Mike Maggio’s appointment last December as President of US dealer group TriMega was welcomed by many in the industry. Maggio has been closely associated with the independent dealer community for over 30 years and has a unique perspective, having worked in the dealer, wholesaling and manufacturing channels during that time.
He joined TriMega at what was seen as an important period in the group’s history: there were merger talks taking place between TriMega and Independent Stationers; major projects such as SmartXpress and Point Nationwide had either been abandoned or were being reviewed; and a significant number of the group’s larger dealers had defected to the Pinnacle group.
Maggio has taken the bull by the horns, addressing the key issues facing TriMega while at the same time planning for the future with the development of a new strategic vision for the group. A timely moment, therefore, for OPI to catch up with him.
OPI: Mike, the last time we interviewed you was back in your ActionEmco days [see Big Interview, OPI May 2008]. Can you give us a quick rundown of what you did after that up until joining TriMega?
Mike Maggio: After we sold ActionEmco, the private equity folks that owned it asked me to go and work at a manufacturing company they owned out in Indiana called Dekko. Dekko’s biggest piece of business was actually in the office furniture space.
OPI: So you weren’t a million miles away from OP?
MM: No. I spent three years out there and then that changed hands when another private equity group came in and I ended up working for Yancey Jones at The Supply Room, and spent two years there.
OPI: That was when it acquired Frank Parsons, wasn’t it?
MM: Right, when it acquired Parsons and then we acquired Rudolph’s not too long after. So I worked there with him, his sons and the rest of the group for a couple of years before the TriMega job. That’s how I ended up in Chicago.
OPI: Was the TriMega job something you had your eye on when you knew it was available?
MM: When it became available I reached out to some folks to profess an interest and then from there TriMega had brought in a headhunter, so she reached out to me and we went through the interview process. They were back and forth a little bit, as you know. Ian [Wist, TriMega Chairman] was doing double duty for almost a year and he spent his year in Chicago.
OPI: What was the thing that ticked the boxes for you in terms of a career move?
MM: If you look at my career, I started on the independent side; I was in wholesale; I did a little bit of manufacturing. But I’ve always had an affinity and a strong sense of purpose when it came to the independent side of the business. At ActionEmco we intentionally cultivated strong relationships with both TriMega and IS which, for as small as we were, was kind of surprising. I believe strongly in the groups, I believe very much in the channel and I think we really add value. So I thought it was an exceptional opportunity for me to really finish out my career doing something that I love. I hope anyway.
OPI: When you joined there was all this merger talk between yourselves and IS…
MM: In fact, one of the first things the headhunter told me was that it was possible that IS and TriMega could merge in the very near future and that I may be brought in to facilitate the merger and move it forward. And when she asked me what I thought about that, I said I felt very strongly that a merger was the right thing to do.
OPI: But that could have meant you moving on after a short time, for example?
MM: Yes, it could have meant that my tenure was very short, but I think it’s an important thing to happen. And long term it still should.
OPI: Can you recap why the merger didn’t happen?
MM: I really can’t, simply put, as I wasn’t involved in the merger talks.
OPI: The board didn’t ask you for your opinion or your advice?
MM: When I started in mid-December, we had a couple of things going on right then – primarily this issue of the large members – and so I focused a lot of my attention working with Greg Fish [EVP of Purchasing] and some of the DSC guys to try to figure out where we wanted to go with that. Ian [Wist] had been bogged down with this and asked me to run the group while he focused on the merger.
So I really wasn’t close to the conversation at all. I can tell you that the board has recently voted unanimously to sit back down. There is a considerable belief that a merger of equals is of value to the channel and to both organisations – and that’s where we stand today.
OPI: Why do you think one merged group would work better than two?
MM: There are some interesting synergies between the two organisations that would work really well, I believe. We have a great national accounts platform; they have a great national accounts programme. Many of the key issues that the channel faces – like e-content and search – would be better tackled together rather than individually. We’ve just upgraded our central system to a new system which we think is going to take us well into the future. So I think, overall, a merger benefits all the stakeholders.
OPI: So when will the boards sit back down together?
MM: I don’t know.
