Diversify or die, say forward-looking firms



There is a general consensus among industry watchers that the traditional office supplies market is fast reaching its saturation point. The face of the industry is changing and cash-rich companies are dipping their toes into diverse markets in a bid to survive.
Steelcase UK is one company which has carefully watched where the market is going and reacted. The firm recently launched a subsidiary, Steelcase Solutions, a new office interiors business offering a range of product, design, planning and project management services.
The subsidiary will serve the UK’s South East region, and with over 1.4 million square metres of occupied office space in central London alone, the area is one of the busiest, if not the busiest, office markets in the world.
Taking only initial design, furniture and relocation into account, Steelcase claims that there is one supplier for every 40 organisations in London, making it very difficult for customers to select the appropriate team of experts to work with.
Mark Spragg, managing director of Steelcase UK and David Hay, the manufacturer’s sales director, attribute the need for a more integrated approach to serving the office market in London to the location’s sheer complexity.
"If you look at the other markets, they tend to be a lot more consolidated," said Spragg. "For instance, most European markets have a much smaller number of suppliers and so there is a much lesser number of external third party referrals and furniture procurement specialists."
Hay continued: "London is so fragmented compared to anywhere else in the world. It’s hard enough for people in the industry to know what’s going on in the market. And it is difficult for customers to deal with all those specialists."
Steelcase Solutions has been designed to remove part of this burden by taking a "holistic approach" to supporting Steelcase’s clients, whatever their interiors may need.
Dependence on modern technology, particularly laptops and wireless broadband, is changing the demand for office supplies.
"There is definitely a trend toward the simplification of furniture products. Things like desks and workspaces are becoming simpler. Technology is freeing up people to work in a more mobile way," said Hay."
Commenting on what’s driving OP companies to diversify, Spragg said: "It’s the way of the world now, it’s diversify and figure out new ways forward or stand still. And standing still in any market these days, especially with the rapid changes in technology, is the death of a business."
Diversification is not only happening in the UK. Last year Minnesota-based Smead Manufacturing launched MO, a team of designers, with combined expertise in graphic design, architectural design and office product development.
MO was launched in response to the rapidly expanding small office home office (SoHo) sector. According to Smead MO, almost half the US workforce (about 66 million people) work form home during the typical week.
With the creation of MO, Smead has been able to build a new market of consumers, and build new sales and distribution channels as well.
Smead’s new markets manager, Chad Lindholm, said: "Whenever a company diversifies it gains, at the very least, a great deal of new experience and knowledge.
"Perhaps more importantly, however, MO has brought Smead a whole new market, consumers that perfectly complement the company’s existing customer base."
At the time of MO’s launch, the subsidiary’s concept was unique to the industry. But the emergence of Steelcase Solutions has confirmed that MO has already lost its ‘unique’ status.
Lindholm said: "Since MO’s market introduction in January 2005, we’ve already seen a few mass retailers that have created their own line of ‘upscale design’ office supplies."
Both Steelcase UK and Smead Manufacturing have taken it upon themselves to address the demands of a changing workforce and changes to the traditional office environment.
The result sees new subsidiaries and plenty of new customers.
"Smead realises that innovation is the key to sustaining growth in this industry, and through MO, Smead has been able to innovate not only with product design, but with marketing campaigns, distribution channels as well as new sales strategies," said Lindholm.
Added Hay: "Clients want you to come with a complete answer. And we need to keep up with that. If we don’t, other companies will."