To make sense of the current global dealer group landscape, OPI asked numerous players in the business supplies industry for their input on a variety of issues within their own markets. Responses were received from all sectors of the industry and around the globe, with the notable exception of some major wholesalers.
While an air of optimism prevails, there is the acknowledgement that dealer groups need to up their game to keep pace with the rapid transformation of the industry and all it entails.
Naturally, the dealer groups themselves for the most part said they were keeping up with the ever-changing OP landscape, with much emphasis resting on the introduction and implementation of new technology. As UK-based Office Friendly Sales Manager Keely Shepherd remarks: “Just look at how much Office Friendly has changed over the past year and the investment we’re putting into new technology. We’ve evolved our service offering in so many ways.”
Australia’s Office Brands CEO Gavin Ward agrees, saying that as a group it is driving significant change in technology, systems, business processes and product expansion. However, he does admit that, while there are dealers welcoming all its initiatives and growing their business, there are also many members that struggle to embrace new market segments, technology and marketing. “This remains our greatest challenge – getting members to understand the need for change, including working with others on an adoption plan. It would be fair to say that a large section of the group can become overwhelmed by such significant change at a relatively rapid rate.”
Australia is a particularly good example of where all of the above will undoubtedly become more of a pressing issue due to the recent upheaval in the country. Indeed, ASA Australia General Manager Siobhan Tagell says the industry finds itself in a rare environment, with consolidation in the marketplace, the continued growth of the country’s dominant OP reseller Officeworks as well as its potential sale or IPO, along with the planned sale of the two largest corporate players to a private equity firm.
That said, she adds: “The biggest change in the market is the continued advancement of e-commerce as a way to market. I believe the dealer groups are, independently of each other, trying to tackle this in their own way.”
On top of everything else happening in this market, unlike dealer groups based in North America and Europe that have had to deal with Amazon for years – and now Amazon Business in some countries – Australia is only now having to realise the potential impact Amazon will have on the business supplies industry. Tagell says ASA Australia is not going to be complacent or dismissive of the threat, and is working on strategies and plans to differentiate and get ready for its impending arrival.
Recognising that Amazon is “one of the best websites in the world”, Ward will steer Office Brands members to focus on their customer service and communication. “That service and knowledge, using smart systems to help our people respond to each customer’s individual needs, will be at the core of how we work to reinforce the engagement with our largely loyal SMB customer base.” (See ‘Dealing with the issues’ for more thoughts on the imminent launch of Amazon in Australia).
Meanwhile, the UK OP industry will have to get a handle on Amazon’s B2B platform – Amazon Business – which launched in the country last month. Numerous UK dealer groups told OPI that their strategy will follow the same lines as their Australian counterparts in so much as encouraging dealers to concentrate on offering solutions and value-added services to their customers.
What the increasingly pervasive nature of the online giants has done is highlight the necessity for dealer groups and dealers alike to take e-commerce more seriously. Online retail has caused much consternation over the years, with the attempt to take on the pure-play e-commerce entities such as Amazon. This is particularly true in terms of building out full product lines on dealers’ webstores and general all-round improvements with regards to e-commerce offerings.
Some dealer groups are making digital headway, however. In the US, TriMega and Independent Stationers have been jointly working on the EPIContent initiative along with the National Office Products Alliance. “While it is still at an early stage, the goal is to create an e-database of non-wholesaler products that dealers will be able to load onto their own e-commerce platform,” explains Independent Stationers CEO Mike Gentile.
To make projects such as this workable, it is also incumbent on dealers to play their part in making the systems work. Suburban Stationers President Bob Shulman believes that while dealer groups are doing a decent job in terms of encouraging members to improve online offerings, he sees some dealers struggling to fully execute their own e-commerce strategies, even when resources are to hand. “Dealer groups can only do so much, but the EPIContent campaign has the potential to make dealer adoption of these e-commerce offerings that much greater,” he says.
Old versus new
With the obvious and deliberate push towards digital, where does this leave the humble catalogue? By all accounts it’s still going strong and apparently relevant (although not everyone agrees with this assertion). Having said that, even resellers that value the catalogue believe that its format will not hold out forever. “We think that the catalogue is an essential sales tool and valuable as a reference guide. Not everyone prefers to use online methods, although this will probably change over time,” notes Abacus Stationery & Office Supplies Partner Mark Dilley.
