Eric Gagnebien

 

Former IBM salesman Eric Gagnebien now finds himself at the centre of the French independent dealer community with his own dealership and president roles at Intropa and consortium G3+. Eric takes time out to talk about the state of play in France and the ongoing battle with the big boxes.

 

OPI: Hello Eric, thanks for agreeing to this interview, especially as it is in English which, I know, you consider yourself to be a bit rusty at. If it helps at all, I can assure you that your English is much better than my French. First up, can you tell me about the various positions you hold. You have management roles with Groupe AB, Intropa and G3+?

 

EG: First of all Bruce, thanks for the opportunity to do this interview. Hopefully, it will help me with my English. In terms of the various roles I have, I can certainly confirm that there are a few. I am the CEO of my own family company Groupe AB and that is my main job. I am also president of my buying group Intropa, which has eight members and does Euro157 million ($204 million) in revenue. I am also president of G3+ which acts as an umbrella for Intropa and another buying group, Unifob, which has 15 members and does Euro167 million in revenue.

 

Intropa and Unifob are run as ‘clubs’: we have no warehouse and members buy directly from vendors. I have been president of Intropa since 1998. With G3+, there is no staff, my role is only honorary and I have been president here since 2004 and a new president is named every two years.

 

OPI: Ok Eric, can you briefly take me through the history of G3+?

 

EG: G3+ was created in 1995 to combine the buying power of Intropa and Unifob and to get better prices. The president is renewed every two years and I was elected in 2004. At first, we were G2+, then in 2000 we added Majuscule, a French buying group with a warehouse, and became G3+. However, we broke this partnership off in 2002 because the buying strategies for a group with a warehouse and one without a warehouse are quite different. Following this, we linked up with a member in Spain, Burototal, and this was our first step out of France. We gained good knowledge about international practices through this partnership. However, after we joined Business Products Group International (BPGI) in 2003, our Spanish member preferred to leave and is now the European Office Supplies Alliance’s (EOSA) Spanish member.

 

OPI: Can you tell me how G3+ works as a business and just flesh out some details?

 

EG: G3+, as with Intropa, doesn’t have to make a profit. The only mission is to get better prices for the members. We have no staff, so we have no fees and all the money goes back into the pocket of the dealers. G3+ puts out tenders every year for the global volume of its members on approximately 20 per cent of our SKUs. Then, for the other 80 per cent, they are directly negotiated by each member. This is coordinated so that a price given to Intropa is automatically applied to Unifob. Tenders are negotioated by the dealers and there is help from staff at both member companies. No revenue goes to G3+ or Intropa, so all of the money goes back to the dealers. That means that a dealer gets back five to seven times his fees plus the net prices gained by G3+/Intropa.

 

G3+ manages 27 dealers and a Euro317 million a year turnover structure. The main role is to negotiate, source and manage the Intropa and Unifob catalogues. The dealer participates once a year in a big negotiating round with our vendors. As G3+ president, I am more of a referee or coordinator than a manager.

 

OPI: What kind of revenue do you do with G3+?

 

EG: G3+ negotiates about Euro80 million a year and gets contracts with approximately 100 vendors.

 

OPI: How do you see G3+ growing as an alliance? What does the future hold for it?

 

EG: I firmly believe that the future is excellent. At G3+ we create good buying conditions, supply new information to the members and visibility to the vendors. We have no problems here and the proof is that we have grown more than four per cent in 2004.

 

OPI: Opening things up a bit, what is the current state of the overall French office products market? Can you take me through the key firms and the market share for those firms?

 

EG: Well, the market is worth Euro5.4 billion and independent dealers have Euro2.5 billion of this market, which adds up to 47 per cent. Outside of this segment, the ‘big three’ are Office Depot, Lyreco and FOS (Fiducial Office Solution). These big three have Euro1.5 billion of the market, controlling 28 per cent of it, while the catalogues of JPG (Staples), Bruneau (3 Suisses) and Viking (Office Depot) have Euro0.7 billion, or 13 per cent. Wholesalers, such as Bureau Vallée and Burostore, have Euro0.6 billion, which equates to 12 per cent.

 

OPI: Obviously you are very heavily involved in the independent dealer community in France. Looking at that segment in particular, how many independent dealers are there in France and what is the break down of those companies in terms of size by revenue?

