Special Anniversary Feature: State of the Industry Report

In the 1980s and 1990s, Quill's Jack Miller used to write his legendary OP state of the industry reports. In honour of Miller and indeed OPI's 25th anniversary this month, here's an up-to-date industry analysis by another well-known industry stal


It feels like only yesterday that I was starting out as an office junior in Spicers’ accounts department in Cambridge in the UK. OPI’s 25th birthday and the increasing number of lines on my face, however, give away the fact that it was actually 34 years ago! Time flies when you’re selling paperclips…

I’ve spent most of my career in this industry and have often been asked to comment on trends and predict what is to come. We’ve debated “the future of the industry” at umpteen OPI forums, and will no doubt do the same again at the OPI Global Forum in Chicago this November, where yours truly will be in the chair. 

It would be tempting to regurgitate in these pages some of the usual stuff about Generation Z in the workforce and the imminent arrival of 3D printers in every office. And yet, as I reflect on the current state of the industry, this time things really do feel different. Is it possible we are reaching the tipping point that we’ve been anticipating all this time? If we are, what are the likely effects and what are we going to do about it?

Three big changes

To my mind, there seem to be three big things driving change in our industry. The first is the digitisation of the office. People are increasingly making notes on tablets – I’ve completely stopped using notebooks and refill pads myself – and are storing documents in the cloud where they are always to hand if you can access the internet. 

As a result, if you don’t use paper then you are less likely to print and you don’t need a lever arch file or a cupboard to put it in. This change is driving a relentless decline in traditional office products and printing supplies. We can argue about the rate of decline and there are certainly some countries where digitisation is less advanced, but there is no doubt that it’s real and here to stay. I even heard for the first time recently about a company that had adopted a ‘bring your own’ stationery policy for staff. Be afraid, be very afraid!

The second big driver has been facilitated by mobile devices and access to reliable, fast internet connection almost everywhere nowadays. People are increasingly mobile and are working wherever they happen to be – on trains, in coffee shops, at home… This means that there is more ‘little and often’ consumption of office products, with the office stationery cupboard in terminal decline. It also means that people often simply grab free pens and paper from hotels and law firms (but that’s perhaps another story).

The third driver is plainly and simply the rise of the internet and all that it enables. Type ‘office products’ into Google and you’ll be dead before you’ve counted all the pages of people selling the stuff. Consumers are now only a couple of clicks away from the lowest price for any product that they require. And they can look for pictures or detailed specifications of products very quickly. 

In addition, online-only players like Amazon have set the bar really high for excellent logistics, generally good packaging with well-presented products, and easy returns. Amazon Business in the US, which offers millions of items, trade credit, user procurement tools, etc, has been hugely successful so far and the concept will shortly be rolled out in Europe as well.

Cause and effect

If you think about the above, you will quickly see how the changes in our industry can all be linked to them.

The decline in traditional office products brought about by digitisation is resulting in overcapacity. Put simply, there are just too many warehouses full of the stuff we sell that are not running anywhere near capacity. We are therefore seeing increased consolidation as players try to achieve synergy benefits from closing facilities and driving more volume through their existing distribution centres. 

Declining volumes and overcapacity have also driven a race to the bottom on prices and margins, as companies fight to retain business against aggressive competition. This is particularly true with very large end-user customers.

Average order size is reducing as mobile end users buy more little and often, with a correspondent deterioration in productivity and an increase in cost to serve.

Products are becoming more commoditised, with end users shifting their consumption in the most competitive markets towards cheaper non-branded products. As a result, vendors will increasingly have to focus on the importance of their brands if they are to maintain sales.

In addition, the old ‘bid cost less x% on the core range, huge margins on the rest of the basket’ pricing model is fundamentally broken. The internet enables end users to find products from a huge number of sources and be much more aware of the market price for anything. This has led to a number of the contract stationers losing money on larger set-piece contracts as the expected sales of products outside the core basket fails to materialise.

A further impact of the ever-growing digitisation is that the circulation numbers of the wholesalers’ catalogues, the bedrock of their funding model with the vendors, is in decline as resellers and end users move to online solutions. 

Lastly, the traditional distribution chain, with products passing from vendor to wholesaler to reseller to end user, is under threat as more nimble and efficient models powered by the internet are taking hold.

All in all, it’s not one of the golden ages for the industry that I’ve worked in for so long.

