Big interview: Arnold Theuws

Are a state-of-the-art warehouse, a unique model and the confidence to take on the big boxes at their own game enough to win market share? OPI asks Arnold Theuws.

Dutch dealer-group-cum-wholesaler Quantore recently put itself on the map by creating one of the most high-tech warehouses in Europe. General Manager Arnold Theuws, who has been at the helm for over three years, is extremely confident that this facility with its modern design will positively impact the fortunes of local independent dealers, giving the group’s members the chance to go after big box contracts.

OPI took a trip to Quantore’s impressive headquarters near Nijmegen, the Netherlands, to meet Theuws and Deputy Director Robert Driessen and to discover just how well-equipped the organisation really is.

OPI: Quantore has quite a unique model; can you give us a brief explanation?

Arnold Theuws: Quantore is a cooperative, a member organisation, and the members are the only shareholders. We work on behalf of about 540 members, the majority of which are in the Netherlands, with the rest in Belgium and one in Luxembourg. 

OPI: Am I correct in believing that the board of directors is not made up of the members themselves, but professional executives like yourself?

AT: The board has two directors. Robert Driessen is responsible for purchasing and marketing and I am logistics, sales, personnel, IT and finance. We also have a supervisory board that we report our finances, operations and also some commercial choices to. We have three dealer members and two external representatives on the supervisory board, and there’s a very clear objective: they have to act in the interests of the company, not just of the members. Sometimes there could be conflicting interests but as a management team, we feel very responsible for our members ourselves.

OPI: Is this run as a profit or a not-for-profit organisation?

AT: Not-for-profit.

OPI: What happens with any surplus reserves at the end of the year?

AT: At the moment we have surpluses and with them we will improve our trade terms for our members. We have one aim which is to support them as much as possible. 

We have invested part of our profits in marketing tools, logistics and this estate, but now we have made the majority of our investments what we have in profit we are giving back to our members through improved prices, reduced logistical cost or improved bonus schemes.

OPI: So you don’t send them a cheque at the end of the year?

AT: As much as possible we give rewards back in pricing, because at the moment they need good prices instead of a big cheque at the end of the year.

OPI: What are the combined annual sales of your members? 

AT: Office supplies is approximately €170 million ($218 million). The total turnover of all those companies, as there are also goods and services that they don’t buy through us, could be €800 million.

OPI: Where does that place you in the Dutch market?

AT: We are by far the market leader in office supplies for the independent dealer in the Dutch market.

OPI: Are your members growing?

AT: In total they are losing a little, but certain groups of members are able to grow. That’s mainly the internet-driven organisations while the more traditional organisations are losing a little share. Every year it’s a 2%, 3% decline so we have a challenge.

OPI: How will you manage that challenge?

AT: We have taken the strategic decision to also sell to businesses other than independent dealers. That includes organisations that are in office supplies but combine this with books and postcards, for example. We also engage with retail parties to do purchasing and logistics.

OPI: You manage a category for them?

Robert Driessen: They make choices in category management, and we provide purchasing and logistics services.

OPI: So with some of your dealer members losing a few percent, have you looked at geographic expansion as an opportunity to grow Quantore?

AT: It’s not a priority. The total market within the Netherlands is €1.8 billion so we still think there is room to grow because we are now focusing on different markets as well, not just independent dealers. As I said, we are looking at retail chains in the Netherlands that are mainly focused on categories like food and beverages, such as retailer HANOS. We are going to look into the direct market as well and will start to compete with Depot and Staples in the contract business – not as Quantore but together with independents.

OPI: As we have seen in the US?

AT: Yes, we have looked at the approach of the wholesalers and dealer groups in the US. We have spent the last few months asking ourselves whether we have all the capabilities to serve this market. And in December we had a meeting with our supervisory board and received the go ahead to start involving our members. For us it’s a completely new business.

OPI: What are the requirements for government purchasers and large multinational contracts that the partnership between you and your members are able to fulfil?

AT: We are known for our variety of products, our logistics and what we try to do with
 local dealers, providing a local service. Pricing is extremely important in this kind of tendering and we have worked out how to manage the conflict of how it can be profitable for clients, but also for our members and for Quantore.

OPI:To eliminate cost in this tight margin situation, will you distribute the product directly to these new customers?

AT: Yes, exactly. In these kinds of contracts you can only handle direct shipments.

OPI: When do you expect this key account activity to start generating profit?

AT: We have already carried out some pilots with different members and they are very enthusiastic, but now we are waiting to have proof that we are getting these contracts in.

OPI:I guess this national accounts programme is a recent but substantial benefit of membership. What other benefits does your group offer versus your competition? 

AT: First of all, we have the widest assortment in the industry, with 17,000 relevant SKUs, of which 14,000 are office supplies. These are mainly A-brands. Then we have the logistics; our competitors cannot fulfil our distribution service as well as we can. We also have a Quantore private label. It’s not our main focus – more a defence against Staples and Depot – but at 10% of sales it is substantial. Our members are quite attached to it, as it gives them a good way of competing. 