 

EG: There are roughly 4,000 independent dealers in France, with around 1,000 being truly significant. In the market, most dealers do $1 million to $5 million in annual sales, with just seven doing more than $20 million and only three achieving sales of more than $100 million. Two of the latter are G3+ members, I am happy to say.

 

Within the dealer community, there are many dealer groups with central warehouses, such as Buro+, Majuscule, Calipage, Carip, Cap International and RP.

 

On average, dealer margins are 35 per cent, with dealers dominating the mid market, an area that in the US is often described as the independent dealers’ ‘sweet spot’.

 

OPI: How healthy is the independent dealer community in France at the moment? How are margins holding up?

 

EG: Obviously things can always be better, but overall things are quite good for the majority of dealers. A gross margin of 35 per cent is not too much to complain about and shows good health generally.

 

OPI: What are the reasons for the positive status of the French independent dealer community? How are dealers maintaining their position amid the encroaching effect of the power channel?

 

EG: One of the key factors is that independent dealers are closer to their customers. This is the one important area that the larger companies, such as the big three, cannot compete. As with people in Latin countries, French customers favour relationships over prices. As everyone knows, the French love their relationships.

 

So, this is the key area where dealers can differentiate themselves from the power channel and outperform them. They can’t really compete with this offering. Other than increasing relationships with customers, it is also important to market prices like the big boxes and to explain to the customers how the big box players work and demystifying their might.

 

The grass is not always greener on the other side and independent dealers have to be confident about what they are offering and how it differs from the likes of Staples and Depot. There are still areas of business that the independents will always do better than the big boxes and this should be highlighted at all times.

 

OPI: If you can pick one, what would be the most important issue for French independent dealers?

 

EG: Well, in France, as with independent dealer communities all over the world, the problem of succession planning is a major one.

 

OPI: Eric, I can talk to any independent dealer in any country and find that this is a key worry in all business communities. It looks like this is a problem that is really coming to a head and it seems that France is no different (see ‘Fear factor’, page 30).

 

EG: Without question this is the case. Most of the owners of French independent dealers are over 55 and in many, many cases there is no successor! It is a very worrying situation that puts a black mark over the future of many companies.

 

OPI: Nevertheless, do you see a bright future for French independent dealers or are you less positive?

 

EG: Well, Bruce, let’s be careful here and say that I am at least not negative. I believe that independent dealers can manage their own destiny and this is by far the most important thing. It is up to them. If they want a future, they can have one.

 

OPI: How have French independent dealers evolved over the last five years?

 

EG: Quite well. Assisted by Spicers or groups such as Buro+ or Intropa, they have learnt to react against the might of the big box players and to consolidate their positions. That is why the big boxes haven’t really progressed over the last two years. Nevertheless, competition is savage and there is no room for complacency.

 

OPI: You became a member of BPGI in 2003, what was the reasoning behind making that decision?

 

EG: All through my career I have believed passionately in the strength of a group. BPGI is the ultimate group for us. It is a terrific feeling to participate in the development of the first conglomerate of small companies built to compete with the big box players. Remember that I had many years’ previous experience with IBM, where I was in charge of big international accounts. Now I am involved in the management of a relatively small company and this enables me to act small but still think big.

 

OPI: How do you feel you have benefited from being a member of BPGI?

 

EG: Of course, in the first instance, the benefit has come from buying conditions. But overall we have felt a tremendous boost from sharing information and tappng into the knowledge base of our BPGI colleagues. You learn a lot as soon as you look over your boundaries and see how things are done in other countries. However, it is most difficult to transfer and adapt the experience of our colleagues in BPGI to the French market and to G3+ members. Thankfully, it is not as difficult as it was for the French to say ‘yes’ to the EU constitution, but not as easy as we had hoped.

 

OPI: Can you sum up the current state of the French economy?

 

EG: Flat and morose, like a bad wine! So much so that the French want to vote ‘NO’ to the constitution!

 

OPI: Well, that was certainly concise Eric. How is the state of the economy negatively affecting the office products market in France?

 

EG: Well, naturally competition is becoming more and more furious, with dropping prices and a decrease in gross margin.

 

OPI: And in this tricky environment, have French independent dealers been successful in battling with key big box players such as Staples and Office Depot?

 

EG: Not all have been so good at competing against them, but some have really shown the way. We like to think that the large G3+ members are among those companies that have shown the way forward in particular.

 

OPI: Merci Eric, many thanks for finding the time to talk to us and enlightening our readers on the current status of the French OP market.