OPI March 2015. Issue 247 EU by OPI

Office Products International ISSUE NO.2 4 7

The word in office.

magazine

Big Interview Sid Lerman, CEO, Weeks Lerman p18 March 2015

MARCH 2015

And then there was one p10

Staples and Depot in mega merger

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The effect of oil prices p30 Interview with EDmarket CEO on OP â&#x20AC;&#x201C; is there one? p22 p44 The potential of education

Contents March 2015

News

www.opi.net

6 Round-up

RadioShack goes bankrupt; dealer consolidation in the US; APA ready for launch

10 Special Report

38 Paperworld

As the dust settles on Paperworld 2015, OPI looks at whether the new hall format was a success

40 BETT 2015

An in-depth look at the Staples/ Office Depot merger and what it means for the OP industry

A review of the four-day UK event that showed – and talked about – the latest in education technology

Features

42 VOW Green Light

Aimed at all of VOW’s dealer customers for the first time, Green Light was a resounding success

18 Going the extra mile

New York dealer Weeks Lerman talks about service levels and product category expansion

Category Analysis

22 The big (price) drop?

44 Education

Oil prices may have plummeted, but the OP community isn’t seeing the benefits. Why not, asks OPI?

The education sector is full of potential for progressive OP dealers embracing the opportunity, but a long-term approach is vital

26 Poised for growth

Scottish dealer Caley Office Group is looking to double in size over the next five years

30 Educating the market

Regulars 5 Editor’s comment

EDmarket CEO Jim McGarry on the latest developments in the US education market

49 5 minutes with... Tom Ashburn

34 Positive EVO-lution

OPI speaks to Robert Baldrey about dealers’ competitive fears, Truline and, of course, rival SPOT

Events

50 Final word

Brad Summersell

“My one concern is the affect this may have on suppliers. We will be paying close attention to the winners and losers in the competition to win the combined entities’ business. In today’s environment of shrinking programme dollars and rebates, one entity taking a large share could potentially adversely impact dollars available to the independent dealer channel.”... For the full story, turn to page 10

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Editorial Editor Andy Braithwaite +33 4 32 62 71 07 andy.braithwaite@opi.net

Features & Production Editor Heike Dieckmann

Editor’s comment

+44 (0)20 7841 2950 heike.dieckmann@opi.net

News Editor Michelle Sturman

Chicago blues

+44 (0)20 7841 2942 michelle.sturman@opi.net

Sales and Marketing VP – Continental Europe, Middle East and Africa Ewan Dickson +44 (0)20 7841 2954 ewan.dickson@opi.net

VP – North America and UK Chris Turness +44 (0)20 7841 2953 chris.turness@opi.net

Director of Growth Services Jeremy Hughes +44 (0)7807 810617 jeremy.hughes@opi.net

Digital Manager India Pride +44 (0)20 7841 2959 india.pride@opi.net

Events Events Manager Lisa Haywood +44 (0)20 7841 2941 events@opi.net

Production and Finance Designer Charlotte Gerhardt +44 (0)20 7841 2943 charlotte.gerhardt@opi.net

Production Assistant Jack Francis +44 (0)20 7841 2950 jack.francis@opi.net

Accountant Dotun Olaniyan +44 (0)20 7841 2956 dotun.olaniyan@opi.net

Publishers CEO Steve Hilleard +44 (0)20 7841 2940 steve.hilleard@opi.net

Director Janet Bell +44 (0)20 7841 2941 janet.bell@opi.net

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No part of this magazine may be reproduced, copied, stored in an electronic retrieval system or transmitted save with written permission or in accordance with provision of the copyright designs and patents act of 1988. Stringent efforts have been made by Office Products International to ensure accuracy. However, due principally to the fact that data cannot always be verified, it is possible that some errors or omissions may occur. Office Products International cannot accept responsibility for such errors or omissions. Office Products International accepts no responsibility for comments made by contributing authors or interviewees that may offend.

