For many years the cleaning materials for an office were bought from supermarkets or convenience stores and it was the janitor’s job to make sure the cupboard was stocked. Now, the janitor may have all but disappeared with the advent of contract cleaning, but the janitorial and sanitorial market – also known as jan/san – has grown into a multi-billion dollar business.
Companies which distribute cleaning chemicals (or ‘the juice’ as it is known in the industry) alongside essentials like paper towels and soap have built up longstanding relationships with their customers and shift millions of gallons of product every year. With the growing variety of washroom products also being offered by such companies, it’s not immediately obvious to see how the OP industry can gain a slice of this action. But, ever evolving beast that it is, the sector has wriggled itself, partly through necessity and partly through ingenuity, into an interesting position.
OP dealers have long carried some jan/san products on their shelves, but it is only in the last few years that wholesalers and resellers have cottoned on to the potential this market can offer. The reasons for this slow recognition are many, but customer convenience is certainly a driving force. The one-stop-shop idea is becoming more and more popular with consumers, especially facilities managers looking to save time by ordering all their supplies from one reseller. SMEs without contract cleaners or offices where there isn’t the space to stock large amounts of cleaning equipment, are pleased to discover essentials such as toilet paper or single bottles of Windex inside their stationery catalogues.
OP wholesalers are already supplying more than the odd product here and there. The current big sellers are paper towels, tissue, can liners and chemicals, but safety and security (first aid kits, safety signs etc) and warehouse products are also gaining a strong footing. It’s not an exaggeration to say that jan/san could be one of the fastest growing channels for the industry in the future.
Wholesalers clearly think so, devoting specialist teams and training to help boost knowledge among dealers. Chris Whiting, director of sales and marketing for cleaning and break room supplies at SP Richards (SPR), noticed that the jan/san market needed to be treated differently just over two years ago and puts the little attention from OP resellers down to a lack of understanding.
Knowledge
"It’s basically a lack of knowledge and confidence to move into the washroom and the janitor’s closet," says Whiting. "It’s always been there, but typical office product dealers have just walked right by it. They weren’t aware of the profitable sales. For example, every white collar employee consumes over $100 of disposable paper products in the washroom every year. So even in a medium-sized business with, say, 18 employees, that’s $1,800 dollars in top line sales that they are walking by if they don’t collar the paper and soap sales in the washroom."
SPR recognised that it needed to have a strategic initiative beyond how it had treated the market before and broke jan/san into a business unit, just like its technology products, office products and office furniture that already exist.
"We have totally committed our company to it. It’s now about 5 per cent of our overall sales and we’d like to take that up to 10 per cent in the next four years. We see it growing at a compound annual rate of 20 per cent for the next 7-10 years. Selling towels, tissues, soap and mop buckets isn’t a new business, but it’s new to this channel and the business is shifting from your traditional jan/san distributor."
SPR recently formed a strategic alliance with the "800lb gorilla of the paper world" – Bunzl/Papercraft. SPR represents the independent office channel dealers for the jan/san giant and the wholesaler’s dealers that are committed to jan/san can take drop shipments direct from Bunzl. "It has the best landed cost over anybody, so we’re able to leverage its buying power to help our dealers be competitive," adds Whiting.
The wholesaler and the jan/san distributor have a slightly different set-up to that of their rival United Stationers and its subsidiary Lagasse. United Stationers too noticed the possibilities of this market and caught its competitors by surprise when it acquired Lagasse, a jan/san wholesaler, in 1996. The success of Lagasse over the past decade saw it, under the auspices of its parent company, acquire Sweet Paper last year. But United’s interest in the market really began about 12 years ago and has accumulated a jan/san category team with dedicated resources. The team consults resellers on jan/san business solutions which include training and sales support, all of which are focused on bringing new jan/san information and product trends to the market. Jan/san currently accounts for approximately 16 per cent of United’s net sales, with the company expecting annual sales growth of above 10 per cent.
Mark Hampton, SVP of marketing at United, says resellers have been inevitably driven towards this product category. "Our statistics tell us that jan/san products represent on average of at least 15 per cent of a business’s typical annual office products budget. That being said, many OP resellers were slow to gravitate to a small slice of the consumer’s spend. However, the need for higher margins to sustain their businesses and the competition entering into the category and selling traditional OP products alongside jan/san [has meant that] OP resellers have felt compelled to enter the category."
