Big Interview: Dieter Schmidt

Plate is one of Germany's largest B2B operators and a force to be reckoned with. OPI has been granted a rare interview with Managing Director Dieter Schmidt at a time when the OP world once again descends on Europe's largest economy for the annual Pape

Fighting talk

Plate is one of Germany’s largest B2B operators and a force to be reckoned with. Managing Director Dieter Schmidt pulls no punches in his assessment of all things office products in Germany – from the ethical attitude of the big boxes over the economic crisis to the reason his company recently left the country’s predominant dealer group Soennecken. OPI has been granted a rare interview with this straight-talking, no-nonsense German at a time when the OP world once again descends on Europe’s largest economy for the annual Paperworld gathering in Frankfurt

With revenues of over w100 million ($132 million), Plate is without question one of the top three independent dealers in the German office supplies market. Located in the town of Bremen, Plate is a national competitor in the B2B business, albeit most strongly focused on the northern part of the country. It is also one of the largest member organisations of the European Office Supplies Alliance (EOSA).

This does not mean, however, that Plate has European ambitions and wants to expand outside of Germany. Far from it. During a wintery trip to the free hanseatic city of Bremen, Dieter Schmidt, Managing Director and great-grandson of the company’s founder, D. Plate, granted OPI a rare and unique insight into a traditional family business. It’s a business that, on the one hand, is firmly rooted in the German OP market. On the other hand, however, through vision and technology, it embraces its European cooperation, making life that little bit harder for its big box competitors in the German market in the process.

OPI: Let’s start with the history of Plate.

Dieter Schmidt: Plate was founded in 1871 by my great-grandfather as a small retail outlet in Bremen. He ran the business until 1923. At the beginning, Plate was just a retailer, although it did some deliveries to business customers – to civil service organisations, for example, as many businesses did back then.

In the years that followed, a great deal happened, including the merger in 1936 with another stationery firm that was located next to our shop. That company was called Dörrbecker. The merger was very much a result of the war: practically all of the employees at the time were male and had been called up, so there was no alternative to the merger. Both companies were located right in the centre of Bremen. This partnership lasted until 1953 when it was dissolved, and Plate went back to just running its own company. The shop then closed in 1958.

OPI: So there’s no retail business anymore?

DS: No, there isn’t. Nowadays, we deliver to businesses and we deliver to public authorities, but not to individuals.

OPI: When did you start working for the company?

DS: In 1959, when I was 16, I went to Hamburg to do a commercial apprenticeship. I had to go to Hamburg because as the apprenticeship was in the same sector, nobody in Bremen would take me on. But it was a good apprenticeship and I learned a huge amount. I trained for one year in Hamburg, and a further two years in Bremen.

I first joined the family business as a member of the salesforce. I was one of the youngest members of the team at 17 years of age. I hadn’t even learned to drive yet, and went to see our customers by bus. Then I met my wife Gotelinde. She’s now in charge of human resources and accounts. The expansion of the company wouldn’t have been possible without her.

OPI: When did you take over at the helm of Plate?

DS: I’ve been MD since 1973 – at the time, I was 29 years old. Prior to that, my mother had been the owner and MD. At that time, it was a sole member company, and as such she was the proprietor. Plate became a limited company in 1977. Part of that company is now all office supplies, paper and technical accessories. We also still have D. Plate – that business makes office furniture and office machines.

OPI: How is the company divided up now?

DS: I have a 51% stake in the company, two of my children have 16% each and the other has 17%.

OPI: What are your succession plans?

DS: It’s all quite straightforward. Two of my children – Ingo Schmidt and Iris Müller – are also Directors of the company, and together with Diego Wagner, our Sales Director, they will run the business in the future.

I’m 67 now and I’m ready to slowly withdraw from the business – at least from certain areas. I still do all the finances, the advertising and so on, but I’ve handed over practically everything to do with staff and all of sales. I want to get to a stage where I can have longer holidays and just come in in the mornings.

OPI: How is the business structured today?

DS: At the moment, we have about 320 staff. Of those, 50 are in the sales team and 51 in logistics – the rest are admin staff and apprentices.

