Hot Topic: Going, going, gone digital

Among all today's macro trends, digitisation has been one of the most impactful. OPI finds out what OP is doing to ensure a future in this digital world


Remember the floppy disk, the 3.5-inch 1.44MB disk that was the ubiquitous symbol of data storage for so many years in the latter part of the last century? It generated billions of dollars for its inventor IBM, many more for everybody that copied it and for a vast array of consumables distributors that couldn’t get enough of the beloved floppy. Now it’s dead, not even available anymore, having been slowly phased out first by the CD-RW, then by USB flash drives.

Fast forward to 2013 and picture a manila file folder, a Rolodex-type card file or even a shredder in a world that is becoming more – if presumably never completely – paperless. There’s no doubt they all still have a role to play, but they’re not the kind of product that will still offer a reliable revenue stream in 20 years’ time, nor provide any growth opportunities. 

As Stephen Baker, VP of Industry Analysis at NPD Group, puts it: “First and foremost, what companies really have to get their heads around is this: what’s the digital equivalent of what I’m doing; is there a path from analogue to digital? Or should I be finding another pathway altogether? It’s that simple.”

Adapting to digital

Traditional and core office products are often perceived as fairly analogue products, desk-based, not always terribly exciting and, when given just a cursory thought, not obviously adaptable to the digital world. But, as many vendors are now proving, the amalgamation of analogue and digital is indeed possible. Better even, there’s demand for them.

Digital sticky notes for PCs have been around for several years, for example. More recently, apps have become available to download those sticky notes to a variety of mobile devices. Ampad (part of Esselte) at the beginning of this year launched the Ampad Shot Note Pads. At the same time, it introduced a digital version of these paper pads, the iOS Ampad Shot Note App, allowing users to choose from six pads once they’ve downloaded the app. The app is currently only available in the US.

Victor Technology primarily makes calculators. But it also sells a range of desk accessories and the company won the Core Office Product award with its All-in-one Monitor Riser at the recent North American Office Products Awards ceremony that was part of SP Richards’ conference. The product, which among other features includes speakers and an Apple docking station, is just one of several mobile-orientated products that the company has been developing over the past couple of years. Nick Giammarino is the vendor’s Marketing Team Leader. He says: “Our thought process was: how can we take desk accessories further? These are products that companies use every day, including monitor risers, pencil cups, those type of things. So what we’ve done is add new functionality to them with the charging options.” 

Focus on mobile

A lot of manufacturers have been focusing on the ever increasing percentage of mobile workers, of employees using smartphones, tablets and the like, and that’s perhaps been the biggest trend in terms of adapting existing categories and products – like the aforementioned pencil cups or monitor risers – and adding adjacent ones. 

It remains to be seen how long the shelf life of some of these ‘hybrid’ products will be, what customer feedback will show and indeed what unit sales will be after the initial bedding-in period, but the point perhaps is that there’s a real appetite for embracing the shift to digital.  

And it’s not just the manufacturers that are thinking outside the box and coming up with new and innovative ideas. Resellers are just as much on the lookout for the elusive next big opportunity. There’s one brand new reseller in the US that has captured the imagination of many. It’s, a pureplay e-tailing company owned by Doug Nash, former VP & GM of United Stationers’ Technology Solutions and Services Group. 

As the name suggests, – which launched in April – is primarily aimed at the mobile worker and sells everything from a vast selection of chargers and surgers over laptop cases and tablet privacy filters to mobile device locks. But it also sells just about everything that a typical desk-based worker would need too, from the simple tape dispenser to a traditional ring binder, although, as Nash says, all products are selected with a “work anywhere” outlook. 

What’s different, according to industry pundits, is its selling approach and the fact that products are sold based on the need of the consumer (home office, mobile working, organisation, etc). John Givens is Founder and CEO of Source Office & Technology, a Denver, Colorado-based progressive independent dealer. He says: “Doug has come up with a really neat idea. 30% of the US workforce are mobile workers now and Doug is tapping into that. He did a remarkable job in putting together products that are important to people that are on the go. Demand for some of these products might be short-lived because changes are happening so rapidly, but he’s focused on it now and putting it out at a time when there’s great demand. What’s also impressive is that he has merged the mobile workforce with the B2C space, so essentially he can present and market himself to both consumer segments.”

