The need to evolve in this fast-changing industry is a theme that seems to constantly crop up in these pages and is something that applies to dealer groups as much as anyone else. One group that has recognised this is the UK’s Office Friendly, run for the past 12 years by the ever-enthusiastic Steve Harrop.
Not afraid to try something different or new, Harrop has made significant changes to the Office Friendly business model in recent times as he looks to derive more revenue from marketing services, and not just within the office products space.
OPI Editor Andy Braithwaite met up with Harrop to find out more.
OPI: Let’s start with how you ended up as Managing Director of Office Friendly.
Steve Harrop: It was quite straightforward in a way. When I finished university, I wanted a job in marketing and managed to get a place on the Reed International graduate programme. At that time, Reed’s portfolio included Spicers and after about six months they sent me there as a graduate trainee in marketing, so I had the chance to work with great characters such as Eric Smith and the late Alan McDowell.
Pretty soon I moved into sales because there were people in Spicers who probably saw more potential in sales for me, and that went really well. Eventually, after about eight and a half years at Spicers, I got to the point where I wanted to move up the tree, but there was a group of about half a dozen of us who felt blocked from getting to the next level, partly due to the financial situation and partly due to the hierarchical, top-down management structure they had. I was determined to prove myself and so I joined Kingfield.
There I had the chance to work for an amazing guy called Alan Hickman, who I considered a mentor; he probably didn’t think he was mentoring me, but I looked up to him and still do. And we went on a rollercoaster at Kingfield, going from £2 million when I joined in 1989 to almost £100 million when we merged with John Heath in 1999.
To cut a long story short, about four years after that I wasn’t happy in what I was doing at Kingfield Heath anymore; Alan had left, I felt the company was changing, and I decided that I wanted to leave too. And that’s when the Office Friendly opportunity came up – they were looking for a new managing director and offered me the job.
OPI: How big was Office Friendly then?
SH: We had about 85 members that were doing between £35-£40 million in end-user sales, so not particularly large dealers, except for Commercial. Remember, we were still tied to Kingfield Heath when I took over. There was probably one other supplier – Antalis – but it was all pretty much managed through Kingfield, all the marketing, etc, and the whole focus was just to deliver stuff to Kingfield.
OPI: So that changed?
SH: We changed the model to become an independent cooperative, but still with the close relationship with Kingfield Heath, which later became VOW of course, and the same corporate identity.
On the back of that we then set off and developed a proper business plan with the goal of growing the membership and building relationships with suppliers. One of the first companies I spoke to was Antalis because they were worried that, with my Kingfield background, we’d just switch the business over. I made a – no pun intended – vow to them and said: ‘Look, we’ll support suppliers that support us and we’ll give you 100% backing and grow this business with you.’ And today we are one of Antalis’ biggest customers, so we stood true to that.
OPI: Tell us about Office Friendly as it stands today.
SH: It’s a totally different organisation. We have almost 160 members with end-user sales of about £465 million ($718 million) and have something like 120 supplier arrangements in place. Our turnover with VOW has grown five-fold, so we have delivered to them too, and I believe we are the largest customer of Q-Connect products.
OPI: But still a member-owned co-op?
SH: Absolutely. Everybody has a single share – one share per company – and our retention rate has been exceptionally good: over 97% in the 12 years I have been here. When you have a cooperative, the reality is that not everybody gets involved. We’re lucky that we have a good degree of involvement from a lot of people in the projects we do or the events we hold.
A lot of that is down to the boards we have had over the years, including the member-chairman, which is something we have had for the past five years or so. The chairmen I’ve worked with – Elliot Jacobs and now Gordon Profit – have been superb because they dive into stuff, they’re there for me and they’ve been supportive. So it’s not been a conflict of interest; yes, they see things from a dealer’s perspective at all times and sometimes you want them to see the wider, bigger picture, but they get it.
OPI: I understand you’ve made some changes in the past couple of years.
SH: That’s right. One of the things I feel strongly about in management is to allow individuals to be the individuals they are. You’ve got to work in terms of the rules and the constraints of the organisation, but that doesn’t mean to say that you can’t be flexible.
I think one of the problems we had was a lack of demarcation in people’s roles, so sometimes we weren’t achieving our objectives. We had an opportunity about 18 months ago to clearly divide responsibilities into three areas: supplies and finance under Julie Hawley; sales run by Keeley Shepherd; and marketing handled by Katie Metcalfe.
The whole brief that we have as a business is be quick to do things, be innovative in what we do, take a risk – albeit a measured risk in most cases – but have a go and let’s see what happens. If you try something and it doesn’t work, fine; you learn from that and do something slightly differently next time. That’s the real ethic that runs through our business. The only time I will take issue is when someone does something that upsets the customer.
OPI: How many staff do you have now?
SH: We’re up to about 20 in all now. It was an OPI conference about three years ago which really opened my eyes to the need to invest in millennials, and in the past 18 months we’ve recruited 12 people all under 25 with degrees in marketing.
The whole idea about this is to use their energy and their enthusiasm, but we haven’t done it willy-nilly; we’ve gone about it in a structured way working with Sheffield Hallam University to recruit talent.
OPI: How are you funding all this?
SH: By putting projects in place and developing marketing tools that have become effective sources of income. If you look at where we were two years ago, most of our revenues were coming through supplies, catalogues and contributions from the members. That’s changed now, so probably a third of what we do is coming from the marketing tools we have created.
OPI: By charging for these services?
SH: Yes, and externally as well to non-members and companies outside the office products industry. The whole idea is, if you’ve got some expertise, why narrow your audience by just dealing with a handful of people? So what we can do is generate revenue which can then be put back in the business to the benefit of our members.
OPI: What are these services you’re offering outside your membership?
