Big Interview: Büroring’s Managing Director, Ingo Dewitz

With the right approach, support and product assortment, the future for independent dealers in Germany remains bright. The same cannot be said for other parts of the channel, fears Ingo Dewitz

In the first two-page interview with Ingo Dewitz (see ‘Man of the trade’, European Annual Review 2014, page 14), Büroring’s Managing Director alluded to an intensely challenging market in Germany and the need for a multichannel approach.

Here, he elaborates on how dealers can stay strong, what they can bring to the table and how, without them, the OP industry at large would be a less dynamic place to be.  He also talks about the difficulties of the wholesale channel, the need for collaboration among all players and why the global players aren’t really a threat anymore.

OPI: Let’s start with a bit of history. When was Büroring established?

Ingo Dewitz: Büroring was created in 1976 and its foundations lie in the office machines business. The first members were copier dealers – selling Sharp copiers, for example – and they just decided to work together and establish a purchasing group in order to get better buying conditions.

We’ve always had a large amount of these business machines and also tech-oriented dealers amongst our membership and that remains the case today. Perhaps it’s part of the reason why we’re not as affected as others by the decline in traditional office products, as so many of our members have never been solely reliant on that category.

That said, we also have some traditional stationery dealers, some with a retail presence, but our core business and the classic Büroring dealer is the B2B full-range supplier. By full range, I mean office technology, office supplies and office furniture.

OPI: How big is your typical dealer?

ID: It’s wide-ranging. It’s essentially anything from €1 million to €12 million in revenues and between three and 120 staff, 15 employees perhaps being the average. What’s important to note is that all our members work regionally. We don’t have any Plates or Kaut-Bullingers. We do have some large members, yes, but they all operate on a regional basis. All members combined – we have 343 at the moment – total revenues of €700 million ($957 million).

OPI: Can anybody join you?

ID: A potential member must offer financial stability and future potential from a commercial point of view, that’s really the only obstacle.

OPI: German cooperatives often have a complex set-up. How is Büroring structured?

ID: Büroring is owned by its members, with each member having one vote, irrespective of the size of the dealer. The Büroring supervisory board is made up of five of our members and this board essentially determines how we’re run and what we do.

We are a ‘pure’ cooperative, but we’re also a for-profit organisation, whereby all the profit is reinvested into the group, either through dividends or services.

My job is to find out what our members need and give added value to them so that they can pool their interests wherever possible.

Another part of Büroring is Büro Forum 2000 which we took over in 2006. That’s another group of 180 specialist B2B dealers and retailers. These companies can use the services we offer, but they don’t own any part of either Büroring or Büro Forum 2000.

Lastly, we share our facilities here in Haan with a group called Prisma. The members of Prisma are the very traditional OP stationery retailers.

Prisma retailers are not affiliated with Büroring, but we do share the central billing function that is part of what we do, essentially a centralised credit insurance for all these members. Legally, however, Prisma is not part of Büroring.

In addition to all that, we have the diverse marketing groups, such as OfficeStar and Redoffice. They basically comprise like-minded dealers that work together on certain projects and Büroring supports them with various services as and when needed.

OPI: You say you don’t have any really large members – but do your members also do business with the public sector?

ID: Some do, but only on a regional basis, for example tenders for city, borough, district or regional councils – but that’s mostly where it stops.

There are a lot of B2B customers that don’t want to work with the big box players anymore. It’s not just about the price. We definitely don’t buy as effectively as the globals, I realise that, but we do have a certain margin that we can pass onto our members. And especially with tenders for councils etc, local criteria increasingly play an important part.

It matters whether you’re a member of the town’s golf or tennis club, whether you live in and pay taxes in the area or simply show an interest in the locality – engagement and these roots are important to many of our dealers’ customers. Also, in particular as far as C-article management is concerned, there’s a move back to specialist dealers.

OPI: Years ago the arrival of the globals decimated the country’s dealer community. Is that threat gone now then? 

ID: I don’t view them as a threat anymore. In fact I’d go as far as to say that the globals are in bigger trouble than many of the country’s independent dealers. They took away the big B2B business 10-15 years ago and dealers faced that challenge and adapted accordingly, except for European or global enterprise business.

OPI: So what would you say is Büroring’s core remit?

ID: Everything we do is aimed at helping our members improve their processes, be that in terms of IT, logistics, sales or marketing.

Some people see us as a wholesaler or a central regulator. That’s a long way from what we do. Yes, we have a warehouse, but we don’t see ourselves as a wholesaler.

OPI: This integrated dealer group/warehouse approach is much more common in continental Europe than it is in, say, the UK or the US. Why is that in your opinion? 

