by Andy Braithwaite
It’s winter in the northern hemisphere at the moment, so for this issue’s dealer profile we donned our woolly hats and moon boots, and headed up towards the Arctic Circle to Anchorage to speak to Mari Wood, VP of leading Alaskan dealer, the aptly-named Arctic Office Products
Alaska may not be the biggest or most convenient market for an office supplies reseller, but despite – or perhaps because of – its special challenges, Arctic Office Products has grown into a leading full-line dealership in the state.
Founded in 1946 as an office machines company by the parents of current owner Bill Borchardt, Arctic now employs almost 110 staff and operates three divisions: supplies, machines and furniture.
Based in the state’s largest city Anchorage (around 300,000 residents), Arctic has another location in Fairbanks and is looking at establishing a third presence in Kenai, a two and a half hour drive from Anchorage.
VP Mari Wood, who is responsible for running the supplies operations – the company’s largest division – has been at Arctic since 1979. She wouldn’t reveal the company’s exact annual sales figures, but the dealer is one of TriMega’s largest members with over 5,000 active accounts and revenues estimated to be well in excess of $10 million.
Buoyed by the presence of the oil and gas industries, Alaska has been somewhat less impacted by the economic downturn than the rest of the US. Latest figures for the state put the unemployment rate at 7.9 percent, comfortably below the national average of 9.6 percent.
That’s not to say that Arctic has been immune to cutbacks in spending.
"I’m used to double-digit growth here and we have been relatively flat this year," admits Wood. Still, the company was recognised as one of the dealers with the greatest growth percentage at this year’s TriMega One-to-One awards in April.
Wood adds that while she has noticed the private sector cutting back, public sector spending – which accounts for a third of Arctic’s business – has been relatively unscathed.
Arctic is one of the dealers on George W Allen’s GoverNet programme for TriMega dealers and a founding dealership of the group’s Point Nationwide national accounts programme.
Wood is confident that Point Nationwide will be a success in 2011 and represents a better long-term strategy than is.group’s National Accounts Programme, despite is.group’s historic award of the US Communities contract.
"I wish is.group dealers the best of luck, but I think they’re going to find with their business model, and the margins they have to sell at, that it may not be a sustainable project," she predicts.
"I think the difference is that we are backed by a much stronger purchasing programme with TriMega, and we can actually compete with the big boxes because we’re on a level playing field. That is going to be the difference. I’ve looked at both programmes and I’m with TriMega."
Wood says that Alaska’s remote geography is just a reality that has to be dealt with. One consequence is that Arctic stocks around $1.2 million worth of supplies inventory (or around 4,000 items) in its warehouse at any one time as product shipments take around seven working days to arrive by ship from Seattle.
The products are not gathering dust, however; Arctic’s inventory turn is at around 12, and even higher for fast-moving lines.
The majority of items are purchased direct from manufacturers with some fill-in products coming from wholesalers.
"We time those orders from the wholesalers to coincide with the sailing of the two big shipping lines, so that we can get products here relatively quickly for the customers," says Wood. If customers need something urgently, Arctic can arrange a 24-hour air freight delivery, but that’s a service that customers have to pay for.
In order to provide coverage to the whole state, Arctic relies not only on the road system but also shipments by mail. A large mail order department ships out one to two pallets every day to rural Alaska.
Big box competition comes in the form of a handful of Office Depot and OfficeMax retail stores (Staples is planning to open three outlets in 2011) and a Staples Advantage business unit that came out of the Corporate Express acquisition.
"Staples has five sales reps and they’re probably tougher competition, but not nearly what we anticipated," notes Wood, who suggests that the big boxes could be using Alaska – which traditionally has higher prices than the rest of the US – to bolster their margins.
"They’re selling on price to a great extent, but the reality is that every time we come upon a customer of theirs that will let us see invoices, we discover that we are able to give a better deal for the customer and still leave some margin for us, so it’s a win-win," she adds.
In comparison to Staples’ five reps, Wood’s supplies division has 13 account managers and the personal relationship and contact with customers is still a vital component to Arctic’s business. Wood says that a significant amount of new business still comes from referrals.
As part of this connection with its customers, Arctic has held a November ‘Open House’ event for the last nine years at its Anchorage and Fairbanks locations.
Despite lasting just a few hours, this year’s Open House saw 11 manufacturer reps fly in to present their products and offer samples, and over 350 customers attended.
It’s also a chance for Arctic to help the local community. Over 3,000lbs of food was donated to the Food Bank of Alaska, one of the charitable organisations that Arctic supports.
That personal contact approach probably explains why still only 40 percent of Arctic’s business is done online – less than what you might expect from a progressive dealer and considerably less than what the competition would hope to achieve. "I understand the big box model is to sell customers a programme and then move them onto the internet, and then, if they really have to talk to someone, direct them to an 800 number somewhere," claims Wood. "We do present the internet option to our customers, but we find they are much happier talking to Alaskans who can actually check stock, find them products and give them information."
Wood also says her account managers are all fully trained to work on a consultative basis with customers, both in terms of the products and the programmes that are offered. "We hear about a move away from products to offering ‘solutions’, but that’s basically something we’ve always been doing," she states. "It’s called customer service and I don’t think that’s anything new."
Just to give an example, Wood said that at the end of the interview with OPI, she was visiting a client to measure a workstation for a 3M keyboard tray. It’s hard to imagine a big box VP of sales providing that kind of personal touch.