SH: All of the tools. If you take marketing, it’s a thoroughly professional service; so we carry out an audit, analyse what clients are currently using, and present them with a solution with costs and the return on investment. We produce full reports on a quarterly basis, and work with clients to actually see what’s working and what isn’t.
OPI: So, a greater focus on marketing?
SH: About three years ago we realised we needed to change massively – and I think we were ahead of the curve there – and change our focus to essentially be a marketing organisation and be driven by sales and marketing for our members.
OPI: How important is the purchasing side, which was why dealer groups were set up in the first place?
SH: It’s still a key factor and we will continue to focus on that through the relationships with our suppliers. We have some good, keen pricing that our members get and we’re always looking to improve that, so it’s not off the agenda in any way, shape or form. In fact, one of the commitments we made about three years ago was to bring in someone full-time on purchasing and that’s why we recruited Simon Webb.
OPI: Let’s look at your relationship with VOW. You’re actually located in the same building, aren’t you?
SH: Yes, and that’s one of our USPs. Physically we were born out of VOW and I think mentally we’re attuned to what VOW are doing, but we are most definitely an independent business. We work interdependently with VOW, so we need them and they need our volumes.
They also need some of the things that we give back in terms of support and help. Over the years we’ve been pretty good when things have been tough for VOW or Kingfield Heath from a financial or service basis. I remember at one point several years ago going to our members and asking them to make their payments to VOW and we generated about £4 million in revenue for them in two weeks.
One of our concerns now is that the owners of EVO or VOW have changed since then, so they won’t be able to look back with any experience or knowledge on what we’ve done. But from our perspective, our members don’t forget that because they’ve been around for all that and they remember the times we’ve helped VOW out of a hole.
OPI: What’s the deal with VOW in terms of ordering product from them?
SH: Basically, the deal says members have got to spend on their core business and hit a certain level of turnover to enjoy the benefits of some of the annual returns. I can honestly say that without exception for the last 12-13 years, we’ve averaged 93.7% level volumes going through VOW to achieve the results.
OPI: We’ve seen other groups such as Superstat and XPD align with Spicers. Do you see the logic behind why they did that?
SH: Yes, you can see them mirroring what we’ve been doing. The bottom line is that if you split your wholesale businesses, then you split your deal.
OPI: Do you think it’s important for the UK market that there are two strong wholesale entities?
SH: Well, this is quite controversial because I actually would say that if we could genuinely 100% trust and rely on one wholesaler to give an excellent, 99.99% next-day delivery service at the right price, be focused on the sector, support the independent dealers, let the groups get on with what they’re doing and really enjoy the benefits of being a truly world-class logistics company, you would probably only need one.
The problem with our market in the past ten years is there’s never been fair competition; it’s always been a case of one being up and the other being down. Because of that, you’ve had people moving stuff around inefficiently, in my view. So the costs of all that must be millions and millions of pounds worth of lost business, service issues and grief.
OPI: If we look at the UK dealer group community as a whole, how healthy do you think it is and how relevant are the groups still in the UK market?
SH: I think there’s a real relevance. Some people view the groups as dinosaurs, but I totally disagree – well I would, wouldn’t I? There’s a danger of becoming one if you stick to the old tried and trusted methods that we used to use five, ten years ago, but we’re not.
The market’s changing, obviously – we know that – but I think the concept of a group is a good one for independently-minded businesses; there’s real added value from groups provided they do deliver added value. Not all the groups are doing that, in my view; one or two of them probably need to shake themselves up a bit, but that all depends on the members, doesn’t it?
OPI: To what extent are you competing with VOW in terms of marketing, etc?
SH: In the past, there’s been a lot of reliance on what the wholesalers have done and I think there still is, but I believe – and they won’t like me for saying this – the quality of the marketing that’s coming out of the wholesalers to the trade isn’t particularly positive, which is great for us.
One of the things that has maybe made the wholesale marketing a little bit sterile is the fact that it’s about bland merchandising. They just take on board what the manufacturers have in terms of offers, free holidays, etc, and they just plaster magazines with these special deals, that’s it. The same advert is going to sit in the VOW mailer, in the Spicers mailer and probably the dealer group mailer, including our own by the way. That’s fine, but you lose that differentiation, so that’s why we’ve created customisable solutions for our dealers.
OPI: What do you think of these newer groups or models such as nectere, Office Power, Cadabra and bokz?
SH: Well, if there wasn’t a need for them, they wouldn’t exist. People have seen an opportunity, but I have to say that a lot of it seems to be attracting distressed businesses or people looking for a quick exit strategy. I just don’t think there’s any asset value left in a business that hands over all of its functionality to somebody else and just effectively runs the sales.
I can see the benefits that these companies provide and I get that one of the biggest issues for a lot of dealers is the back-office system and running a true stockless solution, but all I would say to anyone is to read the contracts very carefully and get a lawyer to read them.
OPI: Do you think EVO is treading on your toes with its bokz initiative?
SH: No, I want it to succeed to a point: it’s being run by a former staff member of ours and it’s an interesting platform. I think it’s more akin to Office Power than to what either nectere or United [a UK dealer] are trying to do. To be fair, most of the dealers that they’re talking to at the minute are not distressed; they are really making a serious business decision in terms of the direction they want to go in, but it’s still early days on that.
OPI: Just to finish up, where do you want to take Office Friendly in the future?
SH: Short term, a lot of it is about enhancing the offer that we’re doing on the marketing front and to make sure that we’ve got the tools to do the job, investing in our people so they can actually become much more consultative to the members and help their businesses by really understanding what they’re doing.
We do have a longer-term strategic vision called ‘2020’. Perhaps we won’t be called Office Friendly by then, but I think we’ll be an incredibly professional organisation working for and on behalf of a lot of people in different industries and sectors that are maybe at a tangent to where we are today.