I said in my previous Editor’s Comment that we would probably see further industry consolidation this year, but I don’t believe anyone was expecting Staples to announce that it was going to acquire Office Depot! The deal still has to overcome several antitrust obstacles, of course (see Special Report, page 10), but it is something that has certainly set the cat amongst the pigeons. And it will have a ripple – or maybe even a ‘tsunami’ – effect that will be felt throughout the industry, especially in the vendor and wholesaling channels. I definitely think we’re now going to see accelerated “I definitely think we’re consolidation on the now going to see accelerated vendor side this year. consolidation on the I’m writing this from vendor side this year” Chicago’s O’Hare airport where I’ve been stuck for 24 hours – due to snow – en route to United Stationers’ CORE Live event in Nashville. In fact, as you read this, the company might not be called United Stationers anymore, having just announced that it will be rebranding shortly. This is another sign – as if we needed one – of the move away from paper-based office supplies. One niche that resellers have been moving into is education supplies. In this month’s OPI we feature an Education Special that will hopefully provide some insight into this particular channel which itself is seeing great changes due to technology – but which still represents an opportunity for traditional office products dealers. Andy Braithwaite, Editor

Office Products International Ltd (OPI), 2nd Floor, 112 Clerkenwell Road, London, EC1M 5SA Tel: +44 (0)20 7841 2950 Fax: +44 (0)20 7841 2951

@opinews

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News from opi.net Canon under surveillance Canon has made a $2.8 billion offer for Swedish network video surveillance firm Axis Communications. Canon views its network surveillance camera category as a “promising new business area” within the rapidly growing video surveillance market. The Axis acquisition will give Canon access to an established global network of 75,000 business partners, including systems integrators, as well as add Axis’s distribution and service channels to its existing network. Canon’s bid to buy all the shares in Axis has already been accepted by the Swedish firm’s three largest shareholders, who hold around 40% of the company. The board of directors has recommended its shareholders to accept the offer of SEK340 ($41) a share. Following a successful acquisition, Canon said Axis will become a separate legal entity within the Canon Group. The Axis management team will remain in place, and its headquarters, development centres and sales offices will stay in their current locations. The Axis brand name will also be maintained.

Mergers & Acquisitions 6

OPI Magazine | March 2015

Large Resellers

RadioShack bankrupt In what comes as no surprise, struggling electronics retailer RadioShack finally filed for Chapter 11 bankruptcy protection citing debts of $1.39 billion. RadioShack was granted court approval for a $285 million financing arrangement, with existing lenders making around $20 million available in new money. To “maximise shareholder value”, the retailer signed an asset purchase agreement with Standard General – which provided funds to the tune of $120 million last year – to acquire around half of its 4,000 US stores. The deal, in principle, constitutes an agreement with wireless firm Sprint to establish a new dedicated mobility store-within-a-store in a co-branding partnership. According to the court files, RadioShack filed a motion to close

the remaining company-owned stores by the end of February, with rumours that Amazon was eyeing up some of the retail locations (still unconfirmed at the time of going to print). The Chapter 11 filing did not include RadioShack’s dealer franchise stores in 25 countries, the stores operated by its Mexican subsidiary or its Asia operations.

Facilities Management

CEP reports strong start to breakroom concept European manufacturer CEP is hoping for a good year for its new ‘Take A Break’ range of meeting room and breakroom products after achieving good catalogue listings for 2015. The main European contract stationers and wholesalers have taken on Take A Break as CEP diversifies away from its traditional desk accessories products. One Benelux distributor that OPI spoke to confirmed that the range is selling well, having been ordered by about 90% of CEP’s existing reseller customers. The Take A Break range took CEP two years to bring to market, and CEO Cedrik Longin told OPI it was an important part of the company’s strategy to add incremental sales, rather than to “cannibalise” sales in existing categories. The range’s line of porcelain and silicon cups is already a big hit, especially with female consumers, said Longin, and additional products and new colours are already being developed. Longin added that CEP was also looking at new distribution channels for Take A Break, such as consumer electronics retailers, and that the company was already talking to major coffee firms about possible partnerships. The France-based firm is further hoping to crack the US market and has partnered with UK vendor Floortex for US distribution.

Amazon opens campus location Amazon has launched its first staffed campus collection and drop location at Purdue University in the US, signalling yet another step towards bricks-and-mortar retail. Members of the university – students, alumni, faculty and staff – that are Amazon Student and Prime members have access to free one-day shipping on textbooks and free one-day pickup on over one million items, including school supplies, when shipped to the Amazon@Purdue location. In addition to standard Amazon pricing, eligible students and staff can also take advantage of benefits that are exclusive to Purdue University. The company said a second location will open shortly at Purdue, and that it has similar arrangements with two other universities at the moment.