Those in favour of the catalogue believe it still fulfils a valuable purpose in today’s business world for one simple reason: it ‘sits on the desk of customers’ and may prompt them to buy something. Additionally, there is still resistance from some quarters over the value of digital media as a sales and marketing tool. As Soennecken’s Business Unit Manager Wholesale Jens Melzer explains: “Digital marketing media is being sent to customers and in the worst-case scenario it disappears without being seen properly by anyone.” However, Melzer also encourages dealers to use more digital marketing services in combination with traditional efforts, including catalogues.
The consensus is that at least for the foreseeable future, a mix of both printed and digital material is the way forward.
Interestingly, what was not mentioned by any of the people OPI spoke to is the well-documented and unrelenting march of millennials into positions of purchasing power. There are many studies that back up the digital native moniker of this age group and their preference for online purchasing. On the other hand, as TriMega President Mike Maggio states, progressive dealers are already using an entire range of on and offline marketing tools to target their customers as well as prospects.
The use of diverse marketing tools and services by dealers is only going to become increasingly imperative in the battle to still be relevant to customers as time marches on.
It will also be up to each dealer group to retain its competitive advantages by providing up-to-date products for members.
Got what it takes?
Not everyone is convinced however that all dealers groups have what it takes to keep pace with the times. PBS Holding CEO Richard Scharmann thinks that some won’t be able to execute on their ideas: “Process optimisation and automatisation along with competitive online marketing can only be provided from a very powerful and capable central infrastructure, so high-end logistics, competitive online solutions, and centralised marketing are the key features which dealer groups are often not able to provide.”
ADVEO Corporate Marketing Director Pablo Aranguren believes that the current dealer group format is not sustainable, in particular the lack of adoption of digital services such as innovative e-commerce solutions and product content management. “Only those dealer groups that achieve the right scale or which rely on the right partnerships to cover those needs for them will still be competitive, responding to the increasing power of the end customers and the bargaining power of the vendors.”
[In what may be considered unfair discrimination], dealer groups also feel the heat from wholesalers which are sometimes accused of muscling in on dealer group territory. Take the recent announcement by Essendant about its foray into enterprise contracts, for example.
“The wholesalers are big and necessary supporters of what we do in national account sales, although there are certainly some competitive forays now underway,” admits AOPD Executive Director Mark Leazer.
It will be interesting to see how this develops, but it’s hardly anything new. While the debate over the separation of offerings between dealer groups and wholesalers has been going on for time immemorial, the relationship between the two also doesn’t always sit well with others. One reseller told OPI that the dealer groups need to “stop pandering” to the wholesalers by only chasing the dollar. The same reseller also suggested that dealer groups need to stop continuously seeking new members and instead focus their energy on existing members.
Perhaps the key to making the entire supply chain happy is specialisation. US-based Pinnacle, a group for large dealers, is a case in point. In the past few years, it has grown its membership substantially as it has obviously found a niche that needed to be catered for. Leazer certainly thinks so: “The ‘all things to all people’ approach may be unsustainable going forward. There is more efficiency within models where like-minded dealers are in the same group, and not having to serve multiple masters. Efficiencies go out of the window when groups get pulled in too many directions.”
Soennecken’s Melzer disagrees. “We believe in the individuality of dealers, which is one of the main USPs of the local business compared to the pure-play online retailers. Therefore, a dealer group must offer a broad portfolio of services to then fit the needs of individual dealers, which is almost impossible to achieve with specialisation.”
Winds of change
Superstat Managing Director Alex Dunn believes that with the onset of potential industry changers such as Brexit and Amazon Business in the UK, the more relevant dealer groups become as dealers need to band together. “We all need to evolve and the kind of support dealers need is changing with the market, the industry and the world. The pace of change is increasing and that means we all have to adapt even faster wherever we are in the supply chain, but being part of a collective provides some protection,” he says.
