Big interview: Bruno Peyroles

Bureau Vallée's CEo Bruno Peyroles talks to OPI about his successful franchise model.


Fresh from being crowned as Reseller of the Year at the recent European Office Products Awards in Frankfurt, Bureau Vallée’s Bruno Peyroles talks to OPI about his firm’s continued success…

Bruno Peyroles’ initial reaction after collecting his company’s European Office Products Awards prize in January was to say that it had come too early. However, while traditional OP resellers continue to see sales fall, Bureau Vallée’s network of stores has virtually doubled in the last four years to over 200 as it outperforms the market; it was not by chance that he scooped the award. 

Now the franchise discounter is preparing to accelerate its development outside France. OPI travelled to Bureau Vallée’s new and expanded headquarters just outside Paris to speak to the company’s founder.

OPI: Bruno, could you start by giving us a quick overview of Bureau Vallée?

Bruno Peyroles: I established Bureau Vallée in 1990 and we now have 206 stores. In the financial year that ended in March we opened 26 new stores, which is about the same level as in the previous two years, and sales are in excess of €230 million ($296 million) and increased by around 12% year on year. Most of our stores are in mainland France, but we have a fair number in French overseas territories and a presence in Spain, Belgium and Luxembourg. 90% of our stores are operated by our franchisees and about half of store openings are second, third or fourth stores, which gives us a certain continuity and also confidence that we have a sustainable and attractive model.

OPI: The 12% growth rate includes new openings, I assume. Can you give the organic figure?

BP: That’s an important question in this economic climate. If you take the comparable figure, we have grown between 2-4%.

OPI: In a market which has probably declined by the same rate?

BP: Yes, our ability to win market share has remained relatively stable, even if our own growth has declined from around 6-7%. We actually saw a significant drop off in sales in the summer of 2012. The situation has somewhat stabilised and I hope we are now scraping along the bottom and that there will be some improvement in the second half of 2013. As to 2014, we have no idea what that will bring.

OPI: Can you talk about your profitability?

BP: That’s not something that we communicate on. It’s not about us being secretive, but we are a network of franchisees with 120 separate legal entities. We do have some visibility on the profitability of our members, but we’d like to have a better idea of their results in order to be able to provide stronger support and to be able to better anticipate possible problems, such as cash flow issues. This is something we are working on internally at the moment.

OPI: Why was there a sudden sales decline last year?

BP: What we are seeing in our stores is the continued increase in the number of clients, but a significant drop in average order size that became more acute in the second half of 2012. Small businesses are clearly being very cautious about their spending after the government implemented tax increases beginning in July. There was an avalanche of taxes that weren’t talked about much at the time, but as usual it was the private sector that was hit. I’m not alone when I say that business leaders are angry and frustrated by our government’s decisions. Politicians who normally don’t know the first thing about running a business are taxing private firms before getting the public sector’s house in order.

OPI: Who are your main target customers?

BP: We have a very stable customer profile. Two thirds of store visitors are consumers that account for one third of sales and one third is business customers that account for two thirds of sales. Our commercial customers are mainly very small businesses – entrepreneurs, tradesmen, professionals – with five employees or less. There are millions of these companies in France. The big resellers can’t get to them – except for the supermarket chains, but they have a restricted offer – so they come to us. Our prices are the best, so that works for us.

OPI: Can you describe the typical Bureau Vallée store?

BP: We can’t really talk about the typical store any more. The two main types are the edge-of-town superstores in various sizes and town centre City shops which range from 50-150 sq m (500-1,500 sq ft). About 90% of the network is still the superstore format, but the City stores are growing proportionally faster and we are aiming to average around 25 town centre openings each year going forward. 

OPI: City? That name seems to have been inspired from the Office Depot stores in Paris!

BP: Well, it’s not a protected trade name in France! [laughs] Seriously, Office Depot has been doing very well with this format which it began in 2000. At that time, we were comfortable with what we were doing, but now there is a greater demand from clients for a closer, more local solution, so we’ve adapted to this need. In fact, as the traditional town centre stores disappear, the concept is being re-vitalised by companies like ourselves and Office Depot. We’ve also had to adapt so that deliveries can be made to these stores as we don’t have our own distribution platform. About a third of sales come from IT and print consumables and we rely on the wholesale channel for that, so that’s not really a problem. However, it’s not easy for a 50 sq m store to organise direct deliveries with vendors; choices have to be made about what and what not to stock. Thankfully, manufacturers like Clairefontaine have always mainly shipped directly to clients so they have logistics solutions that are well-adapted for town centre deliveries. 

OPI: Why don’t you have your own distribution network?

