The facilities supplies (FS) sector is enormous and its boundaries continue to expand. The category now encompasses – slightly different depending on who you ask – everything from jan/san through to breakroom and catering, but also now increasingly sub-categories such as MRO and safety.
In the UK alone, the OP-accessible area of the facilities supplies market is considered to be worth £5 billion ($6.25 billion) according to Stuart Pearson, Director of Workplace at SPOT Group: “This will continue to rise and we see growth opportunities coming particularly from the public sector as budgets are reduced and it looks for innovative ways of delivering savings.”
In the US, meanwhile, the end-user market for this category represents a staggering $25-$30 billion in estimated annual sales, says Mike Schumpp, General Manager at R3 Safety: “But it’s a diverse market with multiple players in the channel vying for a piece of the pie. The challenge lies in knowing how to work effectively in this channel to produce a positive effect on the top and bottom lines.”
It’s estimated that within that overall FS spend in the US, about $8 billion is related to safety products. Office products dealers have naturally been attracted by the revenue prospects of this potentially lucrative market and many are looking to get a foot in the door.
“OP dealers have always had an uncanny ability to ferret out adjacent opportunities to build sales,” says Schumpp, “and they are discovering that selling safety products is a great way to enhance their income and margins.”
This reshaping of the overall direction of the facilities supplies market is also being seen on the other side of the Atlantic. “There’s now a strong focus on sub-categories such as health and safety,” says Debbie Nice, FS Product Director at VOW/EVO Group in the UK. “Demand is fuelled by needs, not wants – these products are essential purchases, with some of them helping users meet legally-required safety obligations.
“Both the MRO and safety categories fit well within our overall FS portfolio allowing us to sell additional lines to our existing customers. However, the diverse product range within these categories is a challenge. We need to carry a large number of SKUs to make our offering credible.”
Keeping up with regulation
The need for legal compliance within an increasingly tight regulatory framework is one key driver that is forcing sales within the safety sector in particular.
As Pearson puts it: “Companies are now much more aware of their health and safety obligations and duties. Businesses recognise that simply sending someone to the local supermarket to buy consumer products could lead to non-compliance with legislation such as the Control of Substances Hazardous to Health (CoSHH) regulations.”
Personal protection equipment (PPE) under the FS umbrella is one key area where technology is driving development and making products more innovative and effective. Schumpp cites the Majestic PPE line of gloves as a good example of where advances in material science are aiding protection: “The product line’s new high-visibility insulated field coat is made from a material known as Westex – it’s flame-resistant and provides protection in intense work environments, while delivering warmth in extreme cold weather conditions.”
He adds: “The gloves are also made with new technologies – Majestic’s Concussion product is made with ‘Armor Skin’, a synthetic material that’s more wear and abrasion-resistant than leather and features a protective exoskeleton to shield against impact and shock. Other gloves are made with Dyneema Diamond technology, the new standard for cut protection. It’s the world’s strongest fibre – pound-for-pound 15 times stronger than steel.”
Gloves are a recurring theme mentioned by others too. Tom Hoffman, Director of Purchasing at US dealer group TriMega is keen to stress their importance in this category: “60% of the safety category is gloves – they’re everywhere and there are as many sources for gloves as there are customers. Their sales are the entry way into the safety category as much as coffee is for the breakroom. Dealers must map out a plan to sell them because of their widespread use within both their current and potential customer bases. Other opportunities include eye protection, ear plugs, head protection and protective clothing.
“Medical and health supplies is also an interesting adjacent category for OP dealers. They’ll find it hard to compete with the large supply houses when bidding for hospital business, but will find abundant opportunities in nursing homes, child care, school sports, dentists and health clinics.”
According to Nice, the safety and MRO sub-sectors are ideal bedfellows: “Both categories are driven by health and safety regulations and guidelines. The increase in work-related insurance claims is driving the need for products within this range, including ladders, trolleys, PPE and signage, for example.”
With categories like breakroom – and coffee in particular – and jan/san already on the radar of most OP dealers, Hoffman agrees that the next real, as yet unexplored, growth opportunity in the FS segment will come through from these areas: “Dealers need to get into the warehouse, manufacturing, automotive, cleaning services and outdoor maintenance zones. These drive the need for industrial grade products such as chemicals, wipes, mops and floor pads. Dealers will be interacting with a whole new type of buyer and can start talking about floor strippers, polishers, machines, degreasers, insecticides, etc.”
LED lighting is another potential related product area cited by Pearson: “A hotel maintenance manager told us of how he’d replaced all the lamps in a large chandelier with LED bulbs. Not only did they pay for themselves in 16 months, he hasn’t had to replace a single one. It used to be a weekly task involving two maintenance teams, large access equipment and the need to fence off a big area in reception – but no more.”
So if the safety category represents such a huge opportunity for OP resellers, why isn’t everyone jumping on the bandwagon and enjoying the ride? It’s fear, says Nice: “Dealers are discouraged because they feel they have to be product experts. However, the reality is that the health and safety officers within their customer organisations will know what they need and require.”
Indeed, this lack of confidence has made some OP dealers reluctant to stock these types of products in the past, says Schumpp. “We can give them access to safety products at competitive prices and also provide them with the necessary expertise on how to sell them. At R3 Safety, we are 100% focused on safety – it’s all we do. We are passionate about this category because we want people coming home in the same shape they left for work in.”
