In its last quarterly webcast back in May, Staples said that one of the key initiatives in its North American Delivery division was to grow its facilities and breakroom supplies business.
This is bound to resonate within the independent dealer community as the jan/san segment has been one of its major growth drivers over the last couple of years.
Facilities Solutions is one of the six core offerings that Staples has identified as part of its global one-stop solution for business customers (the others being Office Products, Print Solutions, Business Interiors, Technology Solutions and Promotional Products).
Staples has alreadysaid that it has expanded its facilities assortment, sharpened its pricing and ramped up it marketing efforts, leading to top line growth above the house average in the first quarter.
opi.net caught up with Jay Mutschler, SVP of Staples Advantage, to find out more about this focus on facilities and breakroom products.
opi.net: Perhaps we could start with a little bit of background as to why your facilities offering needed expanding and what the plus points of the new offering are.
Jay Mutschler: As you probably know I was President of Corporate Express in North America and part of our strategy was to expand our products beyond office products and we looked at a number of different businesses and one of the businesses that was very attractive to us was facilities and breakroom supplies, traditionally known as janitorial supplies and cleaning products.
We made an acquisition of a company in the north west of the US, in Oregon, called Coast Wide Janitorial Supplies. We made that acquisition and it gave us a great chance to really see close up what this business was all about. We used a great deal of their business model to really develop our own operating system within Corporate Express and when Staples acquired Corporate Express in July 2008, one of the first things that they did was to take a look at the ancillary lines of business that we had and to try to determine which one was the most opportune to grow our business beyond office products.
I think that they immediately shared the same enthusiasm for facilities and breakroom supplies that we had shared. Very quickly on Staples made a decision that this was going to be a business that they were going to pursue because it was such a natural tie-in to office products distribution, and when we talked to our customers, they indicated to us this is a product offering that we would very much like for you to supply to us because it’s similar in nature to office products. It’s used in the office, it’s transactional in nature and we trust Staples. We trust your service, we trust your people and so we would encourage you to continue to pursue this.
Therefore Staples has made a decision that this is going to be one of our core growth initiatives and we have committed to this business from a long term perspective. We’re investing a great deal into the infrastructure to support our customers and I think, uniquely to other people, we had a great deal of that infrastructure in place through the acquisition of Corporate Express. We had product offering, we had sales specialists, we understood the unique supply chain aspects of this business.
And so what’s happened is they’ve taken what was done before and continued to expand on it. And today we have a number of product specialists from that industry that support our office supply sales organisation. As a matter of fact we have about a 9:1 ratio right now in our account management group, that is we have one specialist for every nine account managers out there who are working with them and their customer base exposing this product and helping them to sell it.
opi.net: So this will be someone the account manager can turn to if they need some specialist advice regarding the facilities offering.
JM: That’s right. So typically what happens is the account manager meets with the buyer and the customer, leverages the trust and relationship to open a dialogue regarding this product segment and then brings in the subject matter expert to help them close the deal and start supporting them in this category.
opi.net: Is the facilities buyer the same as the office supplies buying or generally are they different people?
JM: Typically in the smaller customers it’s the same buyer and then as you move up the food chain as far as account size, once you get into your larger customers, there’s a separate facilities buyer of this product.
opi.net: So there’s a challenge there getting in front of the right buyer to start with in those cases.
JM: Yes. They’re getting in front of the right buyer and, of course, as we move up with our larger enterprise accounts, then we have a more specific product subject expert that supports our enterprise accounts and they call directly on that buyer and they really manage that whole process of selling them a full system.
opi.net: How much potential do you see in this facilities segment when you compare it to office products?
JM: Well, we’ve sized the market as being about a $23-24 billion sized market and I think that we certainly believe that over a period of time we can obtain a good solid share of that market.
opi.net: So in what way has the former Corporate Express offer been enhanced in the new Staples offering?
JM: Well, I think we’ve enhanced it with more effective marketing material, more extensive catalogues, more prevalent website exposure to the product line, additional product offering as far as the product assortment, a deeper product assortment and additional direct relationships with major manufacturers in this segment.
opi.net: I was going to ask you, what was Staples doing previously? Was it relying on wholesalers to provide the products which you have large volume requirements for?