Plate currently has ten sales offices across Germany, with some of them also having their own delivery service.

OPI: But the central distribution centre is here in Bremen?

DS: Yes. Eastern Germany is supplied by us, as is Hamburg or Hanover, for example. The goods go out overnight in our own delivery vans. As a general rule, our policy is that in our primary locations we deliver ourselves, and where our revenues are smaller we work with courier services. In Berlin, for example, it wouldn’t be worth our while in terms of cost to make our own deliveries. We deliver as

far as the outskirts, because we have a branch in Brandenburg, but the city itself wouldn’t be profitable so we use couriers.

OPI: Who is your partner at the moment?

DS: At the moment it’s Transoflex, but maybe we’ll move to UPS in the near future, because Transoflex’s level of service is quite bad at present.

OPI: Why is that?

DS: Transoflex has got problems with its drivers and these are getting worse. And when a few drivers leave and are replaced with new ones, it happens that packages lie in the van for up to a week and are driven all over the place. Clients don’t like that. We need a reliable partner as far as dispatch is concerned.

OPI: As a percentage, how much does Plate deliver itself?

DS: We deliver about 50% ourselves; the other 50% is delivered by the couriers.

OPI: Are you represented equally all over Germany?

DS: No. On the whole, we are concentrated in northern Germany.

OPI: You’ve been a member of EOSA since 2007. What have you gained from joining the alliance?

DS: EOSA offers us the opportunity to have some of the same price advantages as the globals – that’s why we’re a member of EOSA.

OPI: So you haven’t got any expansion aspirations outside Germany?

DS: No. Our target is Germany. Maybe the next generation will do something different, but I won’t. Germany is large enough for me.

OPI: I hear that you left Soennecken recently.

DS: That’s correct. We left Soennecken at the end of last year. We had been members for seven years, left once before, and before that we were members for 15 years. Now we’re just concentrating on EOSA.

OPI: Why did you leave?

DS: Because Soennecken wants to get involved in direct sales, it’s as simple as that. As a result of that, we’ve now got to deal with Soennecken as a competitor as well, on top of the big boxes.

OPI: So it was a kind of protest…

DS: I wouldn’t necessarily describe it as a protest. Everyone can have their own opinions, of course, but we see Soennecken’s move as the development of a direct sales business, just like ours. Soennecken says that it only wants to attract major clients, but that can change at any time, can’t it?

Once you’ve built up a good sales network… I can just foresee that there will be a conflict of interest at some stage and we will collide somewhere. I have enough on my plate with the likes of Lyreco, Office Depot etc, and I can do without going into battle with somebody else as well.

OPI: I can only assume that Soennecken will also alienate various other members with this move?

DS: Certainly. But there is a background and a reason for all this, of course. Soennecken has a very large central warehouse; a highly automated, modern warehouse. That costs money. And because its own members don’t use this warehouse enough – they get better service from Spicers or Alka, for example – Soennecken is trying to recover its costs somehow. I don’t know if it will work.

At Plate, we had a general meeting about the subject, and only 12% of the members voted against leaving.

OPI: Were financial pressures the main motivation for Soennecken’s newest initiative, in your opinion?

DS: Well, the whole sector is suffering from financial pressure. Everybody who builds a new warehouse builds it too large, because he/she thinks that revenues will increase. There are always certain ups and downs in the economy and I really want to avoid using the word ‘crisis’. But revenues haven’t increased over the last two years, and that of course puts more pressure on costs.

And when you work with the globals… We’ve just had a situation in Hamburg where one of our large competitors offered a ‘welcome bonus’ of over N40,000 in a tender in order to ‘buy’ a client. Interestingly, the customer stayed with us and was clearly intelligent enough to realise what was going on.

OPI: My guess is that wasn’t an exception?

