You’ve heard that “the industry is in a state of flux/change/transformation/consolidation” so many times now, it could almost become the OP industry’s mantra. As the linchpins of the industry, wholesalers keep the entire supply chain chugging along, but is it enough to just push boxes? Wholesalers will argue – and often rightly so – that they are not ‘box shifters’, but rather strategic partners to manufacturers and resellers.
But the wholesaling model is changing. The recent announcement of ADVEO in Europe that it is shifting from a traditional wholesaler to a ‘European platform for workplace solutions’ as part of its 2020 Strategic Plan is perhaps the most extreme reorganisation undertaken in recent times, but is clearly indicative of how much the traditional model is under pressure.
The amazon bug
Interestingly, a recent opi.net poll (see page 21) revealed that just over half of respondents believe the ‘pure’ wholesaling model is still currently viable. But for how long? At the OPI European Forum held in June of this year, a panel on supply chain efficiency provided food for thought on a number of issues that participating wholesalers agreed need to be addressed. Chiefly, these included pricing clarity, value-add services and cost to resellers, limited SKUs, and quality of content and data supplied to dealers.
The good news is this tallies with what the majority of manufacturers, resellers and the independent dealer community (IDC) that OPI spoke to would also like to see reformed. Over and above the perennial issues of cost to serve and margins, it’s no surprise that the industry considers Amazon Business to be the most pressing issue facing wholesalers. As Pentel Director of Sales UK and Ireland Graham Craik points out: “Like it or not, Amazon is now a serious player in the office products market and as a major global brand, it is essential that we engage with it.”
This sentiment is echoed by many OP manufacturers as Amazon carries a far wider array of products than those made available by the OP wholesalers. Resellers procure from Amazon for a variety of reasons, but mainly for buying products that are out of stock or unavailable from their wholesaler.
“We use Amazon for ad hoc purchases or where there is a delay from elsewhere; we sometimes buy too much for my liking,” admits Siobhan O’Connor, Managing Director of Ireland-based reseller Codex.
Still, not all resellers have been bitten by the Amazon bug. HiTouch Business Services EVP of Merchandising Butch Johnson says the company does not yet find Amazon Business to be a valid source given the current aggressive position of manufacturers for low-cost ‘buy direct’.
There are also those who are adamant the wholesale channel, in conjunction with the IDC, can hold its own against the online giant. “I strongly believe that both the IDC and wholesale channels can counteract by levelling the playing field on content and pricing strategies while leveraging dealers’ local presence as a key differentiator,” says HSM America President Bob Ouellette.
Acme United CEO Walter Johnsen is another person to bet on independent dealers, even though Amazon is his company’s largest European customer. He believes that, while the wholesale model is not broken, programme mark-ups will be challenged as dealers fight to deliver value versus Amazon.
In these times of consolidation, it makes sense for wholesalers to provide even more support to the IDC and smaller resellers, as Guernsey CEO Dave Guernsey explains: “The IDC is the wholesalers’ end-user channel. It is a symbiotic relationship and we just need to get the linkage correct.”
Office Depot Europe Spokesman for Core Management Team & SVP Contract Neil Maslen also believes the wholesalers will continue to play a role as they support a significant percentage of the market through the dealer channel.
One issue that is continuously being flagged up is the slow pace of technology adoption by wholesalers, culminating in frustrations, such as the lack of e-commerce and other digital channels. “Wholesalers are still doing rebate programmes when the market is shifting to online buying, so rebates and all the pricing tactics used are not relevant. Pricing given to the sales team is out of alignment with online e-tailers,” notes John Givens, CEO at Colorado-based dealer Source Office & Technology.
One vendor replying anonymously to OPI’s recent Confidence Survey states: “Modern, efficient logistics allow vendors to serve certain channels and customers directly that have been exclusively served by OP wholesalers in the past. While some wholesalers are IT-wise, marketing-wise and content-wise, they are not well prepared to service and manage the fast-growing e-commerce business.”
Maslen adds: “In order to remain relevant, wholesalers need to – and some are doing so already – redefine their business model and tap into the opportunities that exist. E-commerce needs a long-tail approach, with a significant extended assortment.”
Counting the cost
It seems wholesalers are stuck between a rock and a hard place. Resellers that want to become leaner are looking for value-added services such as marketing to be provided by the wholesaler. At the same time, many are griping about the cost of these services, saying that not only were some of these originally absorbed in the price of the merchandise, but more often than not, the cost structure is confusing and not transparent enough.
One European vendor that talked to OPI on the condition of remaining anonymous is certainly keen for wholesalers to add value to resellers through services such as drop shipments and marketing support, adding that, given the option as a brand manufacturer, it would choose a value-add wholesaler over a box shifter.
Not everyone is convinced, however. Avery VP/GM Europe & Asia Pacific Mark Cooper questions whether there is a role for these ‘value-adds’ they provide, especially in view of the potential duplication of these services by the wholesalers and dealer groups.
This perhaps goes some way towards explaining how EOS distributor Exertis Supplies has been able to move into business supplies wholesale distribution in the UK, capturing a segment of the market with its low-frills, low-cost model.
With all the upheaval in this channel currently, it will undoubtedly be an interesting few years – wholesalers just need to keep up with the pace and demands that are being placed on them.
