Big Interview: Anytime, anywhere

ECi's Andrew Morgan is confident that independent resellers can compete in today's digital commerce world, but argues they need to take full advantage of all the tools available to them.

It’s probably a safe bet to say that it has never been as important as it is today for independent resellers to harness the power of technology in order to successfully run their businesses. Customer service, ordering, pricing and margin management, marketing, sales tools, product content, e-commerce, data collection and interpretation – the list of technology-related touchpoints goes on and on.

How, then, are dealers faring in this fast-changing world where the annual technology budgets of the major players run into the tens and hundreds of millions of dollars? And what are the key technology-related challenges that dealers should be prioritising?

Who better to answer these questions than a former dealer himself who went on to set up his own e-commerce firm Red Cheetah and is now President of the Distribution Division at software solutions powerhouse ECi?

OPI: Let’s start off by looking at ECi. You were acquired by Carlyle a couple of years ago now; how has that influenced the business?

Andrew Morgan: I think it’s been a very positive influence. Carlyle and Ron [Books, ECi CEO] and his team have driven some very good changes in the business. From the standpoint of acquisitions, we’ve made three over the past year across ECi as a whole. One of those was in distribution which was the addition of JumpTrack.

From the Carlyle perspective, we embarked on several strategic initiatives that are focused on serving our ECi customers better. One of those is systems consolidation which has been a prioritised focus of ours in this industry over the past year.

This initiative started with a detailed analysis of all of the systems we had focused on in the office products industry to understand what are the best go-forward platforms. Once that was completed, we began focusing on consolidating the solutions that will allow us to invest more aggressively in those areas and better serve our customer base. Think of a world where every million dollars of investments will be spread across two systems as opposed to five. That will significantly help our dealers.

OPI: A challenge that you have in the office products sector is dealer consolidation. How do you cope with that?

AM: We are continuing to see both dealer consolidation and attrition, but while there is a fair bit of that, it’s a little slower on the scale than this time last year. Obviously, with consolidation we like to keep those customers in the ECi portfolio of products and we’re doing a tremendous job and are being successful in that realm. From an attrition standpoint, we are trying to proactively let dealers know that if they are exiting the business or if they are anticipating an exit, let us know and we will do what we can to help.

Every segment of the industry is trying to make sure that the volume stays in the independent dealer channel [IDC] as opposed to going to either the power channel or to the e-tailers. And we’re proactively attempting to communicate with those dealers and, again, keep that volume in the channel.

What’s interesting is that over the past 30 months or so, despite dealer attrition and consolidation, the volume that the IDC is transacting has stayed on the positive side; so the channel is strong in ECi’s opinion. We continue to process and transmit larger numbers every month and every year, but to address your point, yes, the industry is doing it with fewer dealers than we did in the past.

OPI: If you were to identify two or three key product development areas that you’ll be focusing on in the next 12 months or so, what would they be?

AM: The first is mobile. We launched the Office Shopper mobile app a little more than a year ago. The penetration has been good, but still slower than what we would anticipate or like to see in the channel.

I think it’s imperative that dealers embrace the technology and not wait for it to be ‘perfect’. As with all software, we will continue to roll out enhancements and revisions to the Office Shopper app, but I think dealers need to keep up with the e-tailers and the Staples and Office Depots of the world. They have to proactively embrace that technology and truly train their sales teams on how to drive that adoption within their customer base.

The second one – and this is a long piece of functionality that ECi has had with the Acsellerate product – is Profitability Manager. I am constantly amazed at the fact that more dealers are not heavily engaged in Profitability Manager from Acsellerate because, from a margin enhancement capability, it is second to none. The opportunity to be able to market and merchandise better those SKUs that will enhance your margin is imperative, and we’ve seen dealers that have embraced this particular piece of functionality truly have great success stories in profitability.