OPI: I mean, in the weeks or months ahead?
MM: Well, as you know, IS recently had a Chairman transition. I hope that once they get past that change and everybody gets oriented, then the boards will sit down again.
OPI: You said the TriMega board is unanimous in wanting to pursue the merger. That infers that the stumbling block was, or is, from the IS side.
MM: I would ask you not to infer that; it’s not a fair characterisation. I think that it’s fair to say that the talks broke off because the talks broke off. Going forward, I think everybody learned some valuable lessons and if we do it again, we’ll do it right.
OPI: What was your brief from the TriMega board when you joined?
MM: There were a number of things they wanted me to do, but most importantly it was about focusing on what we do – which is we’re a buying group so make sure we do that – and then controlling costs and developing a strategic vision for the future. We’ve actually done a lot in the first six months and I’m really proud of how we’ve started to move the ball.
OPI: You said “we’re a buying group”. People say buying groups don’t exist anymore and that it’s about dealer marketing groups, but for you is buying still the essence of the group?
MM: If you look at our core principles it’s all about buying; it’s all about adding value for our vendors and helping our members with cost of goods. So that is – and has to be – a primary focus. Now, you can expand the hell out of that as you’re aware, but I think the important point is to stay focused and keep it in the context of what we need to be doing. For us right now, it’s about maintaining the core and starting to find those other areas that we need to be operating in. But yes, TriMega is still very much a buying group.
OPI: What about the strategic vision? Where are you with that?
MM: The strategic vision, our ‘driving force’ if you will, is straightforward: we are a purchasing association. We provide suppliers with a single platform of over 550 independent business products dealers. That platform allows us to concentrate sales and marketing efforts around key suppliers and introduce new products while providing our members with low cost of goods and an exceptional rebate programme. We do all this with a very dedicated staff – fewer than 25 full-time employees – and a low cost structure, enabling us to return all rebates and funds earned to our members.
The challenge for us as we move forward is to remain relevant to our members and suppliers. We believe that in order to do that we will need to develop an e-content platform independent of SP Richards and United Stationers, although it will support either one’s stocking mix. That platform will allow members to show product available from key suppliers regardless of wholesale support.
As part of developing an e-content platform, our members must have the ability to control search. This will enable us to feature the suppliers and the products that are most meaningful to us. We have to develop meaningful POS [point of sale] data that we can share with key suppliers, and we have to provide assistance to suppliers and members alike, in order to successfully navigate the transition from paper to digital marketing. All of this has to be accomplished within our low-cost model and without burdening our members with additional fees or costs.
So far, we’ve held a series of strategic discussion meetings internally and recently held our first supplier council meeting, and the plan is to have a full board strategic planning meeting in November at the ECi show. The culmination of all this will be a focused strategy that we can clearly explain to all stakeholders and that executes to the above initiatives.
OPI: Will this new vision be a reinvention of TriMega?
MM: I don’t think it will be some revelation where we’re going to transform the industry. I’m not that smart, Andy! But I think we’re going to figure out solid, focused initiatives that support the overall strategic vision and provide long-term value to all stakeholders while providing clear direction to the staff.
OPI: Let’s turn to the issue, which you inherited, of your larger dealers leaving the group. I think more than 15 of your largest members have moved over to Pinnacle in the past four years, Eaton’s and New England Office Supply being the latest two. That must really be hitting your buying power and group programmes.
MM: Absolutely, it has an impact when you look at comparable sales. There were also two really profound changes year over year that have impacted the buy side of the business as well. One was the Xerox sale to Domtar and the other was the HP change. They hit purchase volumes, but in fact neither impacted our rebate volumes.
We do return-on-membership reports every year for all of our members and the worst that I’ve seen since I’ve been here was about 20 times return on membership. For some of the larger members it’s 200-300 times return on membership: what they pay in dues versus the rebates they get back. So it’s good; it’s impressive; it’s important.
OPI: So why are these large dealers leaving?
