One to One with Rob Vale, CEO Spicers

 

2007/08 was a good year for European wholesaler Spicers. Sales increased by 13 percent to £644.9 million ($1.26 billion) and adjusted operating profit climbed by 57 percent to £20.1 million.

 

The UK business, which had been lagging in recent years, is back on track again, and the European business continues to develop.

 

opi.net spoke to Spicers’ CEO Rob Vale about the improvement in the company’s fortunes.

 

OPI: You were interviewed by OPI shortly after taking over from Bill Armstrong. Have your impressions of the industry changed since then?

 

Rob Vale: I took over from Bill in February 2006 and I must admit that my overall impressions haven’t changed very much from those I formed fairly quickly after joining, which is really all about the resilience of the dealers. Despite what the economy throws at us, customers still respond to people who really understand their needs and take care of those needs.

 

I think the dealers who are doing well are doing so because they are innovative, they’re fast paced and they understand what it means to provide outstanding service to their customers. I don’t think I’ve ever worked with such a committed, innovative group of people.

 

OPI: Your yearly results have clearly shown a marked improvement over the previous year. What do you think are the main factors for this?

 

Rob Vale: The UK is half of our business and there is no doubt that this is where we’ve had the greatest challenges over the last few years. But we’re pleased overall with the progress that has been made in the UK and there are a number of specific things that we’re absolutely delighted about. We’ve improved service throughout the year without a doubt, in terms of fill rate, quality and all the other measurement criteria.

 

We certainly had some difficulties with our transition to FedEx as our new parcels carrier, but now we’re getting the best ever quality out of a parcels carrier, so our conclusion would be that it was worth the pain. Although we’d rather not have put our dealers through that pain.

 

OPI: Did the service levels get that bad?

 

Rob Vale: I don’t think our service was ever bad. What we must remember is that people’s demands for service continue to increase and what was acceptable a few years ago may not be acceptable today. So what we wanted to do was improve the levels of service we offered, both in terms of accuracy and fill rate.

 

Accuracy is more important than ever because an increasing amount of deliveries are directly to the end user on behalf of the dealer. So that remains a key focus for us.

 

The other point is fill rate. It is the nature of our business that we’re dealing with a vast range of products. I’m not saying it’s easy, but it’s easier to get very high fill rates on three or four thousand SKUs than it is on 18,000 SKUs – we set ourselves the same sort of targets on 18,000 SKUs that a large contract stationer might set themselves on 4,000. We’re very tough on ourselves on this – we’ve got to provide that quality of service to our dealer partners because they need to be competing with those standards of service out there in the market.

 

OPI: Has the closure of the Park Royal distribution centre had an impact on your service levels?

 

Rob Vale: It has certainly not reduced our service capabilities. We had three distribution centres around London and it was very apparent that we could get the job done just as well with two and take costs out at the same time. I think the project was extremely well managed by the UK team; we achieved the results we wanted and did not lose business in the process.

 

OPI: Your results statement referred to the strong performance of EOS in theUK.

 

Rob Vale: If you turn the clock back a couple of years, we were being given lots of feedback by our dealers that our offer in the UK was not good enough and neither was our pricing. I think it would be fair to say that, quite simply, we hadn’t put enough resources, energy and effort behind this category.

 

We’ve now done that – we’ve had some fantastic growth in EOS in the UK and in other markets. We’ve achieved HP premier status in the UK, which helps us to pass on additional benefits to our dealers. I even understand we are the fastest growing HP account in western Europe.

 

OPI: What about other categories? Are they growing?

 

Rob Vale: In the UK, we had double-digit growth and while EOS was the primary driver it was not the only category which grew. We were especially pleased with very good growth in other categories such as furniture and facilities management. FM is a growing product area and you’d expect growth here, while the performance in furniture is more due to enhancements in our offering, in terms of our range and our ability to get it to where it needs to be. Having said that, it will be a tough challenge to grow this category in the coming months.

 

OPI: So you’re expecting a tougher year ahead?

 

Rob Vale: I cannot say exactly how things will pan out in terms of our business, but we’re definitely expecting the economy to become tougher.

 

From our point of view, we are going to be trying to get our customers to place more of their spend with us, whether this is share from other wholesalers or distributors or directly from manufacturers.

 

I’m convinced that the arguments for dealers for de-stocking and spending less on their own infrastructures are absolutely compelling and it is no surprise that the stockless dealers, or those who have very little stock, are our fastest growing customers.

 

We’ll be encouraging dealers to look very carefully at how much money they have tied up in their own infrastructure because it is a great opportunity for them to use a highly competent organisation who can do a lot of that work for them and for them to focus on the aspects of their businesses which really lock the customer in.

 

OPI: Turning to your European business. What kind of year did they have?

 

Rob Vale: We had growth in local currency terms in all of our markets and we had very strong growth in a number of markets with double digit growth in Italy, Benelux and Spain. In fact, Italy was off the scale!

 

OPI: Why do you think that was?

 

Rob Vale: Italy and Spain are similar in that they are very fragmented markets. There are a huge number of players in the market who are not clear whether they are a retailer, a wholesaler or, in some cases, a manufacturer.

 

We’ve always been very clear with our resellers about our model. Those in the trade in Italy and Spain are realising that we can provide them with all the marketing tools they need in terms of e-commerce and catalogues and we don’t then go and compete with them in the marketplace.

 

This has come as something of a surprise to some of our customers in these countries and is clearly something that differentiates us from our competitors and that it appreciated.

 

There is an opportunity for us to bring clarity to these fragmented markets – and this is something that we want to take to other markets in the future.

 

OPI: Can you be more specific?

 

Rob Vale: All I will say is that there are plenty of opportunities in Europe. We believe that there are markets that will respond very well to our core model and, while I don’t expect anything imminent, we are looking more carefully now at these opportunities than we have been doing over the last few years.