warnings of devastating climatic consequences should the world not keep CO2 levels under control. Globally, increasing bouts of severe weather have cost billions and severely disrupted businesses.
The recent COP24 meeting in Poland to discuss how to make the 2015 Paris Agreement a reality, will eventually result in new government mandates that set business targets for cutting CO2 emissions. But in today’s global climate (no pun intended), it makes business sense to go greener in every way possible as customer buying habits and brand loyalty – especially from millennials and, increasingly, Generation Z – shift to those companies that embrace sustainability in meaningful ways, such as reducing plastic and non-recyclable packaging, increasing product recyclability, and using clean transport and technology, such as portable power, etc.
Well-being in the workplace
It’s not just the health of the planet that has hit the headlines; health and well-being in the workplace has also been a hot topic. Employee health and wellness continues to be a growing trend, particularly as it is a means of attracting and retaining staff in a time of high employment.
This escalating awareness by businesses of health and well-being at work is certainly having an impact on our sector. There is the growth of the ergonomic furniture and accessories category, for instance, along with new areas of focus such as lighting and healthy breakroom snacks (minus the plastic utensils, of course).
The increased cognisance of mental well-being and the desire to redress the balance between work and play is leading to the rise of co-working spaces, remote working and flexible working. This is creating a burgeoning market for innovative presentation and communication tools, for example.
Data protection and cybersecurity
The surge in electronic communication over the past few decades has led to the necessity to protect the masses of data that is being produced. In May last year, the European Union launched the General Data Protection Regulation (GDPR). Setting new standards in data security and protection, it is also being used as the blueprint for other countries to implement their own regulation.
There is still a significant number of companies not fully GDPR-compliant, but the increase in cyberattacks and data breaches will ultimately propagate acceptance of data protection practices. While it is unlikely there is any large corporation without a cybersecurity policy in place, the same cannot be said for the majority of small businesses. OPI has covered cybersecurity in the past (see Hot Topic, OPI September 2018), but with the expected jump in the adoption of the Internet of Things (IoT) and connected devices, the prevention of cyberattacks becomes ever more important.
Security experts predicts that although the number of ransomware attacks will decline this year, there are other threats that are liable to see an increase, such as cryptojacking or currency mining and spear phishing. Cryptojacking is the unauthorised use of a computer or device to mine cryptocurrency. While these events slowed last year, likely due to the volatility cryptocurrency experienced, this year is expected to see a rise of this type of cyberattack.
Spear phishing is a form of phishing manoeuvre, but it is specifically targeted, usually at an individual or a number of employees at a company. The attack uses personal information often gleaned from a previous breach to customise emails that contain malicious links or attachments.
Artificial intelligence (AI) and machine learning will be progressively adopted in the fight against cyber crime. This is good news for cybersecurity as the world pumps out more and more data. According to IoT Analytics, the number of connected devices in 2025 is expected to reach 22 billion. Additionally, global services firm IDC predicts spending on IoT will reach $45 billion this year and surpass $1 trillion in 2022.
These developments will be boosted by the deployment of AI and machine learning, although we won’t see AI robots sitting at office desks anytime soon. However, there’s no doubt that the use of AI – running in the background in applications such as chatbots – will rise over the course of 2019.
This will be coupled with the growth of smart cities which, according to market research analysts Frost & Sullivan, will create business opportunities to the tune of $1.5 trillion by next year. The Smart Cities Council defines smart cities as those that “incorporate digital [particularly IoT] technology across all city functions”, saying that they will have a profound effect on the way we live and how and where we work.
To make all of this a reality requires the next-generation platform to correlate the data from billions of connected devices. And it is here – 5G mobile networks are already being trialled in select areas worldwide although the official global rollout isn’t due until 2020.
This year, however, will see the start of pilot schemes for services that will benefit from the high-speed connectivity for mobile devices. With eMarketer predicting that 73% of e-commerce transactions will take place on a mobile device by 2021, now is very much the time to sort out that m-commerce strategy if you haven’t got one already.
interesting times ahead
Given the substantial shifts in the global economic and political landscape, the continued rise of smart technology, and the consolidation in the broad business supplies industry, it’s going to be one very interesting year.