United Stationers and BMI forge closer ties

United Stationers and software provider Business Management International (BMI) have agreed to terms for ongoing collaboration that will bring United’s enhanced digital services to BMI customers. Included in the deal is the suite of digital capabilities that United offers, including SmartSearch, Premium Product Relationships, SmartMerchandising and advanced analytics capabilities, which enhance the online shopping experience for independent resellers’ customers. Laying the foundation for future advancements in digital merchandising and marketing performance optimisation, United and BMI will also work together to develop capabilities that connect shoppers with additional product suggestions based on previous shopping patterns, browsing or cart abandonment. BMI is a Microsoft Dynamics solutions provider, and United’s ownership of MBS Dev was clearly a hindrance in BMI’s relationship with United, although OPI understands relations had been improving even before United recently sold MBS Dev. However, this latest announcement shows that United is certainly rebuilding bridges with the major software providers in the US, now that it no longer competes directly with them.

Wholesalers

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News n Round-up

Education

News n Round-up

$50 million dealer APA close to official launch merger in St Louis Dealer Groups

The American Purchasing Alliance (APA) has announced the finalisation and execution of all legal and operational documentation, and is ready to proceed in beginning contract negotiations. Announced in October 2014, the APA is a new, large dealer umbrella buying ‘group of groups’ facilitated by AOPD. The initial participants are the Dealer Supplier Collaborative (DSC) members of the TriMega Purchasing Association and Direct Purchasing Catalog Group (DPCG). The APA will shortly be announcing the appointment of an industry consultant who will be working with Doug Whetstone and Gordon Pepper representing DPCG, and Greg Fish and Lyle Dabbert representing DSC on the APA contract negotiations team. The APA board of directors consists of Jay Godwin and Yancey Jones representing DPCG, David Kenworthy and George Wood representing DSC, and Pat Crowley and Mark Leazer representing AOPD. In addition, AOPD Executive Director Bud Mundt is serving as an ex-officio member of the APA Administrative Committee. “The APA board has taken big strides in drafting the important procedural processes and carefully documenting the operational requirements that will serve this group well in its future development,” said Mundt.

Independent business products dealer Office Essentials has acquired fellow St Louis dealer Universal Business Supply (UBS), creating a $50 million company. With the acquisition of UBS, Office Essentials now has 130 employees, 26 delivery tucks and offices in St Louis and Kansas City. This makes it the largest office supplies dealer not only in St Louis, but the entire Midwest, according to the company. Office Essentials said it was attracted to UBS as both organisations have similar business models and values. UBS President Jerry Holschen added that by joining forces with Office Essentials, which has the size, talent and resources to compete in the ever-changing business landscape, UBS can continue its success. Office Essentials VP of Sales and Marketing Kate Dougherty meanwhile told OPI that the integration of UBS started immediately upon closure of the deal – although UBS employees will not move into its offices until April – and the dealer will be rebranded as Office Essentials.

Mergers & Acquisitions

Independent Resellers

Innovative to hit $100 million Independent dealer Innovative Office Solutions is poised to exceed $100 million this year after acquiring fellow Minnesota-based reseller S&T Office Products. The addition of S&T to the Innovative brand brings with it the S&T Office Interiors Group, adding a highly respected A+ grade contract office furniture service. Speaking to OPI, Innovative CEO Jennifer Smith said that with similar belief systems centred on customer, employee and supply partner relationships, the acquisition increases the ability to serve the customers of both companies. Innovative has taken on the majority of S&T employees while the acquisition has provided its owners the opportunity to meet their exit goals, although they will remain in varying capacities for a time to assist during the transition, OPI was told. For now, Innovative is working on bringing the teams together to create a single, unified organisation, and the dealer is moving quickly to bring new technology to S&T customers. By mid-2015, the companies will be operating as one, according to Smith.

OPI Magazine | March 2015

S&T is also a member of the AOPD dealer network. AOPD Executive Director Bud Mundt confirmed to OPI that following the acquisition, Innovative has submitted an application for AOPD membership that has been approved, and that all contracts and agreements between AOPD and S&T will now be honoured by Innovative. Mundt also confirmed that S&T’s Pat Crowley will remain on the AOPD board of directors as President.

