It comes up at every industry event, every conference, every brainstorming and best practice session: the need to be less transactional and more service-oriented, to stand out from the crowd with a host of value-adds in order to beat – or at least keep up with – the mighty competition, most notably perhaps Amazon (Business).
UK-based Exertis Supplies, part of multibillion pound Irish sales, marketing and support services group DCC, has a very different approach. From origins as a pure EOS operator, its focus is now on shifting an ever-growing range of printer supplies, data storage media and office supplies from A to B. It does this cost-effectively and fast, but without the sales and marketing aids that the broadline wholesalers are typically offering – with all the challenges and added costs that these bring.
Six months after winning the Wholesaler of the Year accolade as part of the European Office Products Awards, OPI’s Steve Hilleard speaks to Raj Advani, Managing Director of Exertis Supplies, about the company’s business model and why it makes sense, especially given the competitive landscape in the UK market.
OPI: Raj, let’s kick off with a bit of career history – what’s been your chosen path in this industry and indeed beforehand?
Raj Advani: Sure. After school I did various things. To start with, I went on a computer programming course. I passed with distinction and went for lots of interviews. Everybody said you needed two years’ experience, but I couldn’t get the experience to get a job and I couldn’t get a job to get the experience – vicious circle.
Eventually, I decided to opt for a career in sales instead. I joined what was then consumables wholesaler ISA – now part of VOW – in 1983 as a trainee telesales person selling Verbatim discs to the trade. I was ambitious and worked my way around various departments. When I left in 1990, I was doing all the grey sourcing for ISA and was travelling around the world looking to buy products cheaply. I felt I had progressed as far as I could in that organisation, so it was an easy decision to leave and set up Advent Data.
I started off using my contacts abroad and began with importing goods. We soon got noticed by various major print manufacturers and gained distribution agreements with many of them. Over time, we built up a good reputation and moved away from being merely importers to working as an authorised distributor in the UK.
In 2010, we were approached by what was then Micro-P [part of DCC] as an acquisition target. My philosophy has always been that if I’m going to sell the business, sell it when it’s going well, don’t wait until you have tough times or health problems and you’re desperate to sell. You’re going to get a much better deal when you’re doing well.
I liked the Micro-P people and the management team, and it was a very good time for us, so it was an easy decision to sell. The business turned over about £120 million ($156 million) back then, all pure EOS wholesaling. I sold Advent Data in 2011 and carried on working here.
OPI: That’s quite a long time after a buyout to be hanging in there. You’re not tempted to go and put your feet up on a beach somewhere?
RA: No. I still enjoy it. I had the option to leave after initially being tied into a three-year contract. The good thing about the parent company DCC is that they invest in you. If you’re a successful business, they don’t come in and try to asset-strip or tell you what to do. We’re doing well and they just leave us to carry on doing well and that’s good.
From my perspective, nothing has really changed. I don’t feel any different about working for somebody now as opposed to it being my own business. And as long as I’m motivated and healthy, I’ll continue because I really do get a buzz from this industry.
OPI: How did Advent Data/Micro-P become Exertis?
RA: We had grown rapidly both organically and as a result of strategic acquisitions across Europe over the years. But we were quite fragmented in our branding – Sharptext in Ireland; Advent Data, Tekdata and Micro-P in the UK; Comtrade and Banque Magnetique in France; Captech in the Nordics; and so on.
Vendors and customers knew all the various entities, but they didn’t know we all fell under one overall company umbrella. We thought it was important to leverage the strength of the group with the vast amount of technology that we sell into one single brand. (See ‘DCC Fast Facts’ below for more details on DDC and Exertis).
OPI: Advent Data was initially a pure EOS distributor. What motivated you to step out of this category and expand into office products?
RA: Well, it sort of fell into our laps because another part of DCC which at the time was called Gem Distribution – the Xbox and gaming distributors – employed a former director of Spicers.
He brought his office products experience with him and Gem’s Managing Director clearly thought the industry sounded tempting and believed there was a gap for a third wholesaler. The result was the creation of an office products division. It wasn’t why he was recruited, but it was what he ended up doing. As it turned out, they were sitting on a lot of stock and were trying to sell to our customers.
We already had these customers’ credit accounts open and we had the relationships, so the decision was made to move that part of the business to us. We recruited Tim Holmes as an experienced person from the industry to head it up for us and it’s grown ever since.
OPI: I know you can’t give me headline numbers, but can you share what percentage of Exertis Supplies’ overall annual revenue now comes from traditional office supplies?
RA: It’s about 12% of Exertis Supplies sales.
OPI: Is that growing at a greater rate than your EOS business?
RA: Yes, absolutely. It’s gaining a lot of traction and completely justifies the decision to integrate it into the Supplies business.
