Doing nicely, thank you

 

Doing nicely, thank you

 

Growth may be slowing in the Australian OP market, but there is still plenty going on

 

A new study from Australian OP expert Penfold Research paints a reasonably optimistic picture for the near-term growth of the industry in the country, despite the current economic concerns.
The OP market in Australia is not one to be sniffed at. Penfold Research puts the core office products market – stationery, paper, computer consumables and accessories, and business machines – at AU$7.5 billion (US$7.1 billion) at end-user prices.
Add to that furniture, kitchen supplies, janitorial products, promotional products, art/craft and printing services and you come to AU$11.8 billion (US$11.13 billion).
The sector has seen some healthy, above average, growth figures over the last few years and the core OP market grew by an impressive 7.5 percent in 2007.
But this is not expected to continue.
Andrew Penfold forecasts considerably lower growth in 2008 and 2009 due to the effects of a slowing economy and tighter consumer spending, associated with the global credit crunch. However, the country’s position as a beneficiary of the global resources boom will help to offset some of this impact, meaning that the market is expected to post better results than the flat to low growth expected in most developed countries.
As elsewhere, the market is being fuelled by a thirst for technology products (see chart), but so far OP dealers appear to be losing out to the retail channel.
Penfold explained: "It’s more difficult for OP dealers to offer the product expertise and support in this category, and the market is dominated by the electronics retail sector."
However, smaller dealers – which have been experiencing higher growth than the nationals – have been able to show more flexibility and proved themselves more adept at providing better service levels for their customers.
Penfold argues that the large operators – the two biggest being Officeworks and Corporate Express Australia – are experiencing flattening sales growth partly due to "sector saturation" and internal issues associated with being larger and less flexible than the smaller players.
As for the new kid on the block, Penfold believes that the impact of Ofis, the new OP chain established earlier this year by retail group Harvey Norman, will be minimal over the next couple of years.
"Ofis only has four stores at the moment and this number could rise to ten by the end of 2009," he said. "For the time being, however, it’s definitely not a significant player in the market."
Some have questioned Gerry Harvey’s motives for setting up an OP retail chain at this particular time.
"There is some speculation that the aim is to create the brand and then sell it off to an international player," said Penfold. "But at the moment it is just that – speculation!"
Anyone know of a world-leading international OP company about to enter the Australian contract market that may be on the lookout for retail space?