A firm staple of the North American office products landscape, manufacturer rep groups have evolved enormously over the years, so much so that their definition is often changed to the more comprehensive term of sales and marketing or brand advocacy agencies. And that is because the scope of their services has expanded in terms of technology expertise, call reporting, product reach – just think of all the adjacent categories in our industry right now – brand representation into more channels, as well as straightforward research and marketing assistance.
Does that make them more invaluable to the manufacturing community than ever then? Not necessarily so. OPI spoke to a range of global vendors, many of which work with rep groups (to stick with that term for now) in various guises. The issues are plentiful and there is simply no one-size-fits-all.
North America stronghold
North America is indisputably the biggest stomping ground for rep groups, for the very simple reason – apart from history – that both the US and Canada are vast geographic markets difficult for manufacturers to penetrate comprehensively from a sales point of view. It’s interesting in this context actually that Australia – equally vast – has no comparable groups at all, at least not in our industry; it’s a concept that simply hasn’t made any headway there.
Some vendors use rep groups – regional or national – to attack local markets and/or independent dealers while they still maintain national account coverage of the larger resellers and wholesalers through their own sales force, a kind of head office/big box customer versus branch office/small customer attitude. And given that especially the traditional vendors work in shrinking product categories with ever-tightening margins, outsourcing all or part of the sales function appears like a cost-effective solution.
Synergistic multiple line selling is often quoted as one of the core USPs of rep groups. But while the economic benefits of this theory are solid and proven, the practice sometimes looks a little different. As one Canada-based global manufacturer told OPI: “Multiple line selling means you may only be getting one fifth, sixth or seventh of a buyer’s attention or the rep’s time.
“Also, what happens is that big customers like Staples or Office Depot have partnership programmes that you must sign up for in order to work with their sales force out of the branch offices. These additional programmes can be quite costly and may vary by vendor. But it makes the use of any third-party sales reps, even at branch level, almost impossible. Vendor sales reps are very protective of their customer relationships and will only work with rep groups if head office approves although that is still no guarantee the reseller will actually take you.”
The ‘advantage’ of multiple line selling is similarly lost on Jacques Merabtene, owner of Novart & Partners, one of the largest sales agencies for print, paper and packaging brands as well as educational supplies in France. And while he also talks about the big box customers – the biggest revenue generators for his group – the reason is very different.
He says: “Our sales people used to represent several manufacturers, but that has completely changed. The buyers at Staples, Depot and Carrefour are in charge of many more product categories now. As such, their time is more precious than ever, you have to wait months for a meeting and then you only get a limited time period of, say, an hour. In that time you cannot feasibly and comprehensively represent and show the products of two or three companies. Times have changed.”
Trust remains a big hurdle and that appears hard to overcome. As one global, UK-based vendor explains to OPI: “We’ve used rep groups, but on a very targeted basis, ie we had an initiative we wanted to launch, like a 12-week campaign in the dealer channel. It was short and hard-hitting and that to me seems more cost-effective than the all-encompassing brand representation that a company like Highlands offers. I’m also not sure I’m ready to relinquish my brand to a third party top to bottom, from commercial negotiations with the wholesaler through to a monthly promotion with a local dealer.”
In that statement lies a real challenge as well as opportunity. A company like Highlands, which is very well established in North America, but remains a relative newcomer to Europe where the rep group concept exists but is not as prolific, is battling engrained attitudes and very different demographics as well as the fruits of its own success. Given the broad scope of its solutions, there clearly needs to be a cost associated with that as well.
Who’s paying?
Indeed, commission-only agreements among established and service-focused rep groups, certainly in the mature OP markets, are becoming a thing of the past, with flat fees topped up by commission rates being the favoured route now. The fundamental proposition of groups to manufacturers is to fund their representation out of the growth generated by increased sales. Achieving that is no mean feat in a declining market.
And it takes time, says Merabtene, pointing out that there’s typically at least a two-year delay before any real results can be expected. Novart works on the basis of a high flat fee/small commission in the first year, lower flat fee/higher commission in the second year and commission-only from year three. The company works 100% with manufacturers that want to enter the French market – mostly Germany and Canada currently – as opposed to native manufacturers wishing to grow in their own market.
That’s not to say that the concept of commission-only sales reps is dead, however. Single or multi-brand commission-only sales agencies – often just one or two-man bands operating out of a family home – are alive and well especially in many southern European countries like Italy and Spain. The OP markets there are hugely fragmented, with thousands of small papelarias dotted around the country and historically a limited wholesaling channel (which has changed now with the likes of ADVEO).
These type of activities might not have the sophistication and services of a Highlands but, as one pan-European vendor pointed out to OPI, it might actually be a more suitable solution in certain markets.
There are many reasons why manufacturers might contemplate employing the services of a third-part sales rep group:
- Cutting cost on their own sales function
- Keeping a foot in the door in low/no-growth categories
- Expanding into new geographic markets
- Penetrating a particular existing channel more deeply with the aim of generating higher sales (like the dealer channel)
- Entering new distribution channels (like the discount or mass market)
- Reaching into new verticals/industries with high-growth products (the industrial sector, healthcare)
All but the first two points are progressive and require finding rep groups that have the specific expertise needed to address the challenge, be that in terms of technology, marketing, contacts or product expertise. And if those groups have skills that the vendors don’t have, perhaps the all-important trust will follow.