ID: It’s quite simple. Many of our dealers say, “I don’t want to have my own warehouse and I want my dealer group to do that for me”. As such, over time it’s become our job to stock products on our dealers’ behalf.

The stockless concept is also finally becoming more widespread in Germany.

Two years ago, we shipped 48% of goods directly to the end consumer; now that figure stands at over 60%.

We didn’t actually used to have a warehouse. It started when Klaus Kemper (Büroring’s MD in the past) started negotiating with Spicers in 2001 that the idea came about. We began with a very small warehouse then, but now obviously have the new large distribution centre.

OPI: But ADVEO is still your primary wholesale partner, isn’t it? 

ID: Yes. When Spicers came over from the UK (and France), they had no customers in Germany at all. Today, Büroring members account for about a third of ADVEO Germany’s sales; that’s about €23 million.

Of course, we are also in competition with each other in a way, but ADVEO has a very wide range that our members can draw from and the wholesaler is also part of Büroring’s central billing arrangement with our supplier partners.

OPI: Have your volumes with ADVEO changed because of the new warehouse?

ID: No, they’ve remained constant. The 26 dealers in the OfficeStar marketing group for example are completely served by ADVEO, not by Büroring at all. What has changed, and that’s the same for everybody, is the market situation in Germany where we had some significant setbacks as I explained in the previous article.

OPI: There’s currently plenty of debate about the viability of dealer groups going forward, particularly in the UK where there are so many of them. Do you believe having a warehouse provides some kind of safety net, as members are tied to it?

ID: No, I don’t, but even if it is, it’s a very insecure one. Yes, our members are dependent on the warehouse to a degree, but we don’t really make any money from it; it’s incredibly hard to earn money in the wholesale business. For us, it’s feasible to maintain it because we have other sources of income, but the warehouse doesn’t add any real value in my opinion. And, of course, we also found out first-hand in 2012 how difficult it is when things go wrong.

Why do we have one then? It’s because our dealer members say: “This is my customer, and I don’t want a company to deliver to that customer that tomorrow might turn out to be a competitor and directly approach that client. As such, I want my dealer group to supply that client for me.” That’s often the thought-process behind it – an inherent distrust towards outsiders – and the reason why some dealer groups have such large warehouse businesses.

We have 11,000 SKUs in our warehouse and we talked about our planned virtual warehouse before, but it’s the end consumer marketing, the flyers, promotions etc that we work on in our marketing groups, that is our real differentiating factor, not the warehouse.

OPI: Does Büroring have its own brand?

ID: Yes. We first introduced the Büroring brand two years ago. Before that, we had Büroline where we worked with Claude Ackermann and PEG, but that line will be completely wound down this year.

Our own brand range is becoming more and more important. We now have 2,000 SKUs – 1,200 ink and toner products and 800 office stationery supplies. Our members increasingly identify with this range and it also offers a fairly high and secure margin, certainly higher than the brand equivalents.

OPI: I thought that own brand products still aren’t all that popular in Germany. Wasn’t that part of the problem with Georg Kugelmann (bought by PBS Deutschland)? 

ID: The own brand situation at Kugelmann was quite different because the product range was mainly in stationery supplies. You have to move certain volumes with own brands to make it work and presumably Kugelmann didn’t have that volume.

We also have most of our production here in Europe and not in Asia, providing what we believe is an extremely high standard of quality. Furthermore, we have a very established customer base and you can only sell our products as a Büroring member – that guarantees a certain exclusivity.

So for us, our own brand is a very stable and, most importantly, fast-growing business with double-digit growth figures.

OPI: How would you describe your relationship with manufacturers?

ID: We work with 560 suppliers that make use of the central billing business, ie they get paid by us rather than our dealer members.

What’s really important in my opinion is that in cooperatives like Büroring, there is a very close working relationship between members and plenty of best practice sharing.

Manufacturers – and wholesalers too for that matter – can very easily get a big thumbs-up from dealer group members with a transparent and well-executed channel sales concept. By that I mean a respect for and adherence to the various supply channels.

Let me give you an example. There are several large global OP manufacturers that think they don’t need a sales force in Germany anymore; that think they don’t need to give dealers any support, offer product and brand awareness training – in other words don’t see the necessity for any real face-to-face relationships. With such an attitude, manufacturers can easily get pushed out.

The portfolio we offer in our catalogues, in our warehouse etc, is determined by our members, through a committee to be precise. Manufacturers that don’t support independents are therefore not going to last very long in that channel and if the likes of Büroring, Büro Forum 2000, Prisma and Soennecken withdrew their support with their combined membership, then 1,000 dealers would be lost to manufacturers. That’s about one-third of all dealers in Germany, so quite significant.