In addition, we have a lot of IT support. We have several web shops that provide a lot of content, such as images and descriptions to help members sell products more easily. We also have different marketing programmes. For example, we are an official HP partner and for our top members we have a special HP support programme focusing on, say, the normal sales of toner and ink cartridges, but also selling contracts as managed print services. We have this support for the 15 main A-brands within the industry such as Post-it, Leitz and Dymo. Not only do our members receive bonuses, but they also get marketing support and our vendors have the ability to communicate their products via our members to the end-users. This is part of our OfficeXperts programme.

OPI: You’re essentially a wholesaler, as well as a dealer group?

AT: Yes, we feel as though we have two responsibilities: we have a responsibility as a wholesaler to our wholesale clients and we have a responsibility to our members and the independent dealer channel. Those two responsibilities are a very good combination. We are more than a wholesaler and we are more than a dealer group.

OPI:How do your volumes stack up against Spicers in Benelux?

AT: Oh, we’re much bigger than Spicers in the Netherlands, our main market. They are more successful in countries where there is no single dealer group that is dominant.

OPI: Let’s talk about this facility; you’re obviously very proud of it.

RD: Yes, we are. We have 21,000 sq m (210,000 sq ft) of logistical space – 15,000 sq m with a 6,000 sq m mezzanine – and an office of 3,500 sq m. We wanted to provide a face for independents, to represent them with this building. We are trying to support the perception in the market that together independents are as big as the big boxes.

OPI: What sort of volume goes through this facility? 

AT: Within our warehouse our turnover is €140 million. We have approximately five million order lines and 300,000 orders a year – a normal day is 25,000-30,000 order lines.

OPI: Do dealers ever bring their customers here?

AT: Yes, which is one reason why we have invested in a new way of working with open space and with colours. For example, we deliberately chose brown, as it’s a bit cosy and gives the feeling of cooperation. We have thought of these things so members and their customers feel at home in this organisation. They bring customers here to show what our capabilities are on the commercial side, but more importantly on the logistical side. We have highly-automated order picking facilities, as well as semi-automated ones, and approximately 2 km of conveyer belt within the warehouse in order to be as efficient as possible. It not only looks impressive, it is impressive.

OPI: What were your inspirations for the design and the infrastructure of the logistics centre? Did you look at other organisations across Europe?

AT: No, we tendered to find the company we have chosen. We looked at other members of BPGI, for instance, but, with respect, at the moment they aren’t as sophisticated as we are in terms of logistics. In fact, a lot of BPGI members are coming to our facility to see how we are organised.

OPI: By the time this interview is published, TriMega will have left BPGI. What impact do you think that will have on the group?

AT: For us in Europe it will not be a big impact but it’s a pity that they are leaving because joining together is always better than separating. But it is their choice and we have to respect that.

RD: And there is BPGI Europe of course. We only had a few contracts that were global, so for us it’s not a big change. And we have two new members, Office National Africa in South Africa and ARD in Russia.

OPI: What is the future for BPGI?

AT: It has to evolve, and I think what is always essential is to deliver commitment. From the moment you have commitment you have added value. It has a chance of a strong future but like always there are challenges. 

OPI:You briefly mentioned private label; what role does this play for your group, particularly given your new emphasis on key accounts?

AT: First of all we are an A-brand company; 90% of our total sales are A-brands. While we envision that private label sales will go up perhaps a bit, they will never reach the substantial shares that the globals have. There are necessary items that we still have to add, but we don’t have a vision that this will increase to the percentages that the globals have. I really don’t feel it is necessary to have this enormous focus on private label. 

OPI: Why would it not be necessary given that’s where most of the margin is for your big box competitors?

AT: At the moment A-brands do have their added value in office products and most customers are still willing to pay for it. But this channel needs to explain the added value and we believe the independent dealer channel is particularly well suited to selling A-brands.

OPI: Do you think independents really do spend enough time selling on the value proposition of the A-brands?

AT: Not enough. It can always be better, but at least they do it better than most of the big boxes!

OPI: What other products and services do you think the dealer community, and by default Quantore, should be looking at in the future? 

AT: It’s still mainly office products because at the moment we have room for improvement in this area. We still have a lot of market share to gain and for the time being it is logical to concentrate on those items that you’re good at.

RD: Another area is, of course, digital but we have to question whether from a wholesale perspective we have to put our stock here or whether we have to cooperate with specialists.

OPI: That raises a couple of interesting questions. Let’s talk about some of the specialist wholesalers, such as ACI Supplies and Alpha. They are two very strong companies here in the Netherlands. What relationship do you enjoy with them?

AT: We have a very close relationship especially with Alpha. They supply the majority of our EOS by far. They supply to us and we are the only company that can put office products, EOS and a pack of paper in one box.

OPI: I thought ACI Supplies was also selling some traditional office products?

