Hot topic: Spread your wings

In order to save their businesses, office products resellers must look elsewhere; but are they able to?

To summarise, there are probably three main threats to a traditional office products reseller’s business: a declining need for traditional office products, evolving customer purchasing habits, and new competitors offering said traditional products. These are all driven by factors including a changing workplace demographic, increasing use of technology and the growth of e-commerce that is making it possible for more people to sell office products at a lower cost. A simple truth has emerged across much of the world, that if a reseller doesn’t find ways to adapt its business model to combat these changes, it’s not going to survive. 

Barrie Hayes, CEO of BPGI, says: “It’s about being a business services organisation, not an office products company. Organisations are transposing into other areas, and technology such as webstores is making that easy in terms of generating awareness. There are four or five channels including OP that are playing in each other’s traditional backyards and that’s only going to continue.”

The difficulty for a reseller lies in deciding where to invest in order to meet customer needs and keep it relevant. Along with general improvements such as efficient logistics, a good webstore and excellent customer service that a business should keep in mind anyway, there are two main routes that could be followed: an increased product range or complementary services – or indeed both, becoming a one-stop provider to meet the desires of every business. The question is, which desires should a reseller prioritise?

Products

On first consideration, branching out into new product areas is probably the most straightforward way for a reseller to extend its offering. Kevin Johnson, Chairman and CEO of US dealer Warehouse Direct and Chairman of the Pinnacle Group, says: “The adage is true that it is easier to sell a new product to an existing customer than to obtain a new customer. Growth by related categories has been a large part of our investment for at least ten years. Expanding into adjacencies may be necessary to maintain revenue in an existing product line or make up for one that has secular decline.” 

It wouldn’t take a radical change in the mechanics of a reseller to deliver different products. The logistics set-ups in the OP industry rival those of most, and rather than send out half empty delivery vans as traditional sales decline, it does seem logical to fill the gaps with other products. As Paul Musgrove, CEO of dealer services group nectere, says: “The question is logistics, and if we can move it then resellers can sell it.”

Facilities management (FM) and breakroom sales are now more or less established as part of an OP reseller’s offering, but categories also embedding their roots into catalogues and websites include safety products, MRO (maintenance, repair and operations) products, hardware, software and arts and crafts to name a few. When it comes to SOHO customers, if your office is at home then almost anything becomes an office product, and large corporate customers require a wide range of items. US wholesaler United Stationers certainly seems to believe that offering more products is the way forward, illustrated by its recent acquisition of industrial products wholesaler OKI Supply last year and its plans to keep expanding.  

To the many resellers looking over their shoulders at Amazon – which stocks almost everything under the sun – as well as at competitors such as Costco, Tesco, Carrefour or Metro that all stock OP items, a product-line extension makes sense to remain competitive. Staples said in a statement to OPI: “Our vision is to establish Staples as the single-source product authority for millions of businesses… We are expanding our product assortment to include categories that make sense for our customers, like facilities and breakroom, safety supplies and the latest technology products.”

An emphasis on greater product ranges can be seen in many businesses. Lyreco CEO Steve Law says that while the business is looking at offering services – “we’re at the point as an industry of not discounting anything” – it is certainly more at ease moving stock. “It depends on the DNA of the business,” he explains. “We’ve come from a stocked office products business. 

“We’re looking at both services and products like most people, but the pure reality is to do this you have to specialise. Services are hard to scale – a solution for the UK would need tweaks to work in France. We love scalability; for example we’ve rolled out safety products in all markets. And when you work with one supplier, stocking other types of products from them is reliable, you know their reputation.”

OTTO Office in Germany is also focusing its efforts more on products than services, though with a different emphasis. The reseller has recently added a new line of ‘lifestyle’ products under categories such as ‘travel and hobby’, ‘trendy office’ and ‘homeware’. Items include a robot-shaped USB, a popcorn machine and a birdseed dispenser for the garden.

OTTO Office’s Head of Procurement and Business Development Christian Langvad explains: “We believe in attracting customers with interesting products. This opens the door and gives them a new reason to place an order. The shift away from ink to laser printers, for example, means that the frequency of ordering cartridges goes down – this is 25% of sales and previously secured ordering frequency. Without that, you need to give them a new reason to place an order.”