Givens himself knows how fickle business models can be. Having started in 1990 as a toner supplier for HP laser printers, the company evolved to first become a major player for a full line of supplies for copiers, faxes, printers and media storage products and then also of office supplies. 

Recognising the threat to its toner business a few years back, it head-on embraced the subject of managed print services (MPS). And now, as both the OP and printer/copier product categories are slowly but steadily shrinking, it’s coming up with new ideas to capture customer attention and spending. 

Givens says: “We believe channel migration will be pervasive as the OP and printer/copier markets shrink and get replaced with mobile devices and digital technology solutions. Old business models have declining margins – we’re seeing a 4-6% decline in toner and office supplies. So you can either try to gain market share in a shrinking market or you could add product categories that are in growth areas. We’re doing both.”

One of the things that Source has been doing is to take a core OP category that is seeing particularly steep declines and turn it into its digital equivalent. The category is filing and the digital spin on it is electronic content management. 

Managing content

The concept of electronic content – and indeed document – management is not new, of course, but historically it hasn’t been offered by the reseller community. But dealers/VARs, particularly those targeting the SMB marketplace where the technology vendors are not that channel-prevalent, are in fact well-placed to take over part of that role. Says Givens: “As an OP company, we know who’s buying paper from us; we also know who’s the most likely candidate to need help with their business processes, so we go in to teach them to progress from a paper-based methodology to a more technology or business process-based methodology with electronic content management.” 

He adds: “People don’t talk about filing cabinets and file folders anymore, they talk about cloud storage. But where is the document stored, who has access to it? We’re working very closely with Hewlett-Packard on this and have gone from a transactional business model to more of a contractual and collaborative business model. 

“What we would do, for example, is to send a first call sales rep into an account and talk to the client about electronic document solutions, about MPS, etc. HP has the technology solutions, but we too have now acquired the expertise to sell them to the SMB space. That’s not an easy thing to do for dealers and it doesn’t add immediate ROI, like another product category added to your catalogue would, for example.”

Now approximately 25% of Source’s total sales of $37 million are in the print technology space, which comprises its MPS business (including copiers and indeed paper) and electronic content management, so it’s clearly been a path worth going down. 

Cloud storage incidentally is also something that other OP manufacturers are looking into and traditional players with an organisational and filing background are often keen to add a ‘digital’ string to their bow. Esselte Leitz is one of them. The company will be launching Leitz Cloud, a cloud-based document management solution, over the next few months. The product will only be introduced in the German market initially and be sold via the small- and medium-sized reseller community.  

Germany’s HSM, meanwhile, has been addressing a problem that’s closely related – the digital storage of data. Just as you had to be careful who got hold of the old floppy disk many years ago, there’s still plenty of data that’s not in the cloud but on companies’ computer hard drives. And that data, like the reams of paper as well as CDs and DVDS etc that are fed into ‘traditional’ shredders, needs to be destroyed. 

HSM launched its range of hard drive shredders back in 2010 and now sells two basic varieties. It’s clearly a niche market and an expensive business – they cost $20,000 and $30,000 respectively – but, says the firm’s Marketing Director Angelika Lange, the cost is usually absorbed within two years. 

Who are the customers? They are unlikely to be the average OP reseller customers at that price. Lange confirms it’s actually the providers that help large corporations to dispose of their hard drives that are high on the customer list of these bulky machines. Only a select few global conglomerates and public sector organistions choose to have a hard drive shredder in-house. 

New purpose

Those that have previously made a good living out of storage products have had to adapt. Take the Bankers Box. It was Fellowes’ first product line and is now almost 100 years old. Traditionally used by businesses for the long-term storage of documents, its must-have attributes have certainly waned in the era of cloud storage. But far from descending into oblivion, the company has given it a new lease of life by, for example, adapting it to its Home Office Solutions segment. It would probably be correct to say that there are now more varieties of Bankers Boxes on the market than ever before. 

