Hot topic: School’s out!

Education products and office supplies don't seem a million miles apart. Getting into this largely government-funded sector has its very own set of challenges, but one that OP resellers increasingly want to embrace.

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Over the past few months, there have been plenty of announcements, by OP dealer groups in particular, stating how they’re going to help their members generate additional sales through new educational products catalogues. From Office Brands and Office Products Depot (OPD) in Australasia over Integra and Nemo in the UK to Independent Stationers, TriMega and Novexco in the US and Canada, there’s been a concerted effort to capture part of this huge market. 

According to Tim Williams, Category Manager of General Office Supplies, Cafeteria and Packaging at New Zealand dealer group OPD, school supplies is an excellent add-on category for OP suppliers. “OPD started with this customer segment a year ago and we currently have five major school dealers that participate in back-to-school (BTS). That said, our strategy is based around everyday pricing, rather than specifically the BTS period.” 

With 2,000 primary and secondary schools in the country and a sector that’s estimated to be worth NZ$135 million ($110 million), it’s definitely a segment worth looking into. 

The list of products of interest is broad too, Williams adds, ranging from basic office supplies, jan/san items and paper, ink and toner to business machines, whiteboards, furniture and arts and crafts. 

The situation in New Zealand is perhaps rather unique, given that the country is small enough for schools to be mostly autonomous in their procurement. They can buy from whoever they want rather than being tied to government-organised contracts. For now, OfficeMax’s MySchool is the undisputed leader in the sector in the country. It is hoped, however, that OPD members could bring a more local feel to the table, a factor that is often welcomed by local businesses and institutions alike.

Opportunities…

Across the Tasman Sea in Australia, the picture looks somewhat different. The opportunities, however, are there too, explains Office Brands CEO Gavin Ward. “We need to look at every opportunity for growth that is available to us. But the challenges in the education sector in particular and the government in general have meant our members have generally avoided this area until recently.”

But, adds Ward, changes in the Australian market in several states have meant that this area is now more open to competition than before. “A major retailer in Western Australia that had the majority share of education has closed,” he says. 

“Also, the New South Wales government has opened the opportunity for schools to buy a certain level from local businesses while the main supply chain to government and schools in Queensland is in the process of being closed as part of cost-saving. The time is right to act now.” 

…and challenges 

But the sector is not without its challenges, he warns: “The market is split into three main segments: BTS, classroom and general stationery supplies. The first two categories require a specialist approach to sourcing and logistics. Fuzzy balls, tubes of glitter and other unique lines are only sold at peak periods. With minimum order quantities and a unique supply chain, these restrictions make the segment a real challenge for most members. Additionally, for standard BTS packs, price is a major factor and we need special supply agreements to satisfy the price points required whilst still enabling a viable margin.”

Again, with a buy local attitude in mind, Office Brands’ approach is to match up members that have the capacity and systems with those that have the local relationship with the schools. This kind of partnership enables members that would not usually participate in this sector to share the sales from classroom and BTS supplies but, says Ward, “keeps the local dealer relevant to the school and as such locks in the day-to-day requirements on a local level which is the bread and butter of what we do”

One of the biggest challenges in the sector is funding and this is pretty much the case wherever you look around the globe – there are not too many overfunded educational institutions in the public sector, especially in tough economic times. 

School Specialty is one of the dominant dedicated educational supplies resellers in the US and Canada. Revenue-wise, the company has taken quite a beating over the past few years. In fiscal 2008, sales reached $1.09 billion, slumping to $762 million last year. But it’s a supplier that covers all possible aspects in the education market, competing with content-driven organisations like global giant Pearson, the OP big boxes (mostly on the B2B side except in the BTS season) and independent educational resellers as well as OP dealers.

For resellers that cater merely for a fraction of the educational spectrum, it’s hard to gauge what product categories are hits or misses at any given time, says CEO Mike Lavelle: “We see very uneven buying patterns because of the discrepancies in funding of educational materials, so it’s not always easy to pin-point ‘good’ and ‘bad’ categories. Within a product category, we may be growing by 5% in one region, but declining by 7% in the other. As funding often takes place at a local level, we see varying degrees of performance across categories and we expect that to continue until we see a broad economic recovery. On a slightly different note, demand also tends to be very ‘peaky’ and seasonal which doesn’t always tie in with what the OP wholesalers/dealers are doing.”

