Wherever I may Rome
This month’s Global Dealer profile takes us to the Italian capital of Rome which, as legend has it, is the home of a priest named Valentine whose martyrdom in the third century is now commemorated by lovers around the world on 14 February. OPI spoke to Stefano di Veroli, CEO of C’ART and Office 1’s master franchisee in Italy, who is based in the city
While millions of people around the world will send and receive Valentine’s cards this month, it won’t actually be the case in Italy, where card-giving is not as popular as in markets such as the US and the UK.
"We don’t really write in Italy; we prefer more personal contact such as going out to meet people or speaking on the phone," says Stefano di Veroli, CEO of family-owned C’ART gift and stationery chain who has been running the franchised Office 1 operations in Italy since 2000.
The fact that Italians like to go out so much is one reason why there is still a large number of small shop owners in the country, although this is slowly changing as the ubiquitous supermarket chains become more powerful.
With such a fragmented marketplace – there are still about 10,000 small independent stationery stores in Italy – di Veroli says he spotted an opportunity ten years ago to develop the office products retail space after enjoying success with C’ART’s social stationery and gifts franchised concept.
"One of our partners at the time was leading Italian notebook manufacturer Cartiere Pigna. We were doing so well together with C’ART that office supplies seemed like a logical next step, so we scoured the globe to look for a suitable partner. We needed to do this because we had a lot of experience in franchising, but not in the office products segment."
Di Veroli’s international search soon led him to Mark Baccash’s Office 1 Superstores International brand and the two parties found their combination could be a winning solution for the Italian market.
"The market was starting to change back then," says the Italian. "The global office supplies players were already here or about to enter the market. Our concept was to help the smaller dealers by providing them with an international brand name and our franchising expertise, backed up with a full package of marketing, merchandising and commercial services. If you like, a chance to defend the little dealers against these new international ‘conquistadors’!"
Di Veroli also says that the concept provided an alternative to Italy’s leading stationery chain, the 900-store strong Buffetti group.
"Buffetti was everywhere, so in order to compete it was important to have a strong brand and a clear marketing strategy. We were also positioned as a discount chain, as opposed to Buffetti’s more higher-end image."
Office 1’s flagship outlet located in the heart of Rome near the Colosseum is a 1,000m2 store and one of three that is actually owned by the C’ART group.
"It was important to establish our own stores as a pilot so that we could test the concept and better understand the office supplies business before we started franchising," says di Veroli.
Interestingly, Office 1’s stores in Italy offer very few Office 1 branded products. Di Veroli admits that this is not an ideal scenario, but C’ART’s distribution and supply chain model means that it is currently unable to stock products, instead relying on wholesalers such as Spicers to replenish store stocks.
"Carrying more private label is definitely something we are looking at because it’s an important factor in increasing margins," he says.
"Take something like printer consumables. If all resellers are stocking the same OEM products, anyone can just push the price down because there is no other differentiation. If we had a good value private label product – a lot cheaper than the OEM equivalent but still good quality – it would be a good opportunity for us."
This is part of a trend – by no means unique to Italy – of cash-strapped consumers looking for better value purchases. Italians still love their luxury brands and are willing to pay a high price, but at the other end of the scale, there is a growing market for discounters, something which di Veroli thinks could benefit Office 1’s low-cost message versus the independent stationery retailers. In fact, the independents are Office 1’s main target.
"The traditional background of independent stationers in Italy is often school-related products, so a stationery shop was commonly opened selling products to students. As the supermarket chains moved into this category, independents had to change their model – some of them moved into gifts, others into office products. They still represent a huge piece of the market, although largely traditional, highly fragmented and in decline. But that’s where we have to go to take revenues, not against the international players or the big chains."
Di Veroli also refers to a number of other changes in the marketplace. "It’s not just a question of the recession ending and people having more money to spend," he states. "It appears that people will have to adapt longer term to living with less disposable income. Italians haven’t cut spending on food and travel, but they have cut down on things like office supplies."
This could shake up the market a bit and accelerate consolidation, he argues.
While the main Office 1 store in Rome has been growing sales year on year to reach the current level of around j1.5 million ($1.9 million), di Veroli admits that there have been several challenges to achieving previously set targets. Currently, sales are up 5%, but this falls some way short of the initial goal of a 25% per year increase.
While the economy has played a role in this outcome, di Veroli also says that the reluctance of OP buyers in small companies to change their purchasing habits has also had an impact, despite Office 1’s competitive prices and extra services such as delivery, which are not always offered by smaller retailers.
"The person who buys office supplies is often a secretary who doesn’t necessarily look to see if the company is getting the cheapest price or the best service, and there is a tendency to stick with the supplier that they’ve always known. They appreciate what we do, but it takes time to win new business."
The digital age
With just over 20 Office 1 stores established throughout Italy, di Veroli is now looking to the power of the internet to drive the next stage of growth. Italian businesses have been slow to embrace the convenience of online shopping – partly due to the Italians’ love of shopping and human contact, partly because of the slow roll-out of broadband internet connections – but the C’ART CEO believes the time is now right to develop this area.
"We are probably about ten years behind other Western European markets in terms of web sales," he suggests, "but the internet is growing faster now."
In what could be seen as a fairly pragmatic decision, di Veroli says that Office 1’s strategy in the Italian market is not to push any new superstore openings right now, apart from exceptional circumstances, but to allow franchisees to buy into a web store concept.
"With the way the market is at the moment, labour and rental costs make retail an unattractive proposition," he argues. "Our web stores mean no rent and no employees, but the same opportunities to sell via a catalogue, and the same advantages of low prices and efficient, direct delivery. With the strong backing of the Office 1 Superstores International office in Florida, we are optimistic that we will succeed." n