Special Report

And then there was one Unsurprisingly, Starboard welcomed the acquisition announcement: “[We] applaud the [Staples] board of directors and management team for pursuing and negotiating a value-enhancing acquisition of Office Depot,” the firm said in a regulatory filing. “Starboard believes that the magnitude of value creation from the Office Depot acquisition will far exceed anything that either company could have achieved on a standalone basis.”

Reduced shareholding Staples and Office Depot to merge to form $39 billion business supplies reseller

“The

smart money must be on a merger between Staples and Office Depot not taking place in the foreseeable future.” That is what we predicted on opi.net on 23 January following the news that activist investor Starboard – a major shareholder in both firms – had written to the Staples board of directors to push for a merger of the two office supply giants. OK, so we got that one wrong, but the speed with which Staples then announced that it had agreed to acquire Depot certainly took many other industry insiders and financial analysts by surprise, so we were not alone. Even Staples had appeared less than enthusiastic to Starboard’s suggestion of immediately “evaluating, structuring and executing a transaction with Office Depot”. As it transpired, the Staples board was one step (at least) ahead of the game, revealing that it had begun discussions to acquire Office Depot as early as last September – the same month, incidentally, that Starboard CEO Jeff Smith resigned from the Office Depot board. Whatever really took place behind closed doors, it does appear that Starboard has successfully engineered the largest-ever merger in the office supplies sector. To what extent, if any, Staples caved in to Starboard’s demands we will probably never know; but by pushing ahead with the merger it has avoided what was likely to be a

OPI Magazine | March 2015

messy and public proxy challenge and calls for a change in leadership. In his open letter to Staples CEO Ron Sargent on 20 January, Starboard’s Smith had said that if Sargent failed to “seriously pursue” the merger then it would be “a clear sign that significant leadership change is needed at Staples”. And given Starboard’s recent track record of shareholder activism, that could have spelled trouble for Sargent and his directors.

Having said that, Starboard promptly announced that it had reduced its shareholding in Staples to 4.9% as part of a “regular portfolio management process” and to “manage” its exposure to the “retail office supply sector”, although it said it “currently expects to maintain a significant holding in [Staples]”. Note the use of the word ‘currently’, not exactly a long-term commitment to its Staples investment. In addition, going below the 5% ownership threshold now means that Starboard can continue to sell Staples stock without having to notify the market.

Industry reaction News of the acquisition has certainly sent shock waves through the industry. It is clear that a Staples/Depot combination will have a major impact on the vendor and wholesaling channels. Manufacturers and wholesalers are – understandably – reluctant to go public at the moment with their opinions regarding this acquisition, but OPI understands that senior level meetings have been taking place around the globe to assess the impact that this deal will have. Snippets of what’s at stake for vendors have come out in a couple of recent quarterly conference calls. Domtar CEO John Williams revealed that a combined Staples/Depot would account for 14% of the paper manufacturer’s sales – approximately $650 million – while ACCO CEO Boris Elisman told analysts that he expected to see some loss of business towards the tail-end of this year as wholesalers reduce their inventories. He also said that the Office Depot/OfficeMax merger had cost ACCO $40 million in lost sales in 2014 (with a similar reduction expected in 2015), due mainly to de-stocking. One would expect the impact of the Staples/Depot merger to be even greater, and we are likely to see accelerated consolidation in the vendor channel. The destination of the combined entities’ North American wholesale business is another key issue. SP Richards succeeded in winning the Office Depot business following the OfficeMax merger, but United Stationers is the incumbent at Staples, so must be regarded as being in the driving seat. How would dealers react should United have the enlarged Staples contract – which would be in addition to its WB Mason business and growing sales in the online channel? That said, the dealer community in the US has been quick to hail this proposed merger as a great opportunity for independent resellers. Here is what leaders from the US dealer group community told OPI:

biggest success, but other areas such as safety, healthcare and education are gathering momentum, too – and enormous investments have been made in digital commerce to try and fend off the Amazon threat.