I always warn manufacturers about leaving traditional independents behind and simply moving on to e-commerce platforms. Those that do that lose brand awareness, loyalty and valuable relationships.

It’s also important to note that branded products still make a market ‘real’ and that in Germany more than 50% of all business in our sector is still done through independent dealers. And if vendors think that they can withdraw support from those dealers, then they’ll soon pay the price. The global players only have about 20% of the market – the strength is still with the dealers.

OPI: What’s your view on consolidation?

ID: In terms of the manufacturing sector I believe we’ve pretty much exhausted the potential in rationalising and consolidating production. There’s not much cost and efficiency left to take out and we’re seeing with the double-digit revenue declines that not everybody will be able to survive, not even the large global operators.

As far as the wholesale market is concerned, especially the smaller players will suffer.  Wholesalers are also particularly vulnerable because products are increasingly sold at trade prices, especially on online platforms such as Amazon and Mercateo. So where is the margin for the wholesalers? I spoke about this in the first part of the interview and the fact that the supply chain keeps getting shorter and shorter.

OPI: What about the dealer community itself? Is it doom and gloom or in fact quite positive?

ID: I see good opportunities for the independent channel if dealers have a good attitude towards a multichannel approach, market it properly, have a good and evolving product range – and that, by its very nature, involves a non-reliance on pure office products – and, above all, use the specific skills of independents which is comprehensive advice and services.

OPI: And dealer groups – do they have a future? 

ID: That’s a good question. In France, for example, there have been dramatic developments and nearly all of the dealer groups have disappeared.

These groups are very dependent on the individual players in the market and their job has more and more to do with advice and training, especially in the area of IT. They also often provide some much needed stability for their members.

Ideology aside, however, you have to consider how dealer groups and cooperatives can make money. Büroring is also a logistics provider, which gives us a certain value-add, but the distribution of goods is a difficult thing to get right. Everywhere in Germany, there is overcapacity at the moment – take a look at Alka, ADVEO and Soennecken. All these players have invested millions and some warehouses are half empty which is incredibly worrying.

Büroring is lucky to have other areas to focus on, rather than just the warehouse. That said, we obviously had a rather painful experience ourselves and learned the hard way what it means to be dependent on a warehouse. As I said before, we don’t necessarily need a warehouse from a Büroring perspective – it’s possible to be set up completely virtually – but our members don’t want to purely source from a wholesaler that might be bought the next day by a global.

OPI: How would you describe your relationship with the other big German OP cooperative, Soennecken?

ID: Firstly, I think it’s fantastic that we have two large dealer groups in Germany’s OP market because our existence helps dealers. There’s no particular partnership between the two organisations, but there’s no real competition either. Quite often, it’s just a fundamental and simple question of where the individual dealer feels more comfortable and best looked after.

Soennecken has some large members and probably more combined purchasing power because of that, but we both have the same right to exist and it’s good for the German market that there are two because in a way that regulates the sector a little.

The wholesalers – or the manufacturers for that matter as I mentioned before – can’t just do what they want, because if both groups throw the might of their combined dealers behind it, it’s quite a powerful entity.

OPI: With that strength in numbers in mind, Büroring isn’t a member of BPGI – is there a specific reason for that?

ID: Not in principle, no. We’ve had some discussions with Claude Ackermann and it’s partly a question of resources. My viewpoint is basically that, if we join, we want to do it wholeheartedly and bring something to the table. So far we haven’t been able to do that and in the last 18 months, had our own problems that had to be resolved first without taking resources away to concentrate on something else that’s not core.

OPI: How, overall, did 2013 shape up for Büroring?

ID: In our logistics operation, we’re anticipating a small growth of 3.5%. Our central billing business is in slight decline. However, that’s not due to a general downturn, but because two of our larger dealers were acquired last year, so we lost that revenue.

In general, we experienced growth from our members last year, mostly from new partnerships, some of which have existed for a while, but haven’t developed to their full potential yet.

OPI: What’s your forecast for this year?

ID: As often discussed, the traditional OP market is moving downwards and we expect further losses in this area, but we’ll grow through offering new ranges.

Also on our agenda is the creation and development of a telemarketing team for the canvassing of new end consumers. Other focus areas include succession planning, the development of new ERP systems and more training in the area of professional development.

What it’s all about for us is to further optimise the process of getting office supplies to the end consumer and that, as mentioned before, includes C-article management. We’re going in a certain direction with that and already have a lot of support from dealers that want to be part of that journey.