DS: Absolutely not. In Hanover, we had a tender from [travel company] TUI where participants offered many products at 20% below cost price. I don’t know how all this will play out, but nowadays this is how clients are bought. In the past, you would have called it bribery…

I would say to every independent dealer: "Do not operate like that". If you set your prices at 20% below cost, and then have to deliver the goods, I would very much question if a small dealer has the resources to finance this situation for an extended period. It’s only natural that you price your core range a little lower and the rest of your portfolio a little higher, but not to the extremes that we’re seeing today.

OPI: Let’s go back to Soennecken for a moment. Other associations in Germany have not gone down the ‘direct’ route – are you tempted to join Büroring instead, for example?

DS: We’re finished with the German buying groups. We want to move forward with EOSA. We’re also large enough to organise our own imports from Southeast Asia. We have huge amounts of warehouse space and we are generally well placed financially, so we should be ok.

Having said that, we are also very happy with our German manufacturers, although I almost hesitate to use the word ‘manufacturer’. Some suppliers merely put their names onto products and they don’t actually produce them themselves anymore. Instead, they procure them from Asia or wherever.

As for the whole ‘Made in Germany’ talk, the situation has got progressively worse since the industry has consolidated. Leitz bought Isaberg Rapid a year ago, but Rapid doesn’t manufacture in Germany. As such, more and more manufacturers are drifting abroad.

OPI: I’d like to talk about EOSA again. The alliance had to cope with a number of setbacks last year; the French member left, beforehand Poland, Great Britain and so on. Does EOSA have a long-term future?

DS: I can’t judge that. There will no doubt be new members from these countries, and the whole thing will be a question of leadership. The working relationship between the members is really good at the moment and if that continues, it will be very positive.

For us, EOSA is important because we don’t have the same leverage as the globals have in Germany. It’s only because of this European association that we have increased our purchasing power.

OPI: When you say the globals, you’re competing with Lyreco, Office Depot and Corporate Express – now Staples Advantage – for business clients I guess. How is Staples’ retail business going?

DS: I don’t think that Staples can be particularly satisfied with its retail business in Germany. If you go into one of their stores, you see shockingly few customers. It’s all very empty. No, Staples’ retail business is not the problem for me; it’s more Staples Advantage, Depot and Lyreco.

But we are also competing with other large independents, such as Kaut Bullinger, of course, although from a geographical point of view they’re based at the other end of the country and concentrate themselves there, as we do in the north.

OPI: Please describe your typical customer.

DS: My ideal customer is a company that has between five and 50 employees. We also have large clients – we supply hospitals, public sector offices, insurance firms, for example – so we’re involved in all areas. But we try to build up our business with mid-sized clients. I prefer to have ten mid-sized customers rather than one large one. If I lose the large client, then I have a real hole to fill.

OPI: Are these smaller customers more loyal?

DS: The larger the customer, the more you are at risk of being pressurised. It’s always a balancing act. Does the business you have cover your costs? What do we have to do to achieve that?

The loyalty of large customers can’t perhaps be generalised, but working with them is somewhat more unstable, because these companies are constantly being bombarded by our competitors, too. This is why I say I prefer ten mid-sized customers to one large one.

OPI: Let’s go back to Lyreco and Office Depot in particular – they have both recently lost their CEOs. Will that make a difference in the German market?

DS: No. However, the departure of Eric Bigeard is a real loss for Lyreco in my view. I don’t think that he can be replaced. And Philippe Martinez has no idea about the ‘pen and pencil business’, as I call it; he’s from Xerox.

OPI: Is a sale of Lyreco on the cards in your opinion?

DS: Personally, I’ve always assumed that Lyreco would be sold one day. The family is apparently very happy in Switzerland.

OPI: And there is no obvious successor.

DS: The Gaspard family is also financially independent. And the German market for sure is not the joyful place it was hailed as 15 years ago. The concentration of independent dealers continues, and the large players are not immune from that either.

OPI: Three are already too many in the US, many think…

DS: I can imagine that everything will become more concentrated in the US too, definitely. And it will probably be the same in Germany, although nobody can say who will buy whom.

OPI: It’s often a question of succession I guess, particularly in family firms.

DS: Absolutely. And all channels are facing this issue. Senior executives are retiring, because of age or whatever reason, and there are very few good new prospects in the pipeline.