President John Fellowes says: “The way we’re working on our business now is to put it into two zones. The first zone comprises our core products, many of which in one way or another are paper-dependent. They still make up the mass of our overall business but are declining already and will continue to do so over the long term. Binding and laminating machines, shredders and cutters – on aggregate they’re all affected.

“The second zone is what we call our expansive product categories and there are eight categories that we’re getting into right now. Mobile accessories is one of those groups, home office solutions another. But in addition to categories that fit in well with our existing customers – like our I-Spire series of products, for example – in other categories such as air purifiers the biggest opportunities lie in different channels of distribution, so we’re increasingly working with new distribution partners as well.” 

As Fellowes puts it, innovation and embracing the new – all the time, not just every 20 to 30 years – is vital, but it’s also important to stick to your brand and keep an eye on the core business. He says: “We’re using a lot of the capabilities that we have in our core business to get into these new categories. 

“We also need the revenue of that core business to then re-apply it to the expansive side. There’s a lot of trendwork we’re monitoring to ensure that we’re going in the right direction. Digitisation is taking us from something and somewhere, but we need to make sure it’s taking us to or at least towards something else.”   

Beware the ‘Kodak moment’

Office products companies are far from alone in their quest to reinvent the wheel and make sure they’re still relevant for years to come despite – and even because of – digitisation and an ever growing reliance on technology. Pureplay retailers from many industry sectors, for example, have come under enormous pressure to counteract the trend of showrooming and eventual online purchasing, leaving most of them no choice but to fully embrace a multichannel selling approach.

There are also several companies that perhaps serve as potent reminders – good and bad – of why it’s important to constantly look at your business model and evolve. Cue the aforementioned floppy disk.

Kodak is a good example. For the best part of the 20th century, Kodak owned the world of photography and film, its founder George Eastman having invented roll film in the late 1800s. Everyone knows about the ‘Kodak moment’. 

But it all started to go wrong about 20 years ago with the decline of film photography. In the 1990s, Kodak poured billions into developing technology for taking pictures using mobile phones and other digital devices. But it held back from developing digital cameras for the mass market for fear of killing its all-important film business. Others, like Canon, weren’t so reticent and the Japanese company is now the biggest seller of digital cameras. It’s ironic then that Kodak was in fact the first company to actually create a prototype of what later became the digital camera back in 1975. 

The rest is history. As a result of the decline in sales of photographic film and its reluctance to embrace digital photography Kodak began to struggle in the late 1990s. It ultimately filed for Chapter 11 bankruptcy protection at the beginning of last year and is still trying to emerge from it.

Another company that has failed to read the signs is video rental company Blockbuster. It too went bust, essentially – though not solely – because it didn’t keep up with technology. Blockbuster still exists, but is merely a shadow of its former grand self. Competitor Netflix, meanwhile, did read the signs and handled the transition from DVD rental to video streaming masterfully.

Netflix was an early mover in terms of offering video on demand and initially alienated many of its customers when it moved from DVD rental to video streaming. But it had the last laugh. Netflix has more than 32 million subscribers in the US, Canada, Latin America, Ireland, and the UK now, with room for further growth.

The “new” competition is not sleeping, however. And who would be surprised to hear that that competition might indeed come in the omnipresent shape of Amazon? According to the Motley Fool’s Adrian Campos, Amazon Prime may be the next big threat for Netflix. Campos says in his blog: “If there is somebody who knows about permanent innovation and expansion, that’s Amazon. From books to server farms and now from server farms to video streaming and beyond. 

“Amazon Prime is the product designed to compete against Netflix for video demand: prime members enjoy free two-day shipping on millions of items with their purchase, unlimited instant streaming of thousands of movies and TV shows, and a Kindle book to borrow for fr
e each month.

“Once more, Amazon is using the resources from other successful products to market a new one.”