AT: Yes they are, but ACI mainly concentrates on the pan-European distribution of office supplies in high quantities and we are mainly focused on smaller quantities.

RD: And when you compare their skill set, we have four and a half times more SKUs in the office products category.

OPI:So you don’t view them as competition?

AT: Oh absolutely, they are competition but in a very specific segment. And we are able to deliver a certain quality with our warehouse, we’re very competitive there.  

OPI: Do you ever see ACI and Alpha getting together at some point?

AT: No. I think culturally they are completely different.

RD: Operational excellence against a trading company, so it’s indeed completely different.

OPI: I won’t ask you to name which is which.

RD:(laughs) We won’t answer that one!

OPI:There are some newer entrants into the marketplace. A company that I’ve just become familiar with is 123inkt.nl. What are your thoughts on this new breed of aggressive online competition?

AT: We did some investigation into the business model behind 123inkt. They are trying to attract as many customers to their website as possible with very low-priced A-brands. Their aim is to convert this customer search into a reconditioned private label purchase. 

We are now looking to explain to the public, very clearly, what this business concept is and also what its consequences are. We are looking into how we can introduce the same type of concept, not as an offensive but as a defensive strategy. At the moment we get a request from a customer who says “look at 123, they are cheaper”. But we could offer these products for better prices. Profit is our defensive assortment against these kind of new entrants.

RD: But again, for us and our members it’s defence because even in this strategy we believe in the A-brands.

AT: I think that, until six months ago, our members were hardly considering selling private label, the B2B channel was only for originals. Due to this kind of competition they now need some tools to survive. If a customer is very price-sensitive and willing to go to 123 to buy under any conditions, we need to deliver an alternative for our dealers.

OPI:So who has the lion’s share of the market share that you don’t have?

AT: Staples, mainly at the high end with big accounts. And then Office Depot. 

OPI:But if you’re going after their big customers now they’re not just going to sit there.

AT: They are too busy with each other! I do think that what we can offer, the big boxes cannot offer. We can offer that local touch, that cooperation with a local dealer to make the difference. 

OPI:I’m sure they would agree that’s your advantage, but they would probably question your purchasing power. Staples is a $25 billion business.

AT: We are very confident, both from the results of making internal enquiries and from our vendors, that we have similar purchasing conditions to what the big boxes have. The big difference is that we now have the same logistics costs.

OPI: As a percentage, what is the cost of running this facility?

AT: If you look at the whole organisation it is never higher than 10%. I think together with our dealers and strong vendors we are able to keep costs as low as possible, at least to the same level as our main competitors. Direct shipments from Quantore directly to the end-user are of course cheaper than going via the independent dealer first. 

OPI: Who does last mile delivery?

AT: At the moment we have Dutch company, PostNL, doing it but we are currently going through a tendering process.

OPI: How has the recent increase in oil prices affected you?

AT: I expected an increase in prices, but there is severe competition within the different suppliers so we have been able to get reduced prices.

OPI: Looking at another macroeconomic issue, there’s a lot of discussion about the future of the eurozone at the moment. Does that weigh on your mind?

AT: Not from a direct financial perspective. It could impact the local economy, of course, and if that results in a recession then it will impact us. 

OPI:How has the Dutch economy been performing lately? Are you in a situation of GDP growth?

AT: No, but it is almost stable, perhaps a very small plus or minus. As an economy we are currently very strong within Europe but because we rely on exports, we very much depend on the European economy. I think approximately 80% of our exports go to other European countries, which is an extremely important factor.

OPI:Looking at the rest of Europe, what are your overall views on Unipapel’s acquisition of Spicers? Will it spark further consolidation among the wholesalers?

AT: It will because the combination of the two is quite substantial for the whole market. But Unipapel’s pan-European market share compared to the Dutch market is quite out of balance because they don’t have any activity here. It could be that they are coming, but there are already two very big distributors in the Dutch market. The question is, which market will Unipapel be focusing on? 

We believe that because we have not only good logistics but also added value for our members we are in a strong position.

OPI:So what is your prediction for the future? 

AT: We believe that within a couple of years there will be only one central place for the distribution of office products and stationery in the Netherlands! 

 

RÉSUMÉ: Arnold Theuws

  • Studied business and accountancy at the University of Tilburg
  • Started his career at KLM Royal Dutch Airlines in 1989, including two years in Spain and three years in Italy, where he was financially responsible for the sales organisations in Italy, Greece, Turkey and Israel
  • Returned to the Netherlands, before a brief spell in Italy when KLM joined Alitalia
  • Joined Quantore, formerly Veneka, in 2001 as Financial Controller 
  • Joined the board of directors in 2002 and became Operations Director
  • Became Quantore General Manager in 2008

 

Quantore: The facts

  • Created in 2001 when CIB and Veneka merged
  • Quantore = quality, quantity and store
  • 240 employees
  • 540 members
  • Combined member sales: €170 million
  • 17,000 SKUs