And then the third one is a wider IDC need, and that’s content. As you know, there are several initiatives going on right now with broadening content and content accessibility, and ECi wants to play a role in that. We want to make sure that the search features within our applications and software are tuned so that dealers can truly sell multi-faceted content. We continue to see traditional office supplies sales decline year over year, but see the expansion of everything from jan/san and MRO to breakroom and coffee services driving their top-line revenues. So content, and the ability to process it in a better, faster, more efficient way, is on ECi’s radar as well.

OPI: Let’s talk about dealers and technology in general. How do you think dealers are doing on the technology side if we benchmark them against the likes of Staples and Amazon? 

AM: I believe dealers are still hesitant to embrace change over the larger picture. I think that they are still hesitant, as we discussed earlier, to embrace a mobile app, to change the sales process that’s needed for their teams to be able to sell the benefits of it to the end users and to truly change their business model. I consider this is the main challenge that the IDC faces.

At ECi, we have a tremendous amount of functionality and technology that goes underutilised and there are times when dealers get a tad myopic in what they are attempting to do as opposed to truly embracing technology, embracing change and again driving it through their organisations. There are some very progressive dealers which do just that and they continue to grow and be successful.

OPI: If you were a dealer, what would be the priorities for you from a technology perspective?

AM: If I went back to the days of being a dealer, the top priorities for me would be SKU selection and margin enhancement. We continue to see margin erosion and as I see it, it’s unbelievably important to tie margin enhancement and SKU selection in with content adoption because it does not work to throw a million SKUs online and not know what you’re selling or what the margin potential is.

So, the first thing I would look at is a programme where I could enhance my margins by the SKU selection. If I was a stocking dealer, I would let that drive my stocking position and then I would embrace mobile; I would make sure that my sales teams had all of the value propositions to go to my end users and drive mobile adoption. It is not about how a dealer or ECi thinks they should order, it is how the end consumer wants to place orders, and that shift to mobile continues to take place.

Back in the late 1990s in our dealership I was a very early adopter of e-commerce and I would do the exact same thing with mobile – I would create value propositions and metrics for my sales teams to drive every single end user I could to mobile. It will facilitate both growth and help with retention.

OPI: We had the news recently that Amazon Business hit $1 billion in sales after just a year in existence, and some of the growth predictions I’ve seen for the next few years are astronomical. When you look at Amazon Business and the fact this part of the company is targeting the small/medium business customer – the bread and butter of the independent dealer, how much of a threat do you think that will be, or already is?

AM: I would say it is a threat for the dealers that are not embracing technology and change. One of the things that I have always been bullish on – and will continue to be – is the relationship that the dealer has with these accounts.

What I’m seeing is a lot of C and D items that are going to Amazon. Again, I think this plays to the accessibility and ease of ordering and the content selection. If dealers can combat those and maintain that personal relationship, they’re positioned very well to not lose accounts to Amazon in that manner.

OPI: Is Amazon really the benchmark, the pinnacle of the online experience in terms of product availability, service and price (or at least the perception that Amazon is cheapest)?

AM: You just hit on it, Andy. I think it is not the pinnacle of the e-commerce experience; I don’t believe that it is the down-and-dirty lowest price, but that is the perception fed by Amazon’s marketing and by those that do buy from Amazon. And it’s the exact same experience that hit the IDC with the explosion of retail stores and the availability of product all those years ago.

Independent dealers need to tell their story from a technology, content and reliability perspective, because once you get under the Amazon hood, it is truly not the pinnacle of the e-commerce experience, nor is it always the cheapest price. So the dealer is not outgunned by anything other than perception.

OPI: So is there a communication gap that dealers need to address?

AM: I would say so, and I think we’ve seen for years in this industry that there is sometimes a lack of marketing to their existing customer base from dealers. Dealers need to have very open and honest conversations with their end users regarding the Amazon experience.

I don’t think that the concept of ‘well, I haven’t heard from the end user so everything is good’ holds true. You need to have those conversations and business reviews with the end user to make sure that you do understand what their wants and needs are from a technology perspective and what their perceptions are of the Amazons, the Staples and the Office Depots of the world.

OPI: How would you expect Amazon Business to evolve over the next 18 months or so?