Manufacturers’ wholesaling wish list
- E-commerce and digital capabilities
- Transparent and competitive pricing
- Sufficient and wider-ranging stock
- Stronger brand loyalty
- Taking care of the independent dealer channel
- Closer partnerships
Resellers’ wholesaling wish list
- Training and field support
- Good product content for digital platforms
- Long-tail products, particularly for drop shipments
- Deep and broad product assortment
- Competitive pricing
- High stock availability
- Partnerships
The world according to wholesalers
Raj Advani, Managing Director, Exertis Supplies
We see the wholesalers of the future offering more choice and flexibility. Our historical business, EOS distribution, has by necessity always been a more dynamic world with a variety of sources helping proactive dealers make additional margin.
With the technology solutions now available, we foresee a time ahead where dealers are more able to customise their purchasing model to buy the right products at the best price, and no longer have to trust one supplier to effectively control their margin.
Jaime Carbó, CEO, ADVEO
New technologies are transforming the way we work and communicate, and consequently the market of office supplies is changing. The digitisation of the office is setting the trend: people are increasingly making notes on tablets and storing documents in the cloud. As a result, there is a decline in traditional OP and printing supplies that depends on the country’s degree of digitisation. The growing number of mobile devices and access to reliable, fast internet connection everywhere is also contributing to this reduction in OP consumption.
On the other hand, the digitisation of the distribution chain, with vendors selling direct via their websites, offers a new scenario that leads to a certain disintermediation of the supply chain. This model involves lower margins and more efficiency in operations in order to be able to compete with big e-tailers such as Amazon that have set the bar really high for excellent logistics and easy returns.
Motivated by business growth and empowered by technology developments, wholesalers have come to disrupt their own business model and industry, with resounding repercussions for the entire supply chain.
As a consequence, there are opportunities to offer a better purchasing experience for B2B customers. Wholesaling operations can be streamlined, including inventory, order management and accounting processes in the cloud, for example.
A further outcome is the provision for multichannel sales, reaching out to both distributors further down the supply chain and to end consumers. In this context, there is a trend to use online channels instead of traditional ones.
B2C e-commerce is not substituting intermediaries and the modern wholesaler is not substituting retailers. It’s just that the lines between what used to be distinct roles have been blurred.
Laszlo Feher, Managing Director, Corwell Group
Nobody knows the answer, but in the long term I think our industry will change as radically as our lives. The habits and routines of the next generation are, from my point of view, totally different. Millennials need more ‘space’ in the workplace, more spare time, and they want to become leaders much faster than Gen X workers did. Our industry is not really a tech-driven one, but this new generation is definitely tech-focused.
What can we offer them? A new label writer? Or paper where you can copy on the edge? This isn’t ‘sexy’ to millennials and they don’t care about it. They need smart devices, community spaces, and virtual workflow. So, will our industry produce something that is interesting enough for Gen Y, Gen Z and Gen Alpha?
Franco Grossi, General Manager, Office Distribution
“None of us can reach the full potential of our business by working alone.” These simple words were used by SP Richards CEO Rick Toppin to open the company’s last Advantage Business Conference in July.
I fully agree with this statement as it expresses the real meaning and function of wholesalers. The challenge that all operators in the OP market are faced with is immediately reacting to the ongoing changes, adapting their businesses – after years of exploiting the benefits of consistently growing demand – to end-users’ new purchasing habits and tastes, and to the decrease in the consumption of some “mature” product categories.
Doing it on one’s own would be inconceivable, costly and nonsense. A wholesaler – with a capital ‘w’ – currently offers resellers the ideal mediation between producers and end-customers. This includes logistic services, the widest possible range of products, common web platforms, IT services and digital catalogues – all are fundamental aspects of the business, but at the same time out of reach for small and medium retailers. Such synergy also involves large operators that can benefit from ‘free’ solutions such as stock breakages, out-of-print products, etc.
There are big opportunities for wholesalers in the future if everybody takes advantage of the available tools, expertise and skills. Continuous investment is also required to identify, share and handle market changes together.
Richard Scharmann, CEO, PBS Holding
The future for OP wholesalers looks challenging due to more pressure in the market and inactive dealers that will be squeezed out by highly-professional competitors.
On the flipside, fully-integrated dealers that are using high-end tools – provided by state-of-the-art wholesalers – offer solid growth opportunities. So while the top line is under pressure, quality is improving.
Jeff Whiteway, CEO, SPOT group
The future of the OP wholesaler is to be less stationary (not a spelling error) and a more effective link in the supply chain, assisting dealers to be able to offer an ever-wider range of product in a fast-evolving market.
Dealers have been forced to increase their supplier base, adding cost and inefficiency to their business in order to fulfil customer requirements, effectively making the OP wholesaler less relevant though still vital with through-the-night delivery.
Maximising single-source opportunities for both dealer and wholesaler is essential. A dealer will buy from an OP wholesaler due to the speed of delivery if the range and pricing is right.
Please note that some wholesalers, such as US-based Essendant and SP Richards, declined to comment for this feature.
For more exclusive content including interviews, information on adjacent categories, dealer consolidation and more, read the Hot Topic Xtra.