Cost-cutting exercise Depot, on the other hand, has been promising a “unique selling proposition” from 2016, by which time it may well have lost further ground to Staples and other key rivals anyway. CEO Roland Smith and his integration team have done a good job taking cost out of the business following the 2013 merger with OfficeMax and have regularly beaten Wall Street earnings forecasts because of this; but there has been

It does appear that Starboard has successfully engineered the largest-ever merger in the office supplies sector The company is midway through a reinvention plan as it looks to move beyond office supplies (BOSS) and compete with Amazon. It’s been a tough five years for Sargent and his team and there is likely to be a sense of unfinished business. There are also signs that the BOSS strategy is starting to pay off – jan/san being the

Special Report

From a financial point of view, the market reacted positively to the news of the merger and its estimated synergies of $1.6 billion (including synergies still to be realised from the Office Depot/OfficeMax merger). However, the current share prices (as of 11 February) of both Staples and Office Depot indicate that investors aren’t 100% confident that the deal will get through an antitrust investigation – Depot’s share price at the time of writing, for example, was about $9.50, some way below the $11 that Staples will pay to acquire its rival (see ‘The FTC holds the key’, page 12). From a business point of view, there are still question marks as to whether acquiring Depot is the right long-term move for Staples.

little to suggest that top-line growth is just around the corner. Now Staples will have to undertake the huge task of integrating Office Depot. Combined, the resellers have 4,020 retail stores, 243 distribution facilities and well over 100,000 employees worldwide. Retail consolidation in the US alone is

Mike Maggio, President, TriMega: “On balance, I believe this will create opportunity for the independent channel as the outcome will be one less large competitor in the B2B space. I believe there are two significant opportunities: new sales is the obvious first; businesses that have already decided for some reason not to deal with Staples will have to look at other options. Strong independent dealers with a focused and motivated sales force will benefit. “The second opportunity will be the hiring of some very talented people that will be looking for a home once this merger is finalised. Unlike the Depot/Max merger, which never really produced the flood of folks looking for work that was expected, Staples has already made significant synergy commitments to the Street that can only be satisfied by a sharp reduction in headcount – and that will have to include the commercial side of the business as well as the retail side. “I anticipate aggressive independents looking for talent will have an opportunity to add experienced staff in customer service, operations and – most importantly – sales and sales management. “My one concern is the effect this may have on suppliers. We will be paying close attention to the winners and losers in the competition to win the combined entities business. In today’s environment of shrinking programme dollars and rebates, one entity taking a large share could potentially adversely impact dollars available to the independent dealer channel.”

Ron Sargent will continue to lead Staples after the Depot acquisition expected to lead to the closure of about 1,000 stores. Bringing these two entities together is going to be a massive challenge. How will this impact Staples’ own strategic development? Will Depot be a millstone around Sargent’s neck that holds his BOSS strategy back? Firms in the midst of a major integration can often find it difficult to keep their eye on the ball. A lot could depend on whether Depot’s Smith – a proven turnaround/integration maestro – stays on to oversee the integration process, thereby leaving Sargent to focus on strategy and growth.

Mike Gentile, CEO, Independent Stationers: “This is a big-time opportunity for the independent dealer channel (IDC), and this is now the time to unite. The wholesalers, manufacturers and dealer groups must develop genuine synergistic strategies to maintain and capture market share. “Manufacturers and wholesalers need to fully embrace the IDC; they need to no longer be concerned what their big box customers think about the investments they make in the IDC. Dealer groups must either merge or develop cooperative joint ventures to leverage assets and create benefits for their dealers. “At the end of the day, big doesn’t necessarily mean better. Who would have thought that there is only one big box retailer left standing in 2015 and the IDC is growing? It’s a new dawn for the IDC.”

“This is a big-time opportunity for the independent dealer channel, and this is now the time to unite” Bud Mundt, Executive Director, AOPD: “These guys will do anything to compete with and keep up with Amazon. This could be very good news for independent dealers, but create some heartburn for the wholesalers going forward.”