Category creep
Hampton adds that this "category creep" can be found in numerous channels of distribution, all wanting to sell each other’s products. "For resellers to continue to become more valued as single-source suppliers that provide business solutions to all their customers’ workplace needs, focusing on promoting and selling jan/san items is beginning to move toward becoming a necessity. Resellers now realise that each of their customers is already buying jan/san products from someone. But is it from them-
Hampton says that resellers simply need to make their customers aware that they can supply them with jan/san products alongside their office supplies or, as he puts it, "to start the conversation with ‘…yes, we can provide you with that’".
But how dealers make their customers aware comes back to how proactive the wholesalers are when educating their dealers. Whiting says wholesalers cannot rely upon manufactures to provide training, so SPR has geared itself up to approach dealers with all the information and opportunities to learn as much as possible. The company has added cleaning and break room supplies modules to the SPR University, an online training facility, for example.
In addition, it holds regional training courses which invite dozens of dealers from a market area, and individual training where members of the jan/san team (including Whiting) travel to dealers to "boost confidence" with dealers’ sales reps. But, as Whiting says: "There’s no silver bullet for training, you just have to get in front of people and hammer away.
"We’ve probably provided 2,000-3,000 dealer reps with initial training over the past few years and we’ve gotten excellent feedback as to the quality. And our sales are growing at a level that suggests it is working."
SPR’s approach is to begin with the general market opportunity – the facts and figures – then arm the reps with marketing tools to create excitement with their customers. The company has relationships with manufacturers that enable it to be price competitive on the power SKUs – the 30+ items with known values equivalent to the copy paper of the office world, like the two-ply tissue or the 35-gallon can liner.
"We’re priced right on those items so they’ll have early success," Whiting adds. "If the reps from the office products companies go out and try this and get their teeth kicked in on the first few sales calls, then they loose enthusiasm – we’re trying to avoid that."
Territory
United relies on the experience of its jan/san sister company to provide knowledge of the market and believes that its efforts are best spent "educating resellers on the opportunity itself, how to market the category and the competition and the array of jan/san products available". United taps into the wealth of experience Lagasse can provide in this category. The fim has its own Jan/San University and last year conducted dealer training seminars from which it gained "overwhelmingly positive" feedback.
But there are differences in the way the two categories operate, as Hampton explains: "The two industries approach order fulfilment and the use of wholesalers in two completely different manners. Stockless OP resellers are becoming more and more commonplace, where a majority of jan/san distributors buy stocking orders from their wholesale sources. This strategy along with a more comprehensive drop-shipping programme gives the OP reseller an advantage in capturing large regional and nationwide business."
Traditional
Manufacturers have also noticed the differences. Dave Vinsel, national sales manager for the recently established Millennium Mats, says jan/san has a more traditional operation compared to its OP bedfellow.
"Jan/san is somewhat like the OP industry was 20 years ago. Business is driven by ‘feet on the street’. This is an area where manufacturer’s reps have a direct impact on business – relationships have a major role in gaining new business here. Reps making sales calls with dealers. In other words, jan/san business appears to be locally generated. In the OP industry, manufacturer’s reps have a lesser role because most OP business is generated at headquarter level."
Hampton believes there may come a time when jan/san distributors will sell OP as the erosion of their business to the IDC and power channel continues.
"Speciality distributors will begin feeling growing pressure in the near term from those resellers that can offer a broader array of products and sound business solutions. OP resellers that can differentiate themselves from the rest of the pack will continue to thrive. And one way to do this is by focusing on jan/san products in addition to office supplies, computer consumables, office furniture, etc."
So the two markets may find that consolidation is the best way to survive. The jan/san market appears to be a permanent and growing fixture in the OP world and the onus appears to be on the jan/san distributors to catch up – or put up with lost revenue. Whatever happens, and one suspects that the "catch up" is already underway, the outcome could see some companies on the jan/san side go down the plughole while the OP resellers make a tidy profit.