OPI: For as long as I have been in this industry there has been talk of a convergence of the office products and the IT channels, particularly from a wholesale distribution perspective. No one has ever managed to pull that off successfully. What are you doing differently to think you will crack that nut?
RA: You’re right, many people have tried and failed. Office products are different to EOS. The category is very SKU-intensive for a start and OP dealers are used to working in a different way to EOS dealers.
It’s the acceptance of some fundamental differences as well as a question of commitment. That’s why we took on Tim to head up the OP division. There are things about office products that are totally alien to us as an EOS distributor. It’s important to bring in some experience and be willing to learn, but perhaps the even bigger part is to have – and spend – the cash to do it properly. In our case it meant building a two-tier mezzanine floor to house the thousands of additional SKUs and recently extending our warehousing to cope with the growth.
OPI: What is the extent of your OP range now?
RA: Over 6,500 and growing.
OPI: Do you envisage a time when you’ll have the 20,000-30,000 SKU count of your more established competitors?
RA: If you talk purely about traditional office products – rather than facilities and other peripheral categories that we don’t stock – our range is actually fairly comparable. We probably have about 70-80% of the coverage that VOW and Spicers have and we are adding to it daily. If you just look at branded products – excluding private label – our ranges are comparable and in some cases more extensive.
OPI: You keep the same number of ‘me too’ products? That’s always been a strength as well as a weakness of the traditional wholesalers – 17 different varieties of a lever arch file.
RA: We’re a bit more selective, but we work with the vendors to choose the range rather than dictate to them. If they have a good customer base for their products, we’ll take some items, try them and see if they work. If they don’t, we’ll discuss how we liquidate the stock we’ve got.
I learned a long time ago to listen to manufacturers and not prejudge a market or its preferences. The best example of this are Quadrille pads. I didn’t think they would ever sell in the UK, but they do and I’m glad we trusted the manufacturer that told us to take them on board as it’s a growing range for us.
OPI: You’ve just mentioned private label. We’ve seen wholesalers – in several parts of the world – increasing their private label coverage. What’s your view on that aspect of running a wholesale distribution business?
RA: We have no aspirations to become a major player in this area. If we started to get much bigger in private label I think we’d struggle to get the right amount of vendor support. Yes, we need a value option, but not at the expense of competing with our vendor partners in an aggressive manner.
OPI: What’s your pitch when your sales team is out there talking to prospective reseller customers? What’s your strength versus the more traditional VOW and Spicers set-ups?
RA: We like to keep it simple. We’re not offering the extra value-add services that Spicers and VOW are. We know many dealers want them and for those that do, they go to Spicers and VOW and use us as a second source when their main wholesaler hasn’t got the stock or if they need a better price.
But there are also many dealers now that don’t necessarily need all the extra services as they have their own offering – they just want reliable service and a fair price. And because of that lack of additional offerings, our prices are much more competitive than those of Spicers and VOW.
This is especially important right now, with companies like Amazon Business, the larger resellers and even the end-user arms of the wholesalers getting so aggressive in some of the larger contracts. Many dealers just need to obtain a better unit cost to give them a chance to compete and survive – we’re definitely getting more and more customers that are happy to take the price knowing we have good stock levels and they can rely on our great reputation for accurate and timely deliveries.
OPI: Is there a danger in your model in that you might be picking up low-quality business? Some dealers haven’t embraced e-commerce yet, are financially struggling and are on credit hold with one of the other two wholesalers, for example.
RA: Of course, there’s always a danger we’ll get some of that but no, a lot of our customers are giving us regular repeat orders and we’re seeing some good traction. I don’t believe we’re just picking up the dregs.
The original philosophy for Gem was that we didn’t want to be anyone’s main wholesaler because we know we can’t be that – we wanted to be the back-up, like VOW would be for a Spicers dealer and vice versa.
That’s how we started when we took over the business from Gem, but we’re actually seeing that we are becoming the main supplier for some dealers because, as I said, they don’t need the extra value and outsourced services that the main wholesalers offer.
OPI: Should dealers commit themselves to one main or preferred wholesaler?
RA: Preferred supplier status is interesting. If I look at the EOS business, the idea of a dealer committing to one supplier is unheard of – people switch business for a few pennies’ better margin. OP is different I realise, as the margin opportunity is bigger for the dealer, but my concern is the cost of managing such a programme. To me, this is taking the focus from growth and is an unnecessary cost.
Why, as a dealer, would I tie my hands behind my back for three years and commit to one wholesaler that, incidentally, also owns one of my biggest competitors? This is only good for the wholesaler as it restricts the dealer’s ability to negotiate terms and allows the wholesaler to dictate the margins.
OPI: Are you surprised that the two main wholesalers left the door wide open for you?
