Hot Topic: Manufacturer Rep Groups

Manufacturer rep groups are part of the make-up of the US OP landscape, but ongoing consolidation, the pressure to cut costs and need to branch out into adjacent categories have meant that they too have had to up their game.

Jack of all trades, master of none – that’s how one person OPI spoke to said manufacturer rep groups sometimes used to be referred to in the past. Whether that rather harsh statement was ever true is debatable in itself, but it’s certainly unlikely to carry much weight these days.

In the US at least, where the concept of rep groups is long-established and accepted, manufacturers have come to rely on these groups a lot more over the past few years.

The reasons are manifold. The need to take cost out of the supply chain has been a hotly debated topic of late and has resulted in a host of new – sometimes unexpected and eyebrow-raising – initiatives and ventures. Manufacturers are far from exempt from these cost efficiency pressures and are indeed the first link in the chain.

Couple that with the consolidative trends overall in the industry and the growing need to broaden your skills to address multiple channels and product categories, and it’s no surprise that outsourcing the sales function at a very minimum has its advantages.

Economically not sustainable

Avery is an industry stalwart that has gone through a major reorganisation process over the past 2-3 years, first through internal restructuring and then as a result of the purchase of its Office and Consumer Products (OCP) division by Canada-based labels and packaging firm CCL in a $500 million deal at the beginning of 2013.

Many people – in sales, marketing, HR – lost their jobs in that period, explains Barry Lane, VP of Sales, Commercial, at Avery: “We’ve let all of our direct sales people go and that was tough. Some of them had been here for thirty years or so, but our model just wasn’t economically sustainable anymore. It was the right thing to do and something we had to do, and because we got sold, the process was perhaps even more radical.”

And while Avery had been supporting the rep firm model for many years, the need to become more efficient further cemented that support. Says Lane: “We now have a sales business model whereby we have our own national account managers that manage the mega channels as well as the headquarters of our large dealers and wholesalers; in other words TriMega, Independent Stationers, WB Mason, United Stationers and SP Richards.

“Our own folks manage that class of trade while the rep groups manage our independent dealer channels. So our manager for TriMega, say, would cascade all the information, objectives and strategies down to the rep groups at local independent dealer level.”

Naturally, some dealers, especially the larger ones, may prefer a direct manufacturer relationship. Historically, one of the gripes of dealing with a rep group had to do with the speed – or indeed the lack of it – of decision-making, but a direct relationship with all customers countrywide simply isn’t economically viable anymore.

Lane adds: “We believe that every customer across the country deserves the same coverage. We don’t pick and choose and say, ‘Well, I’m sorry but that’s Montana and that’s not important to us’. And the best way to make sure our brand gets represented and marketed in all geographies is to have rep groups who go there with multiple lines.”

Those multiple lines can be another sticking point – rep groups don’t just represent one manufacturer, they represent several and that’s perhaps one of the reasons why the concept hasn’t really caught on in any other part of the mature OP world, particularly in Europe where the challenge of expansive geographies isn’t as acute as it is in North America.

As Ron Zusovsky, Principal of rep group firm The Source Group, says: “Some manufacturers want their products being the only thing a sales person talks about on calls. They believe that they are not getting enough mindshare of their reps. My counter to that is that our customers no longer sell products. Whether it is furniture, office supplies, MRO or jan/san, dealers want us to provide solutions both to them and to their end users. We are specialists, solutions sellers and consultants all wrapped into one.”

Indeed, from a reseller perspective, one of the other core advantages of a rep group is the fact that representatives go in with a whole range of products. That not only addresses the time pressures resellers are facing, but also allows them to picture entire product themes in different categories rather than just single lines.

Also, and importantly, says Darlene Akers, President of Akers Business Solutions, if a manufacturer’s direct sales rep were to call on a customer and got turned down, it would take months to get back into the dealership to present its products again. “A manufacturer rep has many reasons to call on a dealership and is back in there the next week,” she adds.

There’s no doubt that the remit of rep groups has changed and has, in fact, become considerably more comprehensive. And while consolidation in the traditional OP manufacturing community has removed a substantial amount of commission dollars from the market, the upside is that, for rep firms just as much as for the resellers they sell to, the pool of manufacturers they can draw from has increased hugely.

Says CEO of The Highlands Group (THG) Bob O’Gara: “There has been considerable investment by facility suppliers as the channel has gained more strategic importance for them. We realised that a national footprint coupled with investments in talented leaders who are knowledgeable about facilities would give us a clear competitive advantage with facility suppliers looking for representation. As a result we now have a comprehensive bundle of blue chip facility suppliers.”

Branching out

Whether it’s facilities management (FM), furniture, industrial supplies or education – all categories mentioned by the various rep groups OPI spoke to – this branching out is exactly what many resellers want to see.

For the manufacturers too, it’s an opportunity to penetrate reseller channels where they’ve previously had a low-key footprint or indeed are new to entirely.

Beth Wright, VP Americas of Bi-silque, says: “Throughout my career, I’ve always worked with rep groups across the country from a field-selling perspective. But with my current role of running North America for Bi-silque, as a fast growing national brand – MasterVision – when you start looking at brand recognition and getting into the dealer community, that’s really where rep groups add the most value.