Services

Some people ask themselves, however, why stop there? Once you’ve lured customers in with products, why not offer to meet their needs with services – or vice versa, offer a service that means they’ll order products? If you’re looking at how to support clients’ business infrastructures then services may be the missing piece of the jigsaw. All businesses are time-poor at the moment, so if you can make their lives easier they might be grateful. It would also give customers a reason to come to you rather than just pick up supplies in a supermarket chain or online.

Gordon Christiansen, CEO of Colway which owns London-based dealer RED BOX that offers various services, says: “You have to offer services to offset the decline in traditional products, and clients need help. One client said to me: ‘We like to deal with companies that can teach us things, and genuinely help us.’”

The services that a reseller could offer are arguably endless. One of the most talked about examples is managed print services (MPS), which can present a solution to the problem of decreasing toner sales and a way to capture customers in long-term contracts. Other examples include environmental or recycling services, shredding, health and safety assessments, workspace and interior design, printing, and water coolers – this is by no means a complete list. Most people agree that if a reseller decides to offer services, these should complement an existing product range. 

Warehouse Direct’s Johnson says: “Today, everyone selling OP is also selling convenience jan/san. However there is a world beyond office tissue, towels and hand sanitiser. For example, chemicals and equipment are used for infectious disease control in a healthcare facility, but the service to determine the best product or piece of equipment to use where and when in each environment and the service to keep that equipment running has far more value than the distribution of the products and equipment. An OP reseller that is content that Windex and Bounty roll towel sales are up 10% over last year is probably only scratching the surface of what they can really achieve.”

Some of the larger players are dipping their toes into service areas that are barely related to products at all, however. For example, OfficeMax has recently partnered with web hosting and domain name provider Go Daddy and will offer service bundles in stores. Staples has introduced its App Centre, an online marketplace for cloud based business applications. Both ‘Max and Staples are illustrating the fact that OP resellers need to think outside the box to generate customers. 

In this issue’s Big Interview, TriMega CEO Charlie Cleary expresses his belief that services are the next thing for resellers to focus on, as no other product category jumps out. However, Cleary also mentions a belief that he shares with many others in the industry – that many resellers will struggle to find the time and resources to fully embrace services.

The barriers

Unfortunately, there are many reasons why becoming a one-stop supplier, offering both products and services, might be hard for OP resellers, smaller businesses in particular. 

Dave Guernsey, President and CEO of dealer Guernsey Office Products – which offers a wide range of both products and services – and Chairman of the Board for the National Federation of Small Businesses, says: “An obvious but overlooked reality is that small business people are frequently under capitalised. You can do a lot of things in a mediocre way or a few things really well. It is a rare small business that has the balance sheet to do a lot of things well, and the marketplace is way too competitive to accept mediocrity.”

Most people agree that trained and knowledgeable salespeople are key. But how easy is it to convince a sales person who’s worked for you for ten years to learn about a new offering, and find the time to take them away from their day jobs to undertake training? Some resellers recruit specialists instead – but again, this takes resources. 

Adam Noble, Managing Director of UK dealer Irongate which has been successful with services such as shredding, MPS and facilities, says: “To do this right there is money to be spent on accessing the right talent that can help with structure, marketing, sales and technology. Dealers need to realise that if they want to achieve success in these new markets it’s not just sticking a services logo on a brochure or business card; it is about real investment and careful planning.” 

MPS is a particularly time-consuming business to understand. There are a plethora of programmes offered by wholesalers and dealer groups that certainly help a reseller to get on board with the service, but there are those who believe that MPS is still beyond the remit of an OP reseller.

Langvad says: “Resellers should keep out of MPS. We asked our smaller and medium-sized customers and they don’t want it – they don’t want us involved with their IT departments. Some larger ones wanted it but we decided to stay out. We have a lot of SMB customers so the amount of effort to serve MPS wouldn’t give a return on investment.”

Another barrier to adding products or services is mentioned by Aidan McDonough, Managing Director of UK dealer group Integra Office Solutions. “The challenge for dealers is that it may not be traditional office products people that buy these other products and services, for example FM products might be procured by an FM manager,” he says. “Resellers need to increase their penetration into the businesses they serve, and pitch to that person, which takes time.” 

