Big Interview Xtra: Jim Hebert

More from the recent interview with Office Partners CEO Jim Hebert, exclusively for OPI's digital and premium subscribers. Here, Hebert reveals more details about the group's membership and operations, gives his views on Amazon and discusses some o

OPI: What’s the average size of your dealer?

Jim Hebert: We have dealers from $500,000-$1 million to a couple of dealers over the $100 million mark.

OPI: Is MyOfficeProducts still a member?

JH: Yes, but I don’t really talk about them or anybody else. That’s their business to talk about what they do. It’s great that they’re here; we have a great relationship and that’s one of the reasons that they’re here – because we can do things, we can be flexible and sometimes in a cooperative they can’t do that.

OPI: It’s interesting from where we’re looking that they would choose to stay in a dealer group with the huge buying power that they already have. Do you think that’s more out of a sense of loyalty that they’ve stayed?

JH: Well, I think it makes sense for any dealer, no matter what the size, if you’re purchasing from 100-150 vendors, you probably want to focus on the top six or eight and let somebody else handle the rest. They chase money for you and it’s really not worth their time and effort to chase all that – that’s where we help.

OPI: Do dealers have to pay a fee to be part of the group?

JH: We’re the lowest-cost people out there as far as monthly fees go. We don’t dictate to them what lines they have to buy or what products they have to buy. It’s all here for them to use and if they need more vendors or vendors in a certain area, then we go out and track them down and set them up electronically to bill to us.

OPI: And then you operate a rebate scheme through purchasing?

JH: Yes.

OPI: How does that work? Obviously, you’re not a co-op so I guess it’s not just split evenly between members?

JH: No, but we’re the only group where the dealers’ programmes or the vendors’ programmes on our internet site are actually kept up by the vendors. They see what the dealer sees so we don’t hide anything from them. They get the full amount of the programme that’s due them on what the vendors have given.

OPI: And then I guess you take a percentage of the rebate or a percentage of the sales?

JH: No, we work lean and mean just like the dealers do and we couldn’t return all the rebates and so forth if we didn’t. So we have to be attentive to how we run our business just like they have to. You can’t just dip into a bucket and pick out more money and say ‘you’re going to get less because we need this to run it’. That’s why you have to be very cautious about your overheads.

OPI: When you look at the programmes that you run, how different from or similar to the other two main groups are you?

JH: There are not a lot of ways that you can be different today. Dealers expect a buying group to have the ability to have a ‘cafeteria’ system where they can pick and choose the things they want to get involved in. The hard part of that is the groups then have to come up with the money to support these programmes that dealers want.

One of the things that Matthew and I have tried to do is negotiate some things for dealers that are stockless, so we try to get smaller pre-paids from the manufacturers, even trading in a point of rebate and so forth to receive it in order for these dealers to at least look at the direct side purchasing. If dealers don’t want to invest in inventory you have to make it financially sound for them to do it. It’s hard to buy direct if you’re a smaller dealer when you have $1,500 or $2,000 pre-paid.

We also have a Schedule 71 GSA contract for furniture. I own that contract; it’s my contract and I allow our dealers to participate in that. It’s much less costly than when a group has to go to another dealer and run it through there.

OPI: We’ve heard a few months ago about Amazon Business starting. How big a threat could that be to the independent dealer channel in general?

JH: I believe that Amazon is chasing the Staples/Depot and Walmart business and it’s going to be a bigger threat to superstores and so forth than it is for traditional dealers on the street.

OPI: They’ve started to set up some administrative tools and are adding more features and services that might encroach onto the dealers’ business.

JH: Amazon doesn’t have the people to really get involved in our business, so they need partners on our side for them to work with. They need guidance because they don’t know how it all works. I think if they lose that personal touch with the customer and it’s all done on the internet, the commercial customer or the contract customer doesn’t want that; they need help with the products they buy and they want somebody that’s professional and knowledgeable to help them.

The larger the customer, the less likely that customer is going to go with somebody like Amazon, at least for our products. I’ve been around those Fortune 500 people and they want service, they need to have special needs taken care of, they need special handling, delivery and so forth for products and they’re not going to get that from Amazon, with or without their drones to deliver all the products!

OPI: But those Fortune 500 companies aren’t really the target customer of your average dealer, are they? The small business customer might just be nipping onto Amazon and buying a few things during their lunch break or at the weekends or something and eating into the dealers’ market share there.

JH: Well, we’ll see where it’s all going to go. We’ve been through the superstores coming into business and they were going to own all the business. They haven’t. Boise Cascade had a better plan than everybody else and they were going to take over all the business. They haven’t. It’s just another player that’s coming in the marketplace and we’ll have to see where it goes.

OPI: So what’s so special about these dealers that makes them so resistant to all these forces? Is it the entrepreneurial spirit? Or something else?

JH: Twenty years ago we had 14,000 dealers in the business; now you’ve got 2,000-3,000 left. I think the ones that are left after all the consolidation and all the buy-outs are the people who have taken the steps they needed to stay in business. They like the business they’re in and, let’s face it, office products are not going to go away altogether.

OPI: How’s your membership been affected by industry consolidation?

JH: It’s the same old story: dealers have never approached or do not approach succession planning. We’ve had a couple of dealers this year who’ve had to sell out because they had families that didn’t want to be in the business. In years gone by, there was usually someone standing in the wings being trained to take over that dealership and that’s not really happening anymore.

OPI: How do you think dealers [in general] will evolve over the years with all this consolidation and diversification?

JH: They’re going to have to sell all kinds of things and they’re going to have to get into places they’re not very comfortable with. I remember when diskettes came out and you couldn’t get a dealer to sell them because they were afraid to go in and sell them to a customer who knew more about the product than they did; and now there are no diskettes. Stuff comes and goes. I think these dealers are going to have to embrace some more buying on a direct basis because the wholesalers can’t possibly stock all the things that they want them to stock.

OPI: When you look back over the past 20 years or so, what for you have been the biggest changes in the industry?

JH: I think the most difficult side of it – for us or any group – has been the consolidation of vendors. If you have fewer vendors out there, you have fewer opportunities, and you have less product to sell.

OPI: Are you looking to add new vendor partners in different categories?

JH: Yes, definitely. It’s just been who do you pick out? And the hard part is that you have a lot of vendors that are out there today that don’t know how to really deal with the independent office products dealers. That’s a different entity than they’re used to dealing with, but, yes, you have to keep searching for vendors.

We take recommendations from our dealers that we explore. People are constantly calling us up on the phone wanting to be part of the group and you have to decide is that good or bad in the long run. Are we going to cannibalise one vendor to bring in a smaller one?