Gentile calls for IS/TriMega merger
US Communities win should pave the way for rival groups to join forces, says is.group CEO
is.group President and CEO Mike Gentile has said that the recent award of the US Communities contract could – and should – act as a catalyst for "a more synergistic relationship" that could migrate to a merger between his dealer group and main rival TriMega.
Speaking to OPI, Gentile said that he felt the recent contract win is "an opportunity for all independents in the entire independent dealer channel to see what can be accomplished", adding: "I’m hoping that what this does is bring us together in the channel and not split us apart."
Then Gentile was more specific.
"If we really want to demonstrate to the industry that we can work together and grow our business through gaining regional and national accounts, then the two major dealer groups TriMega and is.group should seek a more synergistic relationship that could accommodate disparate operating models to meet dealer needs," he stated.
Gentile said that the collective Boards of Directors had previously discussed the topic of a merger between the two groups, but that "issues get in the way" that prevent any developments.
"This [the winning of the US Communities contract] could and should be the catalyst for that," said the is.group CEO.
The very fact that he makes mention of a possible "split" in the independent channel after what would appear to be a momentous victory against the big boxes highlights the negative reaction in some quarters to the US Communities award, something that grates with Gentile.
"What we have accomplished is not just on behalf of is.group, but for the entire independent channel," he stresses.
"By awarding [the contract] to us, US Communities expressed confidence in the independent dealer throughout the country. Some people have missed that message and some in our industry have been very quick to criticise the model and tell dealers that it’s not in their best interests."
Gentile wouldn’t specify which people he was referring to, but it would appear that TriMega has been quick to play down the potential benefits of the US Communities contract.
Perhaps TriMega is concerned about a flight of dealers heading to its rival in search of a piece of the public agency business?
There are reports that some high profile TriMega dealers have already switched over to is.group following the US Communities contract win, something that Gentile was unwilling to confirm "until the dust has settled".
"There will be some new members," he admitted, "because there are dealers who currently have business in the public sector and they want to grow their dealerships with public sector business and they have the operational capabilities to make those deliveries and maintain the customer relationships."
However, he was quick to point out that is.group is not attempting a "land grab" of dealers to join, although he did say that there were certain markets where the group was looking for dealers "who have the operational capabilities to service the contract".
Sowing the seeds
The awarding of the contract to is.group is certainly a major coup and is, as far as OPI is aware, the first time that such a cooperative, or piggyback, contract has not had some power channel involvement.
Gentile says that he began the groundwork for this success well over a year ago when the current US Communities/Office Depot contract was coming under fire following the overcharging allegations made by Dave Sherwin.
"We first made a call to US Communities over a year ago to introduce Independent Stationers. At that time there was a tremendous amount of publicity about the Office Depot contract and I didn’t know what would happen. In my sales career I’ve always felt that to have any chance of being able to get a fair piece of business the customer had to know us.
Gentile adds that there was a tremendous amount of negativity towards the independent dealer channel at that time.
"It was a difficult sell in the beginning because they did not understand who we were and what our capabilities were. We were successful in getting this message across to them so that when the contract went out to bid, they would allow us to bid on it."
The key to the successful bid was the support that is.group received from United Stationers (who also supported the bid by AOPD, incidentally).
As Gentile succinctly puts it: "Without United Stationers, we would not have been successful."
United’s SVP Sales, Pat Collins, explains. "US Communities had a lot of understandable questions around the ability of a group of independent dealers to serve a large scale national business – what backbone and infrastructure they had to support them from a logistics, product/inventory standpoint, from a technology standpoint and from a marketing power standpoint."
A key word underpinning the bid was ‘consistency’.
"If the independent dealer wants to go out and compete against the big boxes [on national accounts], we have to offer the same value proposition and features and benefits that they do," underlines Gentile. "We can’t approach it with a disparate array of services."
This is where United’s MBS Dev platform comes in. Pat Collins says that the scalability and flexibility of the platform are big plus points, especially when half a billion dollars worth of business comes into play like this.
