Research: State of the Industry

While predictions for the core OP market are gloomy, the wider picture looks encouraging, says the brand new State of the Industry Report.

Predictions last year that the ‘core’ office products market would decline by 1-2% have proved to be conservative estimates. However, increasing diversification seems to be reinvigorating the industry, as OPI and OP market researchers Martin Wilde Associates (MWA) found out for the fourth edition of The View from the Top: State of the Industry Report 2016-17.

When interviewed in early 2016, only 24% of a sample of 59 senior OP industry executives in Europe, North America and Australia expected the ‘core’ OP market value to increase in 2016, while as many as 56% of respondents expected the market to decrease over the course of the year, with the largest share of these (29%) believing that the decline would be only 1-2%.

The recent 2017 State of the OP Industry report found that core OP market performance in 2016 was reported by all 61 senior executives interviewed in these countries to have been worse than even those gloomy predictions. Only 15% felt that the value of the core OP market had increased in 2016, while as many as 68% of respondents believed that it had declined during the year – with the largest share (38%) reporting that the decrease had been as much as 3-5%.

The report investigates senior executives’ perceptions of OP market trends in seven countries – the US, Canada, Benelux, France, Germany, the UK and Australia – and the research found that, to some extent, similar downward trends were evident in all of these markets, for a number of different reasons: 

  • Ongoing digitisation
  • Declining demand for core OP items
  • More millennials in the workforce
  • Poor economic situation
  • Price competition
  • Currency fluctuations
  • The decline of the oil industry (in Canada and Scotland)
  • The impact of the Brexit vote
  • The impact of the US presidential election

All change

Despite all this, most respondents believed that their own companies had bucked this downbeat market trend in 2016, reporting that their sales had substantially outperformed the core OP market. Indeed, the majority (67%) of respondents claimed that their sales had increased in 2016, with the largest share (27%) posting growth rates of 3-5% and 8%, stating that they had achieved sales increases of over 10% during the year.

Overall, the product categories that were by far the most widely-reported as growing through OP channels in 2016 were catering/breakroom supplies and jan/san supplies, as OP channels have increasingly diversified into the facilities supplies sector. A significant share also mentioned growth in office furniture as economic conditions – and end-user confidence – have slowly returned. Ergonomic products were also widely reported to have grown in 2016.  

However, ‘traditional’ stationery products, cut paper and printer/IT consumables were again quoted by the majority of respondents to have declined in 2016. Given that this is the perception of respondents in channels where the prime purpose was originally to supply traditional OP items, this is an ongoing trend that cannot be ignored.

Broadly speaking, the two distribution channels that were by far the most widely reported to have won market share in 2016 were – once again – Amazon and the internet-only OP resellers. The larger independent dealers were also significantly quoted to have grown their share last year, confirming the findings of MWA and OPI’s recent Phoenix Report research study on the positive health of the dealer channel in the US and UK (see Research, OPI November 2016, page 100).

It should be noted that it was the ‘traditional’ OP channels which were once again most likely to be regarded as having lost market share in 2016, particularly the contract stationers, small independent dealers, wholesalers and superstores.

Other key trends identified by respondents for 2016 included the following:

  • Nearly a third of these distributor respondents said that their average gross margins had increased in 2016, while only 29% claimed that they had decreased. This is comparable with the results of the previous survey.
  • On average, 6.2% of distributors’ sales were in jan/san supplies, and another 5.6% in catering/breakroom products, with the share of sales in workwear/PPE/signage products, business gifts and managed print services (MPS) each being less than 2% on average in 2016.
  • Overall, the share of own label among the distributor respondents was 14.3% in 2016 on average.

Trend analysis

This extensive research study is based mainly on insights and data collected from senior OP industry executives in a broad selection of major OP companies in the aforementioned countries:

The report also includes the 2016 financial performance of 15 major OP distributors in the US, Europe and Australia, as well as an analysis of the key industry events during the year. Additionally, it features the predictions of these key executives for the OP industry in 2017, including, for each country:

  • Core OP market size and growth
  • Estimated sales growth and margins
  • Growing/declining product sectors
  • New product categories being developed in 2017
  • Growing/declining channels
  • The current market share of Amazon and the end-user sectors in which it is currently having the most success
  • The effect on the OP industry of the Office Depot/Staples divestment of European operations
  • The effect of Brexit on the OP industry in Europe
  • The effect of the Trump presidency on the OP industry in North America
  • Future trends for other key issues, including own label share, the share of online sales and the share of sales in jan/san, breakroom, workwear/PPE/signage products, business gifts and MPS.

In these turbulent times, senior industry executives need a reliable yardstick against which to assess their own performances, perceptions and strategies. The State Of The OP Industry 2016-17 is intended to provide this essential objective viewpoint. This must-have authoritative annual sourcebook for the OP industry is available now for only £850 ($1,080). To order your copy, go to www.opi.net/SOTI2017

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