by Reiner Eckhardt, former Managing Director at Dutch manufacturer Atlanta Office Products
I’ve recently had time to reflect on how the OP industry stands for suppliers and was delighted to be asked to share my thoughts with OPI readers. Firstly, while most suppliers had to accept a 15-25 percent sales shortfall during the global economic meltdown, many have now found that, despite the passing of the immediate crisis, those sales are showing no signs of returning to normal.
Why? Well, I think a big part of the actual decrease was not down to the crisis but because we saw an accelerated move to private label for basic commodity products as well as a major change of trend in distribution. We all realise now that our traditional OP channel is not able to secure the necessary growth and there needs to be far more focus on new and alternative channels across Europe.
It might not be ‘en-vogue’ to sell at Aldi, Lidl and the like, but it is a reality that they now sell huge quantities of school and office supplies in four key periods of the year. We can all see the trend of a sharp increase in office supplies sold through atypical OP channels while our traditional customers are looking more and more for alternative growth in non office supplies as represented by the trend towards Jan/San, coffee-and-cookies and now print management.
Another key area of concern is the barren middle ground in the OP industry. As in many industries, OP suppliers require a strong, established brand that end-users will both trust and desire. Unfortunately, this is no easy task for office suppliers as many have found to their cost. In office supplies as well as other markets, either high-end brands or low prices drive channel and end-user decision. In the middle sector, however, customers feel more uncertain, and while this tendency existed before the global crisis, it accelerated a great deal during it.
In addition, I think that B2B customers as well as end-users are still less sensitive about origin and carbon footprint than many of us anticipated and wanted. Moving back from high capacity, cheap factories in low-cost countries and moving or keeping manufacturing in Europe may not yet work out. This is not only because of the higher direct manufacturing cost, but also because – do not forget – those fast growing low-cost countries also offered highly motivated, well-educated controllers, developers, designers, IT staff and product managers.
I would also suggest that suppliers continually ask themselves whether they would make the same decisions in business that they make with their own personal money. All suppliers have to make decisions and occasionally accept bad conditions in a deal, but if it really looks bad (such as your customer not accepting a raw material clause on a volatile product like plastics or paper, for example), than you had better negotiate further or leave the deal behind. A deal might look good today, even in six or 12 months, but if you are locked in longer term, you are in real danger and may risk your entire business.
Finally, I think it’s vital to find ways to reach the consumer and to consider selling directly through the web or other means. Accept the channel conflict, learn to manage it and find a way to interact with your customer through whatever means enables you to listen, communicate and interact with the end-user of your products.