JM: Yes, it was primarily supported by the wholesalers and they were primarily pursuing the convenience spend in this category.
opi.net: You’ve got your Sustainable Earth By Staples brand as part of the eco friendly offering for FM supplies. How important in general is the Staples own brand as part of the offering or do customers like to use trusted brands when it comes to cleaning and hygiene and that kind of thing?
JM: I think in the initial conversations that we have with customers, typically they want to discuss the branded type products and chemicals in cleaning supplies. Once we’ve had an opportunity to introduce them to the Sustainable Earth line of chemicals and they’re able to see first of all the eco value plus the effectiveness of the products, it hasn’t been difficult to get a lot of excitement from the customer around this product offering because our customers today are telling us you’ve got to help us become more green in our organisations. And the ability to provide them with a green product, that’s highly effective and its application has been received very well.
opi.net: Is this a message you’re still seeing despite the economic problems? We hear that green messages are just being put a bit on the back burner while people worry more about just saving money and not so concerned about the environment. Is that a fair statement or are you not seeing that?
JM: I think that even though we’ve had a tough economic period and people are very focused on price, there’s an enormous focus within our customers today around green products. It’s not that they want to pay a huge premium for those products, but it’s top of mind for most of our customers for us to find ways to provide them with more eco friendly products.
opi.net: As I understand it, facilities is the area you’re expecting the most growth for in 2011. What kind of targets are you setting there for growth?
JM: Well, we don’t discuss specific targets, but I can tell you that the targets we have for growth will be significantly greater than our core business.
opi.net: But I guess starting from a lower base.
opi.net: In terms of the staffing requirements, has it meant taking on extra sales reps or was it really a combination of existing Corporate Express and Staples reps that were already in place?
JM: Well, I think there was a good base of specialists through the Corporate Express acquisition, but Staples has continued to further invest in this category and we’ve continued to invest in a number of different areas, whether it be sales specialists, inventory investment, marketing and awareness, systems to accommodate the special needs of these customers, systems capability and functionality. So Staples, since the acquisition, has continued to make this a priority for investment in this business for the future.
OPI: Obviously the whole facilities offering fits into this new package you’ve got for Staples Advantage with six specialised products and service areas. Have you got specialised teams for each of these categories?
JM: Yes, in each of those areas we have sales specialists that support the general line office products sales organisation.
OPI: And what’s the reaction to this single source model now that you seem to be pushing this more now with the new Staples Advantage offering?
JM: I won’t speak for all customers, but I will tell you that more and more of our customers are asking us to provide a single source solution to consumable products like that, whether it’s promotional products or whether it’s facilities or print or other things. The customers are seeing great value in dealing with one supplier who they can trust who can provide a high level of service and can combine deliveries and reporting and all of the things that are important to them. They see great value in that and continue to encourage us to bring them a single source solution.
opi.net: I suppose that would tend to be the larger enterprise customers?
JM: Yes. I think once you get into the larger customers it requires visiting with a broader audience within the customer, but because as you get into larger customers, there’s a specific person who’s buying facilities, there’s a specific person who’s buying office products and furniture and others. But it still allows us to utilise that relationship that we have and that trust that they’ve built to get warm leads into those decision makers.
opi.net: I imagine things like tech solutions and print solutions, they don’t quite fit neatly into that box. They require more of a specialised input or service from yourselves.
JM: It’s the same with furniture. Once you get into a contract furniture environment if you’re selling desk, chair and file, you can utilise your supply chain infrastructure. Once you get into large projects that involve design and project management, install and delivery, that becomes a separate thing as well.
opi.net: I read a comment by an analyst recently that suggested that Office Depot and OfficeMax had an opportunity to take business from Staples after the Corporate Express acquisition due to customer leakage. Are you seeing that at all or is it in line with what your expectations were previously?
JM: I think as you will know there is kind of a natural change of accounts that goes on in our industry over a period of time, but specifically to the acquisition of Corporate Express, from my personal perspective I think that it has been handled very well and with very little customer disruption, and we’re real pleased with how that has come out from the standpoint of customer retention and new account acquisition.
opi.net: I appreciate your time, Jay. Thanks for fitting me in today.
JM: Thank you. We appreciate your taking the time to hear about this important initiative of ours.