With few exceptions – such as the aforementioned New Zealand example – a sizeable chunk of education-related business is allocated through government-selected contracts and consortia, some on a national, most on a more local authority, level.

But where budgets are controlled by individual institutions, it opens the door for local businesses to step up to the plate. The competition is tough, however, says Tim Beaumont, Managing Director of UK dealer group NEMO. “We believe there is an outstanding opportunity in this sector, but you cannot underestimate the traditional education consortia. They have a comprehensive catalogue and, most importantly, they speak the same language and their prices aren’t bad either!” 

Educating members

Working with education sector specialists, NEMO has put together a 32-page catalogue, covering a broad range of education-specific products, from general stationery products to whiteboards and other technical products over arts and crafts, exercise books and classroom furniture to outdoor equipment. Fellow UK dealer group Integra is offering a similar service and has added an education workshop to its forthcoming conference, in an effort to inform dealers about the opportunities the sector holds.

As ever, margins can be a real sticking point. As a general rule, the more commoditised the product, the lower the margin. That doesn’t bode well for a sizeable proportion of an OP dealer’s typical offering. 

Mo Beck, VP of Operations and Purchasing at John R Green, a Covington, Kentucky-based educational distribution company, agrees that margins are definitely a problem as a result of funding issues. He says: “Many school districts have joined with local or national buying cooperatives to try to reduce expenses. In most cases, we have to compete with those price plans in order to maintain our market share, so it has resulted in declining margins for a large segment of items – office products being one of the most competitive areas. We have to compete with price to be considered, but our focus is using that opening to allow us to sell them complete programmes that encompass all the various curriculum areas.”

Pat Collins, who was appointed SVP of Sales at School Specialty in September, has experience in both camps, having worked for United Stationers before joining the educational sector. He believes the area where the best margins can be realised are content-heavy educational supplies. He says: “There’s a big trend in the US on fighting obesity and School Specialty, for example, has a proprietary line in physical education products. We also have brands that serve the special needs niche or those that are targeted at the arts – these are product categories that tend to have higher margins. Any digital content also inevitably has higher margins.”

Comprehensive product knowledge is key, adds Beck: “The biggest challenge for an OP dealer trying to get into the educational market is the product expertise required. Everyone is competing on price for the commodities. You have to be able to make your margin on the additional items and in order to do that, you need to have a good grasp of the product available. Curriculum directors know what they are trying to accomplish, but what are the best products for doing that? It’s about selling them solutions.”

Product sales with a consultancy aspect is exactly what German independent Kaut-Bullinger is banking on. With the exception of BTS sales that are usually generated on its retail side, the firm’s educational offering is firmly rooted in the B2B segment and mostly – 65% – in its office system house. A total of 15% of overall sales now come from the education segment, much of it through public tenders. 

In the German public education sector, school funds are generally given to the various country states which then have total autonomy as to how they spend them. This partially explains the often rather draconian state of many schools. Interactive whiteboards, for example, widely used in many classrooms and university lecture halls in western markets, are still often regarded as new-fangled modern contraptions that teachers (pupils are keen!) can’t get to grips with. 

Selling solutions

The opportunities are massive, according to Kaut-Bullinger’s Group Managing Director Johannes Peter Martin, because with the sale of products such as interactive whiteboards, an installation, service and teaching agreement is mostly part of the pitch. 

At the moment – and this can also be seen in other countries – it’s a service still mostly offered by the manufacturer, but it’s beginning to change. Overhead projectors, beamers and associated equipment and accessories such as screens and tables, are other products that Martin has high hopes
 for, in education as well as in the boardroom.  

Where OP players differ from those in the education sector is on the logistical service proposition. Says NEMO’s Beaumont: “Independent dealers have extremely high service levels and can deliver a lot of product next-day. They like working with local businesses which are often crying out for superior service. The traditional consortia suppliers have in many cases been a let-down and often take weeks, if not months, to fulfil orders.”

But is that what’s needed? Brad Summersell, EVP at educational supplies wholesaler Educators Resource, says: “The school customer does not expect next-day desktop delivery. Our service level of 2-5 working days is well-accepted across the country. When we were an office supplies wholesaler, we used to be a same-day delivery firm. 