That said, the UK dealer group landscape is particularly crowded and Dunn does expect to have fewer dealers in five years’ time due to market pressures, consolidation and industry transformation. Nectere Managing Director Paul Musgrove certainly thinks there will be consolidation in the UK marketplace for both dealers and dealer groups, the latter of which will have to become very lean or merge.
So, what’s a dealer group to do to ensure its survival both now and in the future?
While individual comments varied, the overriding answer was consolidate. “There is a need for consolidation as most markets globally have upwards of three groups all providing similar support and services with individual infrastructures and costs, which in time will not be sustainable,” says Australia-based Office Choice CEO Brad O’Brien.
Services should be key to the survival of the species, according to Synaxon UK Managing Director Derek Jones. He says that as most reseller and dealer businesses can’t survive only on product margins now, services have become a critical part of the business mix. “It’s no different for dealer groups, or services groups as I think they will all need to become. They need to offer a great set of services that deliver value and ROI for members. If we can do that, the future should be bright.”
Others suggest that investment in technology will be paramount. As ASA Australia’s Tagell points out, with a savvier customer on the other side of the transaction, smarter and progressive operators will prevail. Ultimately however, as TriMega’s Maggio states, while it does things differently than in the past so the group is relevant in the future, its primary purpose and strategic vision remains the same. “We are, first and foremost, a buying group and we believe that now, more than ever, progressive independent dealers need that resource.”
Dealing with the issues
OPI asked a number of dealer groups about specific challenges in their respective markets and how they are planning to deal with them.
What effect do you think Brexit and Amazon Business will have on dealer groups?
Office Friendly Sales Director Keely Shepherd: Brexit has already forced us all to think differently. Following the recent pricing fluctuations within the UK marketplace, dealer groups have had to work extremely closely with members to try and minimise the impact.
Rather than go head to head with Amazon, we have to encourage our dealers to focus on their own strategy. We remind them to offer those value-added services, solution-sell and keep the personal touch. By promoting the aspects that Amazon can’t match like free deliveries, a no-quibble returns policy etc, we can keep our competitive advantage.
Nectere Managing Director Paul Musgrove: I don’t think Brexit will affect anything, except if inflation changes. The industry is still about local dealers for local markets.
As for Amazon Business, we all survived when Viking arrived in the UK, and while a few dealers fell by the wayside, the industry got a handle on it. Amazon Business will skim a chunk of the market and will always be a threat. We must up our game and free dealers to create relationships that service businesses. Pressure also needs to be put on the software houses and wholesalers to help dealers get a million items on their websites. Dealers need to get to this point and be as beguiling as Amazon.
Synaxon UK Managing Director Derek Jones: Will Brexit impact the IT and OP channel? It’s too early to say for sure. There may be short-term implications due to currency fluctuations, but in the longer term I’d expect business to settle down.
As far as Amazon Business goes, this is just part of the trend towards the automation of the supply chain. It’s no different to what is happening already: big online retailers buy in volume from the broadliners and undercut the rest of the channel. This goes back to the issue of major distributors being focused on the big spenders.
What plans are you putting in place to deal with the arrival of Amazon?
ASA Australia General Manager Siobhan Tagell: I can only speak with authority on my own group and I can say that ASA Australia members are Amazon-proofing their businesses. We are not going to be complacent or dismissive of the threat, and are working on strategies and plans to differentiate and get ready for their impending arrival.
Office Brands CEO Gavin Ward: While Amazon is one of the best websites in the world and will undoubtedly bring a new level of expectation on delivery and price, it is just a website. We will be focusing on the service and communication that we have with customers to add value, based on our intimate knowledge of them, their industry and their purchasing habits. Our customer is, and will remain, at the centre of our world. If we do that job well, we believe we can retain and grow our customer base.
Office Choice CEO Brad O’Brien: For us, it’s about working and ‘protecting’ our patch. There’s no doubt customers will try Amazon, but our strength is our engagement and connection with our customer base and community. We are therefore assisting our dealers to ensure they understand their clients and their behaviours through business intelligence, and that they continue to have a profile and presence through proactive customer retention and prospecting strategies.
This is in addition to ensuring our e-commerce experience is a seamless process and our product offering delivers on our business solutions mandate.