RA: I suppose not. They’ve had a kind of duopoly.Yes, there are other niche players like Antalis selling into the trade, but there have only been two broadline wholesalers and that can breed a bit of complacency.
That said, I don’t believe they were complacent, but maybe quite inwardly-focused at the time, both with a number of challenges to deal with. It was an opportune time for us to make a move.
OPI: What’s your view on the future of independent OP resellers, particularly given the ever-growing importance of e-commerce and Amazon Business?
RA: These are challenging times and I believe there’ll be some consolidation, with unfortunately some of the smaller dealers that can’t keep up not making it. But we’re here to help them, which is why we’re coming in as a low-cost, no frills distributor.
Amazon Business, as an example, I don’t believe is going to offer the high-value, at-desk services that some customers are used to. It’s a low-cost solution. End users might get two or three parcels for the same order because they’ll be coming from different Amazon warehouses, so they won’t be receiving the white glove treatment that some dealers are used to giving.
Perhaps dealers need to embrace a new way of working. Some will continue to offer the white glove, high level of service where they’ve got a good local customer base but others, if they want to compete, will opt to change their model to be a lower-cost organisation. Exertis Supplies can help by offering a fair price and allowing dealers to choose how they invest the savings. We want dealers of all sizes to survive and help them compete.
OPI: But there’s so much talk about resellers needing to transition from being transactionally-oriented businesses to ones that are more service or solutions driven. How does Exertis Supplies fit into that concept?
RA: Well, it obviously costs dealers money to develop those relationships and that consultational approach. It depends how they want to spend that money. We’re offering a low-cost product option whereby dealers can invest in their own value-added services and their own approach to the marketplace, rather than paying somebody else to provide these services for them.
It’s just a choice and what works best for each individual dealer. We do not provide those services.
OPI: There were some rumours several months ago about Exertis Supplies buying one of the two members of the duopoly that you refer to. This was firmly dismissed, but do you foresee a need for consolidation in the wholesale community as well?
RA: Wherever those rumours started, there was certainly no truth in them. But it did raise our profile a bit, so I’m not complaining. And no, I don’t think there is a need for consolidation in the wholesaler distribution channel specifically in the UK where we’re selling OP at the moment.
Dealers have two large broadline wholesalers, us as a low-cost distributor, and some niche players. That combination offers some good and healthy choices I believe.
OPI: On the topic of rumours: did one of your competitors cause you to lose your contract with distribution company MDL?
RA: I can’t tell you the details, but we know that another wholesaler uses MDL for a lot of deliveries in the south-east of the UK – the same region they delivered to for us. I had a phone call and some emails from the owner who was telling me he was being put under a lot of pressure by another customer to deal exclusively with them.
I’ve always had a great relationship with him and like him a lot. Although we had a contract, there were always going to be some challenges for us to increase our spend with him due to warehouse locations, etc. I could really feel the stress, so we agreed that, with three months’ notice, we’d find an alternative solution to get products into this part of the country.
OPI: To wrap up, what does the future hold for your business and for you personally? Will you still be around in five years’ time?
RA: I hope so. The day I stop enjoying what I do will probably be the day I go. But right now there’re lots of challenges and I like those challenges. I’ve got a team of people who have been here for 20 or even 25 years, many since we started Advent Data, and it still feels very much like a family business, although we’re part of a multinational organisation.
I think Exertis and Exertis Supplies will keep growing, because we are an ambitious company and we have the backing of a parent that supports us financially, is always open to new ideas and business models, and leaves us to get on with our job – as long as we do it well!
DCC fast facts
Exertis Supplies is part of a considerably larger entity, namely Irish-based sales, marketing and support services group DCC. This London Stock Exchange-listed, multinational FTSE organisation finished the last financial year with sales of £12.3 billion ($15.8), up 17% from a year earlier, and operating profit of £345 million.
DCC has four main divisions: DCC LPG, DCC Retail & Oil, DCC Healthcare and DCC Technology.
Exertis is the name of DCC’s technology arm and is one of Europe’s largest and fastest growing technology distribution and specialist service providers. It ended FY2017 with revenues of £2.69 billion, which was a 10% increase on the previous year, with operating profit up 17% to £41.1 million.
Exertis can be broken down into three parts. One is set apart somewhat from the other and is called Exertis Supply Chain Services. With facilities in Poland, China and the US, it is a leader in professional materials supply chain design and operation. The other two are Exertis Continental Europe and Exertis UK & Ireland. The latter is the biggest entity and comprises five divisions: IT (selling components, computing, print, networking servers and security products); Mobile (phones, tablets, wearable technology); Exertis Unlimited (audio products, gadgets, emerging market and creative items); Gaming (gaming, software, media, peripherals and any leisure technology); and lastly Exertis Supplies (EOS and, over the past few years, office products).