MM: That’s a good question. I’ve talked to Dave Guernsey [founder of Pinnacle] a lot and I’ve talked to various dealers to try and get an understanding of what the reasons are and, frankly, it seems that for each dealer there’s been a little bit of a difference. Bruce [Eaton’s] answer that he gave to you guys was about technology; Dennis [McCarthy, VP at New England Office Supply] feels strongly that there’s some money being left on the table.
OPI: The dealers that left were members of your DSC group. What is that exactly?
MM: The DSC is a group within a group with 38 members. Membership is based on direct buy volume requirements along with agreement to provide our top 12 vendors with POS reporting and to feature those vendors over competing vendors in sales and marketing initiatives. The DSC has its own governing body, a board of managers and pays additional fees to cover costs of reporting. All members of the DSC are part of the Contract Forum – which is our top 50 members by direct buy volume – but not all Contract Forum members are part of the DSC.
OPI: From speaking to DSC members, what were their main concerns?
MM: While a number of issues were raised, there were two key items: using vendor funding for things other than rebates and marketing, ie SmartXpress and Point Nationwide; and the sense that large independent dealers have different requirements and need additional mass to then negotiate as a block with vendors to drive the lowest possible cost of goods.
OPI: How critical is it to the sustainability of TriMega as a whole to stop this bleeding of DSC members?
MM: TriMega has over 550 members. A loss of any member, large or small, is of concern to me. It is our intention to create an environment that retains and attracts independent dealers to the group, regardless of size or business model.
OPI: So you came up with the Prime concept earlier this year [see ‘TriMega’s Prime Gamble’, OPI April 2014, page 10]. What is that exactly?
MM: The idea behind Prime was to create an umbrella entity that would allow groups that contain large independent dealers – such as DSC, DPCG [Direct Purchasing Catalog Group] and Pinnacle – to negotiate as a block but remain members of their respective organisations. It was a joint effort that included DSC members, senior TriMega staff and TriMega board members.
OPI: But now the Prime idea has evolved into something different, essentially an AOPD-run umbrella group [see News Analysis, OPI September 2014, page 17)…
MM: AOPD is already an umbrella organisation that contains members from all key large dealer entities and so was a perfect fit for the idea. While the structure will be developed under AOPD, the Prime concept – and its goals – remain the same.
OPI: What benefits do you think this initiative will bring to its members and to the vendor community?
MM: I think the Prime framework creates an environment that will allow vendors and large independent dealers to work together to advance the common goal of greater sales and increased market share.
The long-term opportunity is significant in that it identifies clearly the strength large independent dealers bring to the table: local relationships, a direct sales force, the ability to focus sales and marketing efforts on specific categories and suppliers. It’s about matching that strength with vendors that understand the independent dealer community and how it is the best long-term partner that can assist them in reaching their sales and market share goals.
OPI: What does Pinnacle think of the idea?
MM: You’ll have to ask them that.
OPI: On the surface, this looks like a Pinnacle alternative or even an anti-Pinnacle bloc. I know you’ll say that was not the idea, but essentially isn’t that how it will work?
MM: Not at all. I think it is safe to say that all parties would welcome Pinnacle’s involvement.
OPI: How likely is that?
MM: Again, you will have to ask Pinnacle.
OPI: What is the timetable for getting this thing up and running?
MM: As soon as possible.
OPI: Let’s talk a bit about your relationship with the two main wholesalers. You’ve got this strategic alliance with SP Richards, haven’t you?
MM: Yes, from our perspective it’s been a very productive alliance and we are in discussions about renewal. We are hoping to expand the alliance to include solutions for our members that incorporate e-content and search. The alliance consisted of a Point Nationwide agreement and a purchasing piece.
OPI: You mean Business Source?
MM: Yes. We treat Business Source as a vendor and we jointly negotiate with SPR with the domestic vendors for those products.
OPI: How has that worked out?
MM: Very well. It’s returned a significant amount of added rebates to the members that take advantage of it. And I think the domestic manufacturers are very pleased with it as well. So we’ve had nothing but good results from it and we’re looking to expand it.
OPI: In 2012, Charlie [Cleary, former TriMega President] shared with us that you had about $50 million running through TriMega Business Source sales.
MM: And that increased in 2013. It’s done extremely well; it’s something that the wider membership is really taking advantage of. I have also worked very hard at shoring up and improving our relationship with United Stationers.