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Special Report

The FTC holds the key With the boards of Staples and Office Depot both unanimously backing the deal, and little resistance expected from shareholders, the fate of Staples’ acquisition of Office Depot now lies in the hands of the US antitrust watchdog, the Federal Trade Commission (FTC). The FTC scuppered plans for a Staples acquisition of Depot back in 1997, but the office supplies world has changed a lot since then, particularly with the rise of online players such as Amazon, the breadth of office supplies available in the mass and warehouse club channels, and the increased capability of independents to service large corporate and government accounts. While no one really believes that the FTC might stand in the way of a Staples/Depot merger based on

and Depot account for an estimated 90% of all office supplies contracts with Fortune 500 companies in the US. Together, they would also enjoy a large share of local and federal government sales. “An FTC decision around the contract segment is the last hurdle to this deal closing, and a decision is not likely for at least nine months,” noted Janney analyst David Strasser. Starboard, Staples and Depot have obviously all done their homework on the chances of the acquisition being given the green light by the FTC, and will have paid close attention to what the FTC said

“An FTC decision around the contract segment is the last hurdle to this deal closing, and a decision is not likely for at least nine months” their retail networks – although even here there might be requirements to close or sell off stores – the key stumbling block could be in the contract channel where, between them, Staples

when it approved the Office Depot/ OfficeMax merger in November 2013. Here is what was written by the FTC then about the office supplies contract channel (bold added for emphasis): A substantial body of evidence indicates that the merger is unlikely to substantially lessen competition or harm large contract customers. First, large customers use a variety of tools to ensure that they receive competitive pricing such as ordering certain products (like ink and toner) directly from manufacturers and sourcing (or threatening to source) certain categories of office supply products from multiple firms.

OPI Magazine | March 2015

Second, the merging parties’ documents show that they are rarely each other’s closest competitor for most large customers and that non-OSS [office supply superstore] competitors take business from the parties in a substantial number of contracting opportunities. Third, the parties will continue to face strong competition for such customers from Staples and a host of non-OSS competitors, such as WB Mason. Non-OSS competitors are growing in number and strength and have demonstrated the ability to win large multi-regional and national customer contracts. In particular, regional office supply competitors have developed and utilised various strategies to compete successfully for large national accounts, including working with office supply wholesalers and joining cooperatives of independent office supply dealers to create a distribution network capable of meeting the needs of large multi-regional and national customers. Finally, potential competitors in adjacent product categories, such as janitorial and industrial products, have existing contractual relationships with large office supply customers and can leverage those relationships to enter the office supply distribution market.

An asset sell-off? The big question is whether the FTC will drill down into the Fortune 500 and government segments of the contract channel or if it looks at the B2B market as a whole. If it does the former – and major end-user customers make enough noise – it could well put conditions on a Staples/Depot combination, possibly even the sale or spin-off of one of the contract divisions.

Acquisition details at a glance •

Staples will pay $11 a share for Office Depot, valuing Depot at $6.3 billion. Following the transaction, Depot shareholders will own about 16% of Staples.

•

The combined entities’ headquarters will be in Framingham (MA) and Ron Sargent will be the CEO. A continued presence in Boca Raton (FL), where Depot is currently based, will be evaluated.

•

Staples is not required to close the transaction if antitrust authorities require a sale of assets that deliver more than $1.25 billion of Office Depot’s 2014 revenues in the US, or if a requirement of the antitrust authorities has a “material adverse effect” on Office Depot’s operations outside of the US.

•

Staples will pay a $250 million termination fee to Office Depot if the agreement is terminated due to antitrust requirements.

•

Total sales of the combined companies will be around $39 billion, with $31.5 billion of that in North America.

•

Following the transaction, retail store count in the US will be over 3,500 – but about 1,000 stores are expected to be closed post-merger.

•

The acquisition is expected to close at the end of 2015, assuming regulatory approvals.

The same applies if antitrust authorities impose requirements that have a “material adverse effect”

The big question is whether the FTC will drill down into the Fortune 500 and government segments of the contract channel “Our take is that they will find a solution, even if it includes asset sales,” noted Janney’s Strasser. However, that could bring a key caveat of the Staples acquisition of Depot into play: if the FTC requires Staples to divest Office Depot assets that account for more than $1.25 billion in sales in the US, then Staples can pull out of the transaction.

on Office Depot’s operations outside of the US – although what ‘material’ actually constitutes was not specified. Australia and possibly Canada, where Staples and OfficeMax are both strong players, may face some antitrust hurdles (for additional, exclusive content on what the Staples/ Depot merger means for markets outside the US, please see opi.net or the OPI mobile app). app