“We carried on that policy when we moved into education in 1993, but found that the need for it just wasn’t there,” he adds.

Educators Resource recently teamed up with US dealer groups Independent Stationers (IS) and TriMega, allowing dealers to sell a larger mix of educational supplies than they would get through either group or the two main OP wholesalers. Summersell adds: “Dealers typically already offer some school supplies like ink, paper, toner and other commodity items, but for the most part it’s not been a heavy concentration. The reason for bringing us into the picture is so that they can now offer a one-stop-shop.

“With our classroom materials, arts & crafts and the long tail of the so-called ‘c’ categories – supplementary teaching materials, classroom decorations, teacher aids, learning games – we complement the traditional products that SP Richards and United stock. Now when dealers’ reps go to the schools they can say ‘I’m your single source supplier’. It’s more effective as school administrators don’t have the time to shop around and would always prefer to have a single source.”

For a start, OP resellers might just opt to go for the lowest hanging fruit. But if approached properly, the opportunities can certainly be very sweet, however difficult to reach.  

Education vote

Education is important, nobody would disagree, especially not politicians hoping to get into/remain in the White House. As this issue of OPI hits our US readers’ desks, the country may well have a new leader, but Barack Obama has been the man in charge of this second-most important issue to the American people – after the economy – for the past few years. 

Obama’s ‘Race to the Top’ competition, the $4.35 billion competitive grant programme first announced in 2009, has no doubt given many schools, districts and indeed pupils better opportunities. But it’s been a tough political term for those working in this field as overall budgets have been severely cut, often hurting local discretionary spending. 

Educational reseller School Specialty has witnessed first hand the tough conditions of the past few years. CEO Mike Lavelle says: “Despite what you hear from the federal government and from different bodies about ‘racing for the top’, being focused on improving education and the federal government providing money to drive that change, it’s not necessarily impacting education at the building level yet. There continue to be teacher lay-offs, there continue to be cuts in educational spending, there continue to be reductions in the purchase of supplies/curriculum materials and other products.”

The two presidential candidates Obama and Mitt Romney differ on some key points in their education policies. In terms of discretionary spending, Obama requested $69.8 billion for the US Department of Education (a 2.5% increase) in his 2013 budget proposal while Romney wants to cut 5% of all non-security discretionary spending and envisages an eventual reduction of federal spending to below 20% of GDP.

Whoever wins the race, many hope the only way is up as rhetoric is replaced by action. 

Education round-up

Education has been on the minds of many, from manufacturers and distributors to resellers. Here’s a round-up of what’s been happening in OP circles most recently: 

BIC last month launched a digital educational solution for primary schools in France. BIC Education is aimed at combining handwriting and digital technology and comes in the form of a digital tablet – the BIC Pad. 

Kimberly-Clark Professional has developed a customised educational programme to reduce germ contamination levels in schools. Super Germ Fighters is designed for kindergarten to fifth grade (K-5) students.

US dealer groups TriMega and Independent Stationers have both announced alliances with school supplies wholesaler Educators Resource. The collaboration will allow members to sell a larger mix of school supplies.

IT distributor Westcoast has partnered with Texas Instruments Education Products. The partnership will increase access to education technology solutions for mathematics, finance and science both for institutional and individual purchases.

Digital print and document solutions provider Altodigital has secured a hotly contested position on the Crescent Purchasing Consortium framework, a procurement hub for further education colleges across the UK.

UK dealer group NEMO in September published its first EducationALL catalogue. The 32-page catalogue features a wide range of products for staff and pupils and is designed to help members grow sales in the education sector.

Education workshop

UK dealer group Integra will be holding an education workshop at its Celebrate National Conference this month, following the launch of its education catalogue. 

Former Europa Office Managing Director Nick Oates, now with consultancy Oatik Business Solutions, will be holding the session. He says: “The education sector can seem like a daunting challenge. We aim to break down some of the barriers and obstacles which members are presented with on a regular basis when it comes to local schools and colleges. We will look at best practices, who the key decision-makers are and how to access them, what the key product opportunities are, what schools want that our members can provide and how Integra can help them do this.”