BP: It’s a fundamental part of our business model. We understand that networks which have a distribution platform don’t have certain delivery or SKU issues, but there are also the logistical and financial risks that go with that. When it works well, a distribution platform is a powerful tool. Take Spicers or Majuscule, for example, which are reputed to have excellent logistics; for them it’s a key strength. But it can also be a weakness. Look at Plein Ciel before it was taken over by Spicers or, more recently, SACFOM.

We are constantly questioning ourselves, so we generally take a serious look at this issue every two or three years. We talk to the vendor community, look at what’s at stake in terms of the investment and financial risk. Until now, we have always felt it has not been the right move for us and we will continue to develop in the way we have been doing.

I also think you have to take a step back and consider our operating philosophy, or our DNA if you will. We are a discounter of branded products and the discount concept is still at the heart of what we do.

OPI: I noticed the picture of [Walmart founder] Sam Walton behind you!

BP: I cut that picture out of a French magazine when I left Auchan in 1990, and what Sam Walton said then still holds true today. Discount is about price, and a big part of keeping prices low is keeping a tight control on your own costs. Again, we regularly ask ourselves if it is still the right concept and there is much debate internally. However, we have consistently shown the franchisees that if they keep taking share it’s because we are cheaper than our competitors, even the online players. 

And it’s a particularly strong message during a crisis and it’s important to show our clients that our price advantage is real. We did some comparative advertising for the first time in 2003. We were actually sued by a competitor at the time, but we won that case. 

Moving forward almost a decade we did some more comparative advertising for last year’s back-to-school and for print supplies. Earlier this year we did a comparison on inkjet prices versus our main office products competitors such as Office Depot, Amazon and Calipage.

OPI: You’ve got this loyalty to branded products. Why don’t you have your own Bureau Vallée brand? Everyone else has private label.

BP: There are a number of reasons. Firstly, it’s not something that is set in stone, but as long as we have a suitable offer from our suppliers with suitable conditions that allow us to have a ‘normal’ level of profitability, we believe that the manufacturer is the best one at developing, innovating and marketing its brands and it’s not up to us as resellers to do that in its place. Just look at our sector. We have strong international brands in all categories. Are we going to be better than them at their job? I don’t think so. It then goes that there are no costs for us in product creation, manufacturing, marketing and advertising and so on. 

OPI: Do you think you are able to buy better than your competitors?

BP: We are a €230 million business. How can we have better terms than companies that are five, ten or even 100 times bigger than us? As I already said, the basis for a discount offer is to sell for less by costing less. If you don’t have the second part then you don’t have the first. So, if my running costs are tighter than the competition, I require lower gross margins to balance my books. The other players tend to forget that. When they see
 our aggressive price advertising, they turn to the manufacturers and accuse them of offering us better terms rather than looking at their own cost structures first.

Another thing is that our core business does not involve tenders, where we have to respond to offers based on a certain budget. I can see the need for sourcing alternative products in that case, but that does lead to a reduction in quality and usually to lower margins as well. Ultimately, it’s the end-users who suffer. We see clients in our stores who are obviously not happy with the office supplies they are made to use. They’ve asked around the office and then come to us to buy their favourite brands, putting it on expenses.

OPI: In OPI we’ve talked a lot about Amazon and its move into the OP space. What are you seeing in France?

BP: I’d say that we are definitely in a state of alert, even if we haven’t been directly impacted by Amazon yet. Nevertheless, there are some signs and we’ve always looked to prepare ourselves for the arrival of a new type of competitor; it prevents us from becoming complacent. We look at the most likely challenger, look at what they are doing, and we try to learn. At the moment, rightly or wrongly, it’s Amazon that is on everyone’s radar. But this is nothing new for us. In 1992 it was Viking. Following that it was Office Depot, Metro, Top Office, and then at the start of the 2000s the supermarkets with their back-to-school offerings. We’ve always tried to find answers in relation to our clients; it’s part of our company culture. We just have to prove that we are cheaper than the online players who still have delivery costs to end-users.

OPI: But you recognise the importance of providing an online solution?

BP: Yes, we have been selling on the internet since 2012 with what we called ‘BV Drive’. It’s a solution that is directly linked to a store which the customer selects before purchasing. We can’t provide delivery, but the order is prepared and is then ready to collect. Customers can pay online or when they are at the store.

OPI: So it’s not a pure online solution along the lines of Amazon?

BP: No, our model doesn’t allow that, but in any case we want to keep the store at the centre of our concept. Customers still have to go to the store so we can maintain that personal contact and relationship which is important. It’s something that is still relatively new and is not yet available in all stores, but it is gaining traction and growing as we expected.

OPI: We are also seeing secular declines in traditional product categories. How is Bureau Vallée adapting to these developments?