OPI: Is consolidation good for the sector?

DS: I seriously doubt whether it’s a positive development for the consumer, but the trend is unstoppable.

OPI: For consumers, price matters – have prices stayed on a fairly even keel for you?

DS: Not at all. In January we had another lot of price increases to deal with. Whether it was Leitz or Elba, almost all the branded goods manufacturers raised their prices, on average by 5%. Paper went up, as did many raw materials. Whether these price changes will continue throughout the year depends on what developments there are in the economy.

OPI: Talking of price, own brands are becoming more relevant all the time. What’s your view?

DS: Plate already had its own brand in the 1960s. The problem today is that a Leitz folder costs about N2. The consumer can get a folder of almost identical quality without the Leitz name on it for 79 cents. So, of course, the percentage of branded products will decrease and the cheaper products will gain in importance. This means immense competitive pressure for the manufacturers, but it’s the way things are going.

The big boxes also often replace branded goods with their own brands. Some customers don’t even notice. In our catalogue, it says that we don’t deliver replacement goods. We know why, and we don’t do it. In the past, it was regarded as fraud; nowadays it’s the norm.

I think it’s vital for the survival of brand manufacturers to work together. There’s nothing to stop a couple of suppliers from getting together and saying, "OK, we’ll work together in distribution". Your costs would then be in a completely different league.

OPI: Cooperation rather than consolidation. Is that a feasible proposition for the market?

DS: Some attempts have failed, while others work. At the moment, the concept is still in its infancy, like the distribution cooperation between Schneider and Novus, for example, but there hasn’t really been a big push yet.

Take a small manufacturer of writing instruments, for example. For him, it is exceedingly difficult to succeed in the market. If he got together with a stapler manufacturer and cooperated in certain areas, a lot could be gained in terms of costs for both.

OPI: How much of an impact has the recession – I won’t say "crisis" – had on small independent dealers in Germany over the past couple of years?

DS: When there’s an economic downturn, your first concern is costs, that’s always the case. For a small dealer with a large customer, it’s very difficult indeed if that customer then gets bought by another company that already has its own supplier. Suddenly, it’s a matter of life and death for that dealer.

We also lose clients, because they are bought and are then supplied by one of our competitors. We can’t do anything about it – it’s just life.

OPI: How much has Plate specifically suffered during these difficult times?

DS: Relatively little has changed for us. We have lost some clients, but we have gained others. In terms of employees, nothing has changed. I see the whole thing as a temporary weakening of the market, but not as a crisis.

Times like these also have an advantage. You really think about how you can potentially reduce your costs, how you can improve logistics and how you can change the structure of the firm overall. And at some point, the situation will get better again.

OPI: How were revenues affected?

DS: We lost about 10% of our sales in 2008. Our balance sheet at the end of 2009 looks exactly the same as it did in 2010 – pretty flat. Now we’re growing again, around 5% – it’s not phenomenal, but it’s better.

OPI: According to various studies and forecasts, the economy and business in general are on the up again.

DS: (laughs) If you want to know about the state of the economy, all you need to do is listen to the traffic reports on the radio. When the traffic jams get longer, particularly in bottlenecks such as Hamburg or the Ruhr industrial area, then you can assume that the economy is improving. The more traffic jams, and the longer the jams, the more people are in work. And traffic jams in Germany are getting worse again.

OPI: What are the trends as far as product categories are concerned?

DS: The trend for us lies clearly in technical and PC accessories. About 33% of our sales are for ink, toner and technical equipment; 20% is paper. The rest is general office supplies.

OPI: That’s still quite a high percentage in the traditional space.

DS: There’s the constant challenge that old products are phased out, so we need to supply technical products to balance that out.

There have always been plenty of developments in the sector, caused by technical advances, and they have resulted in changes to our structure and our product portfolio. In the 1970s, for example, when the first spirit carbon copiers slowly came onto the market, we had a good business with accessories for those machines; that collapsed very quickly.