However, both Collins and Gentile stress that, despite the important role that United played in helping is.group secure the US Communities contract, the traditional roles of wholesaler and reseller have not been blurred.
"We didn’t ask United to do things for us that they don’t do for other dealers," states Gentile.
Pat Collins added that United performed a similar function for the consortium of independent dealers who were recently successful in being awarded the Texas statewide contract.
Battle for business
While this contract is a tremendous opportunity for is.group members, it is certainly not a question of $500 million worth of business being handed to them on a plate, and Gentile recognises that a lot of hard work will be involved.
The business has to be competed for, just as Office Depot did successfully for all those years. Depot says that it will try to keep as much of the business as it can and Staples has said that it will compete aggressively to win customers. OfficeMax should not be discounted from public agency business, as its recent success in Texas has shown.
However, there are a number of trump cards that is.group holds – apart from the strength of its bid – to at least gain its fair share of the business, or more.
Firstly, there is the backing of US Communities itself. US Communities has some 40,000 members and its 20 or so cooperative contracts exceeded $1.4 billion in sales in 2009. Not all of these members are currently purchasing on the US Communities office supplies contract, by the way – that figure is around 10,200, so there does appear to be enormous potential with the almost 30,000 participating public agencies (PPAs) not currently using the contract.
"Many PPAs chose not to buy off the contract because they did not want to do business with Office Depot, but now they’re interested in doing business with their local community-based office supplies dealer," claims Gentile.
US Communities has already organised a series of webinars to present the new contract to PPAs, and its messages so far certainly present some compelling arguments that are bound to sound attractive to agencies: lower transparent pricing and local service being just two of these.
US Communities also has a number of influential sponsoring agencies: the Association of School Business Officials International (ASBO), the National Association of Counties (NACO), the National Institute of Governmental Purchasing (NIGP), the National League of Cities (NLC), and the United States Conference of Mayors (USCM).
The last two, in particular, are elected local officials. "They can now stand up to all of their constituents and say, ‘We have made a major step to support and do business with small and mid-size independent dealers in our communities’," says Mike Gentile, who also describes the contract as a "textbook example of buy local". This is likely to be a pretty powerful marketing message going forward.
is.group has also got a highly experienced team in place.
VP of National Accounts, Kevin France, was a Director of National Accounts at OfficeMax and Charles Foreman has significant national accounts experience from his years at Corporate Express. is.group has also hired four national account managers and a support staff. "We have a team of extremely talented people who are now totally focused on and committed to implementing the model," says Gentile.
Gentile didn’t specify how many dealers are currently on board the programme, but said that is.group is currently conducting a ‘capability assessment’ of dealers and determining where it makes the best sense for them and where they would like to serve the PPAs.
"We need to make sure that we don’t burden any one dealer and we need to be careful that where dealers are doing existing business with PPAs that they continue to have those assigned to them," explained Gentile.
The US Communities programme is an optional one for is.group members to join.
"We have had a series of webinars with our members where we’ve explained the contract to them, so it’s their choice whether they participate or not," says Gentile. "Then, it’s important that they have the operational capabilities to service the PPAs in their market."
There’s no fee for dealers to join the programme, but if there is a trade off, then it’s the requirements concerning the business that they already have with public agencies.
According to the US Communities terms and conditions, dealers on the contract are required to lead with US Communities on all their PPA business. This means offering existing public agency customers the opportunity to switch over to the US Communities contract. The PPA then makes a decision whether it wants to buy off of it or not – but the dealer must lead with the US Communities contract.
Gentile points out that this requirement does NOT apply to GSA/Federal contracts and only affects is.group dealers who opt in to the US Communities contract, not the whole membership.
"There’s a tremendous opportunity to grow in the public sector business," concludes Gentile. "The dealer needs to make a choice."
And choice for dealers is always something that Gentile has felt passionately about.