BP: When I look back to the early 1990s, IT supplies were essentially a few toner cartridges for photocopiers and laser printers. Then inkjet arrived, we got in that space early and achieved a certain level of credibility, becoming the fourth largest reseller in France of print consumables behind three large supermarket chains. Traditional stationery resellers had thought it was a risky, complicated category that didn’t provide enough margins and they initially stayed out of it. 

Today, the category is a third of our sales, and a profitable third. It doesn’t take up much space, it’s fast moving and we know how to sell the category. We’ll do the same again. It won’t be easy, but we’ll adapt.

We’ve developed a concept for mobile workers, including tablets, accessories and buying and selling used smartphones; we’re doing a lot more service-oriented in-store printing and we’re getting into pay-per-click printing. So we’re developing our offer in line with changing consumer habits. 

Paper usage won’t die out overnight, of course, but I do believe that we are now on the edge of a revolution when it comes to how and what businesses consume, and that 20 years from now our industry will have completely changed.

OPI: Tell me about your relationship with Apple. I was interested to see some Apple products in your stores.

BP: It’s all about our ability to sell Apple for less than others do. We’re not an authorised Apple reseller, and have little or no relationship with them, and we just stock a few of the latest products. But we have been able to source products a bit cheaper and sell them for a bit less than everybody else. It’s great publicity for us and helps us to maintain our discount position. But we’re in control – we have Apple when we want to have it and when it suits us.

OPI: Let’s talk quickly about the French market. There have been some major developments recently with SACFOM, Rouge Papier and ADVEO. It seems to be an evolving market.

BP: Things are moving for sure, I think that this will continue. Market contraction will lead to other developments, such as mergers and possibly bankruptcies. Can traditional stationery resellers, which sell little or no technology or services, continue to resist the market trends? Obviously not. If you take the stationery resellers, mail order players, or superstores, I wouldn’t be surprised to see a merger or perhaps someone going under in the next 12-18 months. 

OPI: Do you think the liquidation of SACFOM was a natural correction of the market?

BP: You could put it like that, yes.

OPI: What do you think of the establishment of ADVEO in France?

BP: That is a major concern for us. It’s not an issue that Spicers as a wholesaler or Adimpo as a wholesaler came together, but there is a structural issue with the Calipage and Plein Ciel networks competing with our stores. Adimpo is an important supplier for us, so it’s an uneasy situation to have it as both a supplier and a competitor.

OPI: There is a separate ADVEO Digital subsidiary.

BP: Yes, but we can certainly ask ourselves about the information exchange we have with Adimpo and where this information will be seen or heard. It is an issue, a question of confidence in our relationship with Adimpo, and it has complicated things. We will see where that leads.

OPI: Just a couple more questions to wrap things up. You’re working on a national environmental labelling project, I understand?

BP: We introduced our own ABCDE environmental labelling system about three years ago, working with the French standards organisation AFNOR. That has been a success and we can clearly see the relationship between product sales and their environmental grade. 

Now we are working closely with the French office products trade association UFIPA which is leading an initiative to develop a national scheme that will expand on and improve what we have been able to achieve by ourselves. Good progress has been made in the last few months and there is a real desire amongst industry stakeholders for a single set of environmental criteria.

In fact, UFIPA has even been in contact with peers in Holland – thanks to an OPI article, I believe – about establishing a pan-European labelling scheme.

OPI: Talking of Europe, do you have any plans to expand outside France?

BP: We’re already in Spain, Belgium and Luxembourg, but I admit that international development has been slow. We’ve now reached that 200-store number in our domestic market, though, and are now ready to increase the speed of our growth outside France. We feel more mature and comfortable with our position than we did three years ago. We’re actively developing a franchise model in Spain, which could include partnerships with local networks. We’re also looking at Central Europe, Germany, and to accelerate in Benelux.

OPI: Any particular targets in terms of store numbers?

BP: I hope that by the end of this decade we will have exceeded the 1,000-store mark, including 400-500 outside France.

OPI: That sounds an ambitious plan.

BP: If you say so.

OPI: And will you still be in charge by then?

BP: I’m now 57 and I’d like to think I’ve got a few more years left in me yet! Having said that, I’ve already started to move away from the day-to-day operational responsibilities of the firm. My daughter Christel has taken on a General Manager’s role and my son Adrien works in the marketing department. I’m also surrounded by outstanding and passionate teams, which will allow me to play a more strategic role, focused on change and development. 

Bureau Vallée:

Founded: 1990

Headquarters: Les Clayes-sous-Bois, France

Headquarters staff: 60

Founder & CEO: Bruno Peyroles

Business model: Franchised office supplies stores

Number of stores: 206

Countries present: France, Spain, Belgium

End-user sales: Above €230 million ($296 million)