We always have products that die. We’re not happy about it, particularly when we built up a category carefully and invested in it. But then there are new categories and you have to constantly be ready in order to not be left behind by developments. We’ve added to our range over the years, sometimes in quite a specialised way. We produce customised rubber stamps, for instance, and that’s going really well. We sell coffee, milk, tea, cleaning products – everything, in fact, that is needed in an office.

The dominant categories today, however, are consumables and computer/technical equipment. Here we have to keep our costs as low as possible as far as warehouse storage and so on is concerned, because the margins are so small.

We made a lot of money with the spirit carbon copiers as I mentioned; accessories for overhead projectors were also very successful and profitable. But I very much doubt that we can make huge profits with ink cartridges and margins of 10%.

OPI: We haven’t spoken about the wholesalers yet. Is there any collaboration?

DS: No, we don’t need to. I can’t even judge their performance, because I don’t need them. Without a doubt, they are necessary to look after the small dealers. Those small independents don’t have the means to buy vast quantities of products. They have to buy small, and that is most efficiently done through the wholesalers. That’s often the reason why even members of Soennecken work with the large wholesale operators rather than just with LogServe – they know it works cost-efficiently and smoothly for them.

OPI: Is there a big case for stockless dealers in Germany?

DS: I can see a big problem with that in Germany. We have trained a frighteningly small amount of people over the last 20 years in our sector. For somebody today to make the transition from a very small stocking dealer to one relying entirely on the wholesalers, a complete re-think would be required and also a lot of experience. It’s not an easy thing to do, but it could certainly be a viable alternative.

If we had better trained entrepreneurial people who wanted to take this step, it would be a possibility. But good people in most cases already have good jobs here and the companies they work for tend to make sure that these people don’t leave.

OPI: For small independents, it’s not only a question of training, but also of succession, isn’t it?

DS: That’s a problem we have all over Germany. More and more dealers are closing down because they can’t pay the rent and they disappear from the market because of financial reasons. And when there is no successor to take over, it often seems the easier option to either shut up shop or get bought by one of the many, many chains. As a result, the high street dies, because people drive to the large shopping centres and do all their shopping there. It’s often cheaper and more convenient – whether the quality is as good is another question.

OPI: How is Plate’s web shop doing? Is it an area that you are pushing?

DS: It is growing, although I can’t say that we’re particularly happy about it. I personally prefer the tried and tested methods – the combination of a sales person with support admin staff in the office. The customer knows and trusts the sales person and our admin staff look after all the little details and know exactly what the client wants – I think that is extremely important.

If you ring some of our competitors, you don’t have a specific customer contact. Sometimes you’re lucky, sometimes you’re not. To me, having the same customer contact all the time is important, not having to speak to a different person every time you ring.

OPI: OTTO Office, Printus and Viking, of course, have all been very successful with their online shops…

DS: OTTO Office is successful at what it does and there are other operators that work like that, mostly smaller ones. How much more scope there is in mail order and web shops, I don’t quite know.

The issue is service. Mail order firms in this sector cannot offer the same service proposition that we do. Take the return of wrongly ordered goods. We don’t like it when a customer says: "I made a mistake. I’m really sorry, but can you come and take lamp X away? I need lamp Y." But we’ll do it, it’s part of the service. If you buy the lamp from a mail order company, you have to get the box, pack the lamp up again and then take it to the post office.

OTTO Office has a good range and its core range is excellent, although it could be a little more comprehensive. With Viking, it’s like stepping in a maze to find anything.

Basically, it’s about how customer-friendly the shopping experience is. If it is customer friendly, then it’s a danger for us, regardless of whether it’s an internet or mail order company, a global player or another independent dealer.

OPI: What is your forecast for the next few years, and how will Plate stay on the ball?

DS: The pressure on costs will increase, and for Plate the training of salespeople and other employees will be very important indeed. That means we have to have more apprenticeships. Generally speaking, we have not been getting enough new people into the sector in recent years – that has to change. To stay competitive, we also have to constantly improve our purchasing and logistics.

OPI: That about wraps it up. Many thanks for your time today and for a glimpse into Plate’s operation.