AM: I’ve seen the same projections as you and I think they’ll continue to drive that business very well. It will be spread out over more than just traditional office products and Amazon Business will continue to grab market share.

I also believe that they will continue to push the envelope on areas like same-day delivery. So it’s imperative for the IDC to combat all of this with all of the things we’ve just discussed.

OPI: Do you think they’ll have feet on the street, ie Amazon sales reps knocking on customers’ doors?

AM: Personally, I don’t see that happening. I’ve been wrong more times just today than I would care to admit, but I don’t foresee that happening because it would be such a change in the business model for Amazon.

So no, I don’t see them putting feet on the street, but again, Amazon has always proven to be a little bit unpredictable.

OPI: How are your relations with the wholesalers? You had all that stuff with United [Stationers, now Essendant] and MBS Dev a few years ago and about whose role it was to provide technology solutions. Are you comfortable or happy with the situation as it is now?

AM: I would still argue that there’s a lot of overlap in the industry, but I would also say that, as a whole, the industry is acting more unified in its approach.

I think we’re doing a lot of the right things and the relationships between ECi and the wholesalers have never been better.

OPI: When you look at the two major OP wholesalers, would you say your relationships with them are on an equal footing, or are you having more strategic discussions with one or the other?

AM: No, I would say that they are equal. We have always been relatively agnostic in our approach with the wholesalers and we’ve never positioned one over the other. It is equal between the two because, at the end of the day, we have dealers working with both of them. And at the same time, both wholesalers are doing great things for their dealers.

OPI: If you could ask them to either do one thing or stop doing one thing, what would that be?

AM: Just one, huh?

OPI: Well, you can make a whole list if you like.

AM: Honestly, Andy – and this is going to sound like I’m shying away from it, but you know me and you know I don’t tend to shy away from too many things – I think that independent dealers are in a great spot with their wholesalers. The control that the wholesalers are enabling with some of their search is fantastic and the opportunities that they’re presenting to their dealers are great.

So there’s nothing – given the capability – that I would tell Essendant, SP Richards [SPR] or Supplies Network to stop doing because I think they’re truly doing great things for the dealer.

OPI: But…?

AM: There is no ‘but’. Again, I’m not a shy man and I truly think that what the wholesalers are doing has the best interests of the dealer in mind. A year ago, I would have said more focused product expansion, but, as you can see from recent announcements, both Essendant and SPR are making aggressive moves in that area.

They’re doing great things merchandising and search-wise; they’ve handled the conflicts that naturally occur between the wholesaler and dealers that want to exercise their own merchandising and marketing. So no, there was no ‘but’. The wholesalers are doing things that will continue to be good for the channel.

OPI: Just to finish off: if you could dust off your crystal ball and look into the future, where do you see the whole technology field going? The Internet of Things seems to be a bit of a current buzzword, for example; is that something that impacts what you do at ECi?

AM: The Internet of Things is mobile based and for me it is the ability to purchase anything from anywhere. That means content, SKU selection and mobile, and it’s the relationship we talked about earlier that will cement that business with the millennials and the next generations as they come though.

I’ve got young kids; my six-year-olds can operate an iPad and an iPod and everything else and have been for years, and they aren’t going to stand for the non-availability of products on mobile platforms, so that’s where I see it going. There are so many things that are important, from e-commerce and all of the things we’ve discussed, but in the future the Internet of Things, in my opinion, will be anything from anywhere.

OPI: Are you optimistic that dealers will embrace this or concerned that, if they don’t get on with it pretty soon, it might be too late?

AM: I don’t think it’s too late and I am optimistic. We will continue to see attrition and consolidation in the industry based on a number of factors. As technology continues to speed up it’s going to continue to play a part in that attrition. The dealers that understand it, embrace it and set goals and metrics with key performance indicators have got a tremendous future ahead of them, I really do believe that.

The ones that don’t, we’ll see how that plays out, but I’m optimistic and very bullish – and have been since I first got into this industry – about the future success of the independent dealer.