That $1.25 billion sales threshold in the US does seem rather low – given that it presumably applies to retail and contract – and should the acquisition agreement be terminated due to antitrust requirements, then Staples will pay a $250 million termination fee to Office Depot. Of course, Staples doesn’t have to terminate the agreement if the FTC ruling triggers that asset sell-off clause, nor is there any reference to divesting Staples-owned assets so there is certainly some legroom to play with. Enough to suggest that, even if the FTC imposes conditions, Staples would press ahead with the acquisition if it wanted Depot that badly. To conclude by playing devil’s advocate: the $250 million termination fee that Staples has committed to doesn’t seem that high since Depot is the one taking all the risk – and has the most to lose. Staff have just been through the upheaval of the ‘Max merger and now face the prospect of the Boca Raton headquarters closing down and sweeping job cuts elsewhere – that won’t be good for morale and people might be looking to move on already. Uncertainty will now exist in the contract market, too – will customers want to renew with Depot when they could be faced with a switch to Staples next year? Depot as good as admitted that it never fully recovered from the failed merger with Staples back in 1997. Could we see lightning strike twice? w w w.opi.net | OPI Magazine

Special Report

You could certainly see why Starboard et al would take encouragement from that view of the office supplies contract channel. A big difference two years ago, of course, was the presence of Staples as a national competitor to Depot/’Max – with two national players in the contract channel, then a level of parity still existed. Take one out and where is that competition?

News ■ And finally...

Comment The back-to-school (BTS) season has traditionally been a crucial time for those supplying the education sector (see also ‘School of thought’, page 44). OPI asked some key players if that is now changing. Below are just a few opinions. For many of our members it’s an extremely busy and important time and most have to take on extra staff to cover the influx of work. Chris Brown, Operations Manager, Office Brands Traditionally, the BTS season has been a key time of year for suppliers as a high proportion of the year’s sales have come within a couple of months. This is still the case to a certain extent, although we are seeing the sales spike becoming more smoothed out than it used to be. The rise of academies has contributed to this as they run on a different financial year to traditional government-run schools, and so money is spent at different times. Schools are also gradually starting to take more control of their finances so, although the BTS period is still important, suppliers should not overlook the importance of the remainder of the year. David Garrod, Channel Marketing Manager, Henkel UK Education and classroom-related spending isn’t limited to the BTS season – it happens throughout the year. Teachers and schools stock their establishments through a variety of methods including school lists, wish lists and extra supply lists that go out after school has already started. Greg DiLaura, Director of Sales – North America, Tombow

TWEET CHAT follow us on Twitter @OPInews, @andy_opi

$347

The average amount US teachers routinely spend to buy school supplies out of their own pocket

55 million

The minimum number of children globally that receive no schooling at all

@SAGEeducation Sifting through photos from @Bett_show – we especially loved the graffiti wall with all those lovely messages. @AudioNotetaker Witnessing @getaloadageo create a giant illustration across our stand was pretty mind-blowing #bettchat @eduappstore @Bett_show Our social media manager’s #bestbettmoment has to be meeting Dick ‘n’ Dom during a coding class #Bett2015

56%

Number of US adults who find shopping for clothes and school items the most stressful part of the backto-school season

24%

Number of US children aged 4-14 that use a tablet to do their homework

@richjsimmonds Star struck by Tomorrow’s World and Saturday Superstore’s @maggiephilbin @Bett_show. Sorry Maggie! #80sKid #bett2015

SNAP SHOT

We’re affected by both the winter and autumn BTS periods. These are the two biggest cycles we see and they have a major impact. Leen Nsouli, Industry Analyst, Office Supplies, The NPD Group BTS is an important part of the year as that’s when buyers tend to get their order pads out. But as our products are used throughout the year, there’s constant demand for them. Mike Fogarty, CEO, Wizard Wall BTS is a critical part of our business, but we also find other peaks around tax time, holiday periods and the start of the second school/college semester. Ken Newman, Director of Marketing, Zebra Pen Floor cleaning and deep cleaning take place in the shutdown periods, so schools will tend to stock up on these FM supplies months before they close for the holidays. Debbie Nice, Head of Facilities Supplies, VOW For our independent dealers, 80% of their school business occurs in the BTS period