With the third edition of The View from the Top: The State of the OP Industry 2015-16 hot off the press, OP market researchers Martin Wilde Associates (MWA) and OPI found that the ‘core’ OP market appears to be performing even worse than anticipated last year.
In the first few months of 2015, MWA & OPI’s second annual survey of senior OP industry executives in Europe, North America and Australia found that only 12% expected the ‘core’ OP market value to increase in 2015, while as many as 63% of respondents expected it to decrease over the year, with the vast majority of these (44%) believing that the decline would be as much as 3-5%.
A year on and the most recent study on the state of our industry established that core OP market performance in 2015 was reported by senior executives to have been slightly worse than those gloomy expectations. The value of the core OP market was believed by 72% of respondents to have declined in 2015, while only 17% felt that market value had increased during the year.
The latest The State of the OP Industry 2015-16 report investigates senior executives’ perceptions of OP market trends in seven markets: the US, Canada, Benelux, France, Germany, the UK and Australia. Broadly speaking, the research found that similar downward trends were evident in all of these markets, for a number of different reasons:
- Less demand for core OP items
- Poor economy
- Price deflation
- More millennials in the workforce
- Shift to managed print services
- More unemployment
- Fewer white collar jobs
- Decline of oil industry (in Canada)
- Currency fluctuations
- Customer mergers
- Customer destocking
- Overall sales on the up
However, the overall picture beyond core OP looks much rosier. Most respondents, for example, believed that their own companies had bucked the negative market trend in 2015, and reported that sales had outperformed the core OP market, with the majority (62%) claiming that their revenues had in fact increased in 2015, with the largest share (21%) posting growth rates of 1-2% and 17% stating that they had achieved sales increases of over 10% during the year.
Like last year, the category that was by far the most widely-reported as growing in 2015 was facilities management (FM) supplies (76% of all respondents), with a significant share (41%) also mentioning growth in office furniture as many world economies have improved and capital investment activity returns.
Some tech categories (tablets/iPads, smartphones and accessories) were also quoted to have grown in 2015. However, virtually none of the traditional paper-based OP categories were reported as seeing noteworthy increases last year: indeed, it was these categories that were most often cited as being in decline in 2015, particularly envelopes, filing supplies and office paper.
Overall, the two distribution channels that were by far the most widely reported to have won market share in 2015 were – once again – Amazon and the internet-only OP resellers. That said, it is clear that there has not been a universal flight away from bricks-and-mortar channels, since the mass market retailers (and even the OP superstores in some countries) also seemed to have grown significantly.
Of the traditional OP channels, it was – also once more – the independent OP dealers that were regarded as having taken share in 2015, although the same group was also slightly more widely-reported as having lost share last year.
In fact, it was some of the traditional OP channels that appeared to have lost the most share in 2015, particularly the contract stationers, office products superstores and mail order businesses, as well as the OP wholesalers.
Other key trends identified by respondents included the following:
- A third of distributor respondents reported that their average gross margins had increased in 2015, while only 27% claimed that they had decreased. This is an improvement on the previous survey, in which nearly 50% said gross margins had declined.
- In general, as many as 34% of distributors reported that their net profits had increased in 2015, while only 24% claimed that there had been a decrease. Again, this is a better picture than the last survey presented, in which 30% of distributors reported a decrease in net profits in 2014.
- There is a steadily increasing share of own label products, although this varies by country. Overall, the share of own label among the distributor respondents was 16.5% in 2015 on (unweighted) average; among manufacturers it was 18.8%.
The State of the OP Industry 2015-16 study is based mainly on insights and data collected from 59 senior industry executives in a broad selection of major OP companies across the various channels in the aforementioned countries.
It includes the 2015 financial performance of 15 major OP distributors in the US, Europe and Australia, as well as an analysis of the key industry events during the year. Most importantly, it also features the predictions of the 59 key CEOs for the OP industry in 2016, including – for each country:
- Core OP market size and growth
- Estimated sales growth and profitability
- Growing/declining product sectors
- New product categories being developed in 2016
- Growing/declining channels
- The prospects for Amazon becoming a significant B2B player in the OP market
- The effect on the OP industry if the Staples/Office Depot merger goes ahead – or not
- Future trends for other key issues, including own label share, the share of online sales and of sales in FM supplies.