Indeed, one jan/san expert from a wholesaler says: “Office products is pretty much selling to white collar people; you need to find the blue collar guy for jan/san. They will be motivated differently, it’ll be about solutions, not price, and quality professional brands, not household names.” 

What customers want

The good news is that despite these challenges, you don’t have to look very far to find excellent examples of resellers that are already offering services that augment their product selections, and are extending their ranges. Some are doing this by testing the water with partnerships (see boxes on Innovative Office Solutions and Banner Business Services below), others by refocusing the business entirely. 

Independent Stationers CEO Mike Gentile says: “We see a high percentage of dealers’ revenue growing in ancillary categories; it’s more than just talk. Most dealers have gone through some kind of rebranding to redefine themselves. There are some that are struggling, no doubt about it, but the dealer groups, wholesalers and many of the manufacturers are trying to reallocate resources to help them.”

One bonus of being a small business is often agility. It does take resources and time to offer a new selection, no doubt, but with a smaller team it is easier to try something out or form a partnership and, if it doesn’t work, stop. Rebranding is certainly a smaller task for a small business than for a national or international player. Staples, for example, might struggle to update such a huge and well-established brand name, though would a customer turn to a business named Staples for a cloud app, for example? Or would a business go to a wholesaler named United Stationers for industrial supplies? CEO Cody Phipps was coy about whether or not a rebranding was on the cards in a recent earnings call.

Naturally, whether to offer products, services or both boils down to what customers want. This varies by country and market, so isn’t easy to define. For example, OTTO Office’s Langvad details how his SMB customers are more likely to want a one-stop-shop supplier than larger business clients, which buy from specialists and shop around. In contrast, while Christiansen agrees that larger corporate customers are more likely to have specialist buyers for different products and services, he doesn’t believe it’s the smallest customers who want one supplier for everything. He says: “It’s the middle-sized customers that are most likely to buy into a one-stop supplier. They require a wide variety of services but aren’t big enough to have specialists for each.”

It takes a lot of attention to detail to get the product and service offerings right, but keeping up with changing customers takes even more than that. As BPGI’s Hayes says: “You have to talk to customers about what you’re offering and have a variety of touch point strategies. It’s no good any longer just having salespeople, or mail order, or a website; you need a combination geared to the requirements and behaviour of a customer if you really want to succeed. You need the strategy overlaying the products and services you want to offer.”  

Dealer experience: Innovative Office Solutions

Minnesota-based independent dealer Innovative Office Solutions offers a wide range of products and services and is an example of a reseller that aims to offer total office solutions. Services range from office and furniture designers to site surveys and print management.

CEO Jennifer Smith details the business’s approach: “We don’t have to be everything to everyone, but if you choose a product line you have to offer services as a value-add to create a fence around the client. For example, we went into facilities products, but also have specialists to do site surveys for clients, look at their bathrooms and make a whole proposal.” 

Smith explains that the dealership’s approach isn’t to charge for services as such, but to offer them as a reason to remain a customer. “We see what need is out there in the marketplace, and make sure we have a solution for anything they might need,” she says. “And if we don’t have a service that they’re looking for, we work with a partner. For example, for e-document storage we manage the programme but work with a partner to make sure it’s worth our time. We want to walk before we can run!”

Dealer experience: Banner Business Services

UK-based Banner Business Services, part of office2office, has become known for its Closed Loop service for paper supply and recycling. This service was developed as a reaction to a customer need – specifically HMRC (UK tax office). 

Managing Director Richard Costin explains the investment behind the service: “We always try to diversify as much as possible, but normally outsource. This was a case of getting the salesforce off the road in order to conduct about 50 site surveys and work with specialists to get them trained up. It was a big investment but highly successful.”

Banner is now launching a record management business. “Customers buy archive files from us, and now we’re saying why don’t we store those for you offsite. Lots of companies offer that service, so we will work with record management specialists to store them, as they don’t necessarily have the salesforce out there to promote it or the infrastructure to move the boxes. And the beauty of it is, at the end of their life those documents need to be destroyed and there’s a charge for destruction – and that waste paper has a value itself.”

And all from selling a traditional product in the first place!