Battle lines are drawn Down Under



Both large resellers and small dealers in Australia are looking to exploit the recent rapid growth of private label goods, which is expected to accelerate even faster over the next few years.


Analysts believe the private label phenomenon has countered a stalling market for established products which has seen average prices falling.


Because of their affordability and comparative quality with main branded products, the private label boom has been credited for propping up the Australian OP market, which has grown on average 4.4 percent a year since 2003.


And business research firm BIC Shrapnel believes new product innovation, such as private label, as well as technology developments can be relied on to deliver more growth targets in the future.


Several new product categories, including scrap-booking and high-capacity storage media, such as memory sticks, have emerged as clear recent winners in the Australian market, which is now worth an estimated A$6.48 billion in 2005, according to Senior Consultant, Andrew Penfold.


However, traditional stationery products such as writing instruments, paper and label products, pads, books and envelopes, all showed declining or low to moderate growth between 2003 and 2005.


While growth in the OP market has been reasonable, office product manufacturers have had to cope with a series of challenges, according to BIS Shrapnel. Manufacturers of office products have counteracted dealer decisions to import their product directly and replace established brands with private label product by introducing new product ranges, modifying and enhancing otherwise mature products and acquiring other businesses.


The most successful manufacturers have been creating their own growth.


Since carrying out its previous study of the OP market in 2004, BIS Shrapnel has noted a wider range of products being purchased through the OP channel. For example, resellers such as Corporate Express and Officeworks now offer categories such as coffee supplies, janitorial products, printing services, furniture and promotional items — to facilitate one-stop shopping.


"Online ordering is now the most popular way of purchasing office products," said analyst Penfold. "It’s grown very rapidly amongst medium and large businesses and is becoming more prevalent within the small business sector. The convenience of this ordering method will ensure increasing numbers of businesses switch their purchasing behaviour and will decrease the number of customers visiting office product stores."


According to BIS Shrapnel, superstores and large format retailers have grown very well in recent years. Officeworks, Corporate Express, the ASA Group, COS and the Office National Group, have grown their market shares significantly in the past two years — largely at the expense of narrowly-based operators such as newsagents and small independents. BIS Shrapnel expects industry rationalisation to continue.


"The most successful dealers of the future will be large, systems-driven organisations, with exceptional logistics that are able to manage a diverse and increasingly complex business," said Penfold.


"However, small local dealers who are owner-operated and not too large will also do well. The strongest performers in this smaller segment will be companies who are part of a buying group, and win and retain customers through high levels of personal service and operational flexibility."


The Australian Office Products Market 2006 to 2008 report shows the highest growth in demand is coming from micro businesses and households. The study shows these consumer segments predominantly purchase their office product supplies directly from retailers, not online. In 2005, retailers accounted for almost half of total office product sales, said Penfold. BIS Shrapnel believes much of this growth is due to improving affordability of items such as printers, computer accessories and speciality papers.


In terms of dollar value, the five largest suppliers of office products are Hewlett-Packard (HP), Australian Paper (manufacturer of Reflex), Canon, Lexmark and Epson, according to BIS Shrapnel.


Mr Penfold expects the Australian office product market will exhibit solid growth over the next year and a half, before easing in 2008. The primary drivers of this performance will be strong employment growth forecasts, increasing numbers of micro businesses and home offices, healthy levels of business profitability and investment, continued uptake of computers in the home space and new product development.