And yet…

We must not forget how robust and entrepreneurial this industry is and how we have successfully managed change in the past. It is possible to do well in the future; we’re just going to have to do things differently…

It’s been said many times before, but we need to start talking about business supplies, not office products. Broaden your mind and that of your customer to all the other stuff that they need to run their businesses. We have a highly developed supply chain, which is better in fact at getting products to the end user than a number of adjacent industries. Let’s use our skill to offer a more diverse range to the customer. After all, no one has yet invented the digital toilet roll (i-Wipe anyone?) yet.

Also, let’s think about our pricing models and perhaps take inspiration from the airline industry. Maybe a product can be priced very competitively and you can make the return from all the services the customer requires (like priority boarding or putting a bag in the hold in the case of budget airlines). 

We certainly need to make everyone in the supply chain understand the cost of all those services that were offered free when everyone was making lots more margin.

If you are a reseller, make sure that you know and love your customers and become the ‘go-to guys’ for everything that they need. Think services as well as products, taking away all those daily problems that get in the way of them doing whatever it is that they do. If you become super reliable or even better, indispensable, the discussion moves away from price. Just ask Amazon…

Understand where you fit in the supply chain, what you are good at and concentrate on that and only that. As an industry we need to eliminate all the duplicated cost and effort that might have been sustainable when margins were significantly higher, but not now in the face of the hugely efficient internet players. 

If you are a vendor, spend your money developing your brand and make sure that the customer really wants your product, not some generic me-too own label stuff that anyone can make and sell. 

If you are a wholesaler, make sure you have the product in stock for next-day delivery and offer your resellers an efficient delivery service that enables them to focus entirely on the customer.

Embrace technology. Your competitors will and you will be left behind if you don’t find ways to be as efficient as possible. But make sure that you know what problem you are trying to solve before you embark on complicated system upgrades.

In conclusion…

I remain very positive about the future of our industry, but we all have to realise that the old ways will not all work anymore. Maybe I’m wrong about the timing of the tipping point, but even so, what harm can it do to start making some of the changes that we know we all have to make in the medium term?

We have faced challenges before and can thrive in the future but only if we collaborate, remain open minded, dynamic and willing to embrace positive change while holding on to some of the key principles that have made us successful in the past.

Here’s to the next 25 years! 

The view from across the pond

Shira Goodman, newly-appointed permanent CEO of Staples, gives her take on the past few decades years in OP, with arguably the biggest milestone in 1986 even preceding the launch of OPI by five years.

From my point of view, there have been four major developments during my time working in the office products industry. The first was the launch of the office superstore concept in 1986, pioneered by Staples and its founder Tom Stemberg. The birth of this channel was followed by years of retail growth. 

Second was the rise of the catalogue and delivery business which effectively turned the office products sector into a contract business. 

Next, the dot.com era ushered in a whole new way of doing business, with the rise of e-commerce eventually leading to the omnichannel world that we live in now. 

Staples.com debuted in 1998 and we, and the rest of the industry, have been adding digital properties ever since, including mobile sites, sister brands and social media channels.

Finally, over the past ten years we’ve seen the expansion of our product set to include options beyond traditional office supplies. Now, Staples and companies like us are charged with providing business solutions, which include new categories such as technology, print and promotional products, or facilities and breakroom.

I’m convinced that some of our biggest challenges have also led to our greatest opportunities. First and foremost, what the customer wants and needs has dramatically changed from the early days of our business. Our first stores included shelves of typewriters and ribbons! Needless to say, we’ve come a long way in the breadth of products customers have come to expect from us.

And talking of products, the fact that the world has gone digital has not only presented a challenge for traditional OP categories like ink and toner and paper, it’s also provided opportunity in the form of greater e-commerce capabilities as well as opening up a whole new product set in technology solutions. 

Going back to the early days and with the OP superstore concept so new at the time, when we first started, Staples was certainly having trouble getting people to walk into our first store. The general public simply wasn’t familiar with a large warehouse-size store for office supplies. True to the entrepreneurial spirit that helped found our company, we brainstormed ideas to generate foot traffic, ultimately deciding to stand at busy intersections handing out $10 bills and asking people to spend that $10 in store. That $10 became $50 or even $100, and our journey to where we are today had begun. 

Overall, I have very fond recollections of all the great people I’ve met over the years, specifically our founder Tom Stemberg, our former CEO and one of my mentors, Ron Sargent, and Evan Stern, the former head of National Office Supply, the first contract stationer we acquired. They were all extremely smart people who would have been successful in any field they chose, but luckily for all of us that got to work with them, they chose office products.