OPI: It needed shoring up?
MM: No doubt about it. They have been a good partner over the years and almost two-thirds of our members are United dealers. Early on I wanted them to understand that we will not ignore a vendor that is the primary wholesale partner to approximately 60% of our members. I’ve had good conversations with all of
their senior people; we’ve talked about e-content and search, about working together more closely on TriSupply; we’ve even discussed potentially working together on TruChoice.
OPI: Has anything concrete come out of those discussions?
MM: Not yet, but the good news is that everything is up for consideration and right now we’re having good, substantive conversations about all of it. What I’m telling both wholesalers is that whatever we do, we’re going to concentrate on our members that are their dealers. So, whatever we build with SPR, we’ll go out there and try and get 100% of the TriMega members that are SPR dealers using it; and it’s the same principle with whatever we do with United.
OPI: What’s the latest on Point Nationwide? I know Grady [Taylor, EVP Member Services & Managing Director PNW] revamped the whole thing last year [see News Analysis, OPI November 2013, page 14]. What’s the situation now?
MM: First, I have to acknowledge the job that Grady has done and is doing with PNW – he’s done a remarkable job of getting that organisation focused and he’s accomplished an enormous amount with very little.
He is working with a very dedicated, small team to make PNW a success. Right now, we’re in the process of doing a strategic review of Point Nationwide and…
OPI: Another one?
MM: Yes, because all those months ago when I got here I would have told you that our goal was to shut it down by the end of 2014. But I can tell you that it’s very different right now; we’ve got some nice traction and things are starting to happen. For example, a large US association came to us recently through a member and said that it wanted to talk to us because with just two power channel players it wanted a third choice, and we’re in the middle of an RFQ with them.
We’re making our living on government sales, but the real opportunity is on the commercial side and we absolutely need to ramp that up. So Grady and I have been formulating some ideas and will shortly come up with a fairly straightforward game plan on where we’re going with PNW: what kind of investment it’s going to require, where the money is going to come from and how we’re going to achieve our goals.
OPI: Why hasn’t it been successful so far?
MM: Something I learned when I first started managing was that first you become effective and then you become efficient. Focusing on efficiency first very rarely works. Being efficient means that whatever it was that you were doing, regardless of whether it was right or wrong, you’re just going to do it faster, but if you’re effective you can always figure out a way to make it more efficient.
So to me, PNW was a classic example of a really efficient platform and a great model, but we neglected the effectiveness side. We didn’t have the revenue to start with to support the platform. But I am cautiously optimistic that PNW has a future.
OPI: What are some of the other things you’ve been working on? We’ve had quite a few press releases recently announcing various partnerships and initiatives.
MM: Yes, we’ve got a lot of good stuff happening which I think all fits in strategically with the things we should be doing for the membership. We’ve got a data agreement with NPD; we’ve announced a partnership with [jan/san trade association] ISSA where they’ve agreed to provide training to our members; they’re offering a reduced membership fee for our members that want to join and a free visit to their annual show for members that join this year.
The nice thing about ISSA is it’s a true trade association so you’ve got vendors, distributors, resellers and end users, and their training programmes are exceptional – just that alone could be a big value to some of the members. And you’ll continue to see us work on finding other ways to help our members grow their business. Michael [Morris, VP of Marketing] is an exceptional marketer; he’s very creative.
OPI: How’s his Torque marketing programme doing?
MM: That’s been terrific. It’s unique because it’s a multimedia platform, so instead of throwing a flyer on the web or just sending a flyer and an email, it’s got a video, it’s usually focused on one product, it’s all original copy and content and it’s got Meg, who’s our spokesperson.
It’s been very well received and the results have been extremely positive. I think it’s one of the best things we’ve introduced in years; we’ve got to start transitioning away from paper to digital and I think this is one of the things that’s going to lead the way. The vendors are supporting it so that’s a good sign as well.
OPI: We’re out of time, Mike. Many thanks for talking to me, good luck with all you’ve got going on and I look forward to catching up with you at EPIC later this month.
MM: My pleasure.