“Our largest rep group is Frey Gaede (which also runs Blazer Brusa and Tri-Gold) which serves the south-east and middle of the country. The reason why I hired them is because they have the ability to look at a business differently. They know that in the industrial channel, for example, customer needs are a little bit different and for that reason we have to approach that channel differently. The good old days of your salesman going out, having a couple of drinks with the customer and you’re going to get all the business – they’re over. These sales organisations have to arm themselves; they have to be more technologically savvy than they’ve ever been and they have to think outside the box. And the rep groups really do that.”

How far a manufacturer wants to take its representation various enormously. Avery’s Lane comes from a long-established traditional manufacturer and for him it’s all about getting in front of the customer to sell. “One of the things that I believe manufacturers need to be very sensitive to is that manufacturer reps are sales people for a reason,” he explains.

“We have said to our rep group: ‘We don’t want you sitting in front of a computer all day; we don’t want you to do an analytical spreadsheet. We‘ve got people who are category experts and who do our trade marketing – we want you to sell. Take the tools that we’ve developed, sit in front of customers and sell.’ In my opinion, rep groups should do what they’re really good at – sell, persuade, problem-solve, build business for customers.

“Of course, financial and business acumen is the price of admission today – you shouldn’t be in sales if you don’t have those two things. But the key is not to overburden the manufacturer reps and try and turn them into category analysts.”

Comprehensive offering

Yet overall, it’s arguably the deep level of cooperation between rep groups and manufacturers that has changed the most over the past few years. From data entry and marketing functions to a variety of administrative tasks being outsourced to rep groups, they’ve all become part of the mix, with real partnerships being developed between manufacturers, their rep groups and indeed the resellers.

Steven Glass, Managing Partner of the Midwest Resource Group, says: “We are now having great conversations with manufacturers that we traditionally haven’t had about how they can protect the market differently, how they can engage and increase their sales, maybe not even just in traditional OP, etc.

“Our vantage point and our value proposition to the reseller, meanwhile, is that we see all the other channels and product distribution networks and know how they operate. So we have a knowledge base that has a real value.”

That’s good for the vendors too. New manufacturers to the business supplies channel, in particular, benefit from employing a rep firm. Says Nick Aronis, President at The Godfrey Group. “We offer a turnkey solution for manufacturers that are new to our industry so the learning curve is eliminated. For example, many jan/san manufacturers have chosen to hire rep groups to help them understand the channel and significantly grow sales. Our channel doesn’t seem complicated to all of us because we do this every day, but it is daunting to a manufacturer that is new to our business.”

Whether manufacturers partner with a variety of rep groups, both regional and national – Avery is a keen exponent of this – or just one firm is a case of individual and often historical preference. For instance, earlier this year, GMi Companies, consisting of Ghent, VividBoard and Waddell, made a concerted effort to switch from over 20 different rep groups to one national one, believing that it would streamline and simplify its go-to-market strategy.

Tech-savviness

To efficiently do all the jobs that have become part and parcel of the rep group’s role, tech-savviness has been vital. And here, adds O’Gara, rep groups have historically not been the first in the queue. “Market coverage is accelerated and vastly broadened through the effective use of email marketing campaigns and social network marketing. Investments in a robust CRM system allow representatives to engage in multilevel selling campaigns coupling inside sales support for field sellers. This coupling, along with digital marketing, is the most cost-efficient and effective path to market for agencies in the future.”

Susan Roberts, Principal at Unified Sales Associates, agrees: “Technology is dissolving traditional boundaries between people, countries and industries. There’s a real blurring of the marketplace. Successful manufacturers, resellers and rep agencies are taking full advantage of this shift in the way people shop and buy.”

Collaboration – within the restrictions of competition – is key, she adds, saying that Unified Sales has developed relationships with other sales agencies and developed and launched a best-in-class technology platform.

Indeed, what’s interesting is that despite the competition that exists and the numerous guises of rep groups – regional or national; focused mainly on core and/or adjacent categories; offering a pure sales function as opposed to a fully-fledged sales, marketing and administration model – there is a great deal of collaboration going on between them.

There exist already some umbrella groups that comprise regional rep groups – Harbinger National is just one of them, bringing together firms like Frey Gaede, John Motley and The Godfrey Group – while operators like THG have been steadily expanding their reach through acquisitions and partnerships, most recently into Europe (see ‘Reaching Europe’).

Even within the vendor community, Bi-silque’s Wright points to collaborative ventures that may from the outset seem surprising. She says: “What you will increasingly see is non-competing manufacturers having some very strategic alignments with rep groups.

“We may not talk about it, but we are definitely looking at what the other one is doing to make sure that there’s not conflict. But ultimately there has to be alignment and collaboration in how manufacturers go to market and in my opinion having supplier cooperation and working together with the rep groups is a good go-to-market strategy that will help resellers grow their business.”

Rather than just another link in the supply chain, rep groups have – in the US at least – stood the test of time and are now arguably more effective than ever. Whether that perception will ultimately travel to other parts of the world remains to be seen.