moment of truth

The Stationery Channel has made gradual progress since April, but whether it will become a must-have fixture in the UK market remains uncertain

At 58 and following an eventful career, Alan Hickman could be forgiven for contemplating retirement somewhere hot and sunny. He’s certainly played a defining role in the shaping of the UK office products market over the past 25 years.

But instead of hanging up his OP boots once and for all, Hickman – who stepped down as CEO of Kingfield Heath at the end of 2001 and has since worked mostly as a consultant for a variety of companies – went back to the drawing board. The result was the Stationery Channel, a specialist UK-based wholesaler that, at Paperworld 2003, was hailed as becoming "an alternative approach to stationery wholesaling". It would also offer a much needed alternative to the two large UK wholesalers Spicers and Kingfield Heath, as well as purchasing and logistics operation Europa.

However, it’s been anything but plain sailing since that announcement, as initial manufacturer feedback and financing issues required a rethink, which delayed the official launch of the venture. Nevertheless, last April operations began in earnest and despite encountering a fair amount of criticism, Hickman remains bullish about the timing.

He says: "We went public in January 2003 at Paperworld. At the time we had nothing other than a detailed business plan. We needed time to check the concept out with dealers and manufacturers and knew the story would get out, so better to do it in the open. Provided that stage looked OK, we had to get the funding in place. Those two steps took us till October 2003 and I still don’t see how else we could have done it!"

It’s all in place now. About 40 per cent of the Stationery Channel is owned by venture capitalists and banks, while the remaining 60 per cent is financed by the company’s management. This has been a deliberate policy, according to Hickman. "I think it is important to suppliers and dealers alike to know we are not at the mercy of the big institutions. Anyway, in the light of hard experience, this was the only way I was prepared to proceed!"

Indeed, Hickman went back to his former stamping ground and several of his new recruits previously worked for Kingfield Heath, among them new managing director Jim Davies.

pilot

The Stationery Channel kicked off on a pilot, regional basis in late April with 50 manufacturers and just three van runs to, as Hickman says, "test the infrastructure and the pricing". Having made a few changes along the way, the operation now deals with about 70 manufacturers and over 120 dealers, a number that is on the increase, as is the number of products on offer, the latter having risen from about 5,000 to 7,500.

But progress is slightly slower than anticipated and hasn’t been helped by the fact that Davies is only now able to fully immerse himself in the business due to his previous contractual obligations. Also, its two main competitors have stepped up their game and are now enjoying renewed success. Repeat orders at the Stationery Channel are coming in steadily however, according to Hickman, with only a few customers using the company merely as an occasional back-up service to one of the main players.

The aim, of course, was never to replace the likes of Kingfield Heath and Spicers, but to provide a viable alternative as well as a back-up. That said, purely in branded stationery terms, over time the Stationery Channel intends to move beyond their level to become a true stationery specialist. Indeed, the fact that the company focuses solely on stationery items, rather than including EOS, jan/san and the growing range of FM products, is its main differentiator. So is its strategy to avoid private label.

Says Hickman: "Our commitment to our manufacturers is to work very closely with them on their branded offering. Having our own private label is inconsistent with this strategy. Nevertheless, we offer some white box products, such as envelopes, in sectors where there is no branded offering that is competitive at a particular price point, but even these lines we try to draw from our supportive manufacturers."

Out of its total offering of 7,500 SKUs, about 200 are such unlabelled products, all without a real high volume brand alternative.

Hickman acknowledges that the trend in the past couple of years has been towards one-stop shopping and stockless dealers. "From the outset we always accepted that particular sector of the market would be tricky, but interestingly enough, even those that are totally dependent are grateful for a reliable back-up, because the other big wholesaler certainly won’t want to know! Dealers that do pick and mix, which includes all those making use of other specialist wholesalers such as EOS, are better set up to compare prices and chase the deal."

In the short time that the Stationery Channel has been up and running, no obvious segmentation has emerged in the type of dealer that approaches the company. Small dealers appreciate the personal service and absence of minimum orders, while larger players recognise the need for a responsive but competitive back-up service to their primary wholesaler.

Says Hickman: "We are working closely on the ground with each company to design the best way we can assist them, and even our entry into the market has made a difference to the way they are treated elsewhere! Choice means a great deal for dealers in more than one way."

competitive

And while the Stationery Channel may struggle to be competitive on very high profile branded products that are almost commodities, its pricing on manufacturer brands appears to be on a par.

With regard to its own margins, Hickman is content with the results, saying that "at present, we are running very close to what we had projected on gross margins. Remember our mix is neither diluted by EOS or furniture, nor are we trying to compete against Europa."

Geographically, the Stationery Channel is currently limited to the centre of the country – where it is based. Hickman points out: "Our 14,000 sq ft facility in Tamworth is very central to the motorway network. It was also a requirement of our venture capital partner, Midven, that we were in the west midlands. Finally, it has enabled us to tap into the network of the experienced people we knew, those who had been made redundant from Kingfield in Nottingham."

The company is currently delivering with its own fleet to central and northern England, while carriers can deliver anywhere in the country if an order exceeds £125 ($222).

As the Stationery Channel moves ahead and Davies takes over the reins, Hickman’s role of chairman will become less involved. He says: "Theoretically, the Stationery Channel accounts for 80 per cent of my time, but it feels like over 100 per cent at the moment! Now that Jim Davies is able to take up his MD role fully, I can spread the load a bit more, but we still have a lot of hard yards to cover, so it’s still very much hands on for me."

It hasn’t exactly been all guns blazing for the Stationery Channel. Nobody disputes UK dealers need more choice – in some form or another – and it will be interesting to see whether the Stationery Channel will rise to the occasion and become that choice.