MRO and safety are clearly growth areas within the facilities supplies sector and with the right strategy and successful partnerships, they could prove as lucrative as other adjacent segments such as breakroom and jan/san under the broad FS umbrella.
Case study: Breaking into facilities supplies
Kerr Office Group (KOG) is an independent B2B office supplies dealer based in the US state of Kentucky. OPI speaks to President Brian Kerr about the company’s moves into the facilities supplies sector and the challenges that has presented.
OPI: When was Kerr Office Group founded and how has it developed over recent years?
Brian Kerr: It was established in 1939 as the Bean Publishing Company and started out as a small print shop for letterheads, envelopes and stationery. I became the General Manager in 1999 and we saw steady growth over the next seven years. In 2006, my wife and I purchased the company and have since made four acquisitions.
Today, we cover many categories including jan/san and breakroom, safety, furniture, and floor and wall coverings. We also supply managed IT and print services and have our own interior design service. We operate out of three Kentucky locations, which gives us a wide market area that includes southern Indiana and northern Tennessee.
OPI: When did the firm first get involved with the facilities sector and what challenges did you face?
BK: We decided in 2011 that this was a category we needed to focus on. We hired a dedicated facilities supplies rep and made it a targeted growth area for the company.
It turned out to be a big challenge. We were competing with the direct jan/san houses and the cost of our goods just wasn’t competitive enough through our existing wholesale partners. We paid a visit to a fellow independent dealer, Sayes Office Products in Louisiana, where Kenny Sayes gave us some ideas on becoming more competitive and how to better market the FS segment of our business. We started buying some key items such as bin liners and chemicals direct to obtain better prices and have grown from there.
OPI: Have industry partnerships helped you establish yourself in this sector?
BK: Definitely. Our dealer group, Independent Stationers, has added more direct facilities and MRO vendors in the last few years, with exceptional programmes to help with the cost of goods. Our wholesale partners SP Richards and Essendant have also made acquisitions in the facilities industry that have allowed us better access to products for next-day delivery. The team at KOG is now growing FS sales by around 34% year on year.
We still have a long way to go, but by continually gaining new direct partners we are able to win more business. Additionally, we’re a member of global cleaning association ISSA which also provides us with more contacts and resources to become better connected with the facilities and MRO industry.
OPI: What particular sub-sectors are performing well for you?
BK: We’ve recently started making progress on selling safety products. We also see MRO as a new growth opportunity and are focusing on making this part of our single-source package. Specifically, we’re concentrating on supplying equipment such as carpet extractors, auto scrubbers and floor-cleaning machines and are aligning with a major manufacturer to distribute its products. We’ve also trained our in-house technicians to service the products we sell.
OPI: What would be your words of advice for OP businesses thinking of getting into the facilities sector, but that have yet to take the plunge?
BK: The most important aspect is to have a dedicated specialist on your staff who understands the products and the industry. This is a strong growth segment and OP dealers really should look at making an investment in this area. It’s easier than it was previously because of the programmes that the dealer groups and wholesalers now provide. Businesses should take advantage of the marketing materials and SKUs they offer until they are able to stock some key items themselves and purchase them directly.
A safe bet
Walter Johnsen is Chairman/CEO of Acme United, a specialist in the MRO and safety market. His area of expertise is the first aid sub-sector, a somewhat niche area that the company has a substantial stake in.
OPI: How important is the first aid market to Acme United and how do you ensure you meet your customers’ needs?
Walter Johnsen: First aid products represent over 40% of our overall corporate sales, so its growth is very important to Acme. We’re one of the leading suppliers of first aid products in North America, supplying Staples, Office Depot, WB Mason, Essendant, SP Richards, Grainger, Fastenal, Bunzl and many others.
The first aid and safety market is highly regulated and requires expertise. Our customers expect Acme to share that expertise with their end users, whether by in-house training or calls to our customer support. We are staffed to respond and rigorously train our team to be able to have the answers.
OPI: What are the main reasons for growth in this market in your opinion?
WJ: The primary driver for growth in the first aid and safety markets is simply concern for the welfare of employees. It’s much safer to stabilise or treat an injury on-site than to delay and run the risk of infection, serious illness or death. Of course, avoiding an injury altogether and quick first aid action also save money.
There are many regulations that attempt to legislate for what is essentially common sense – avoid injury first, but if someone gets hurt seek attention immediately. In the US, there has been a change in regulations which has altered some of the items required in first aid kits and expanded the number of components necessary for workplace safety. The net effect of this has been a revamping of products in the field and the need for additional training.
OPI: Have technological developments and progress in the treatment of wounds affected the first aid sector?
WJ: Yes, there have been many technological advancements. For example, there are now dressings that quickly stop the flow of blood. Originally developed for war zones, these are now increasingly commonplace in industrial first aid kits. These new products truly save lives.
On a less critical note, Acme United has introduced a new phone app that scans the barcodes of any first aid consumables used to treat a person. It then automatically creates a replenishment order. This creates a continuity of refill demand between the customer and dealer and, importantly, helps ensure that kits are kept properly filled.
OPI: Do you think there any barriers to entry in this market?
WJ: Many dealers want to expand into the first aid sector, but just lack the confidence to do so. That’s because the field is confusing and there’s a fear that they might harm someone or break a law.
However, with proper training and support they can gain that confidence and ensure they’re providing the proper items. And of course, we’re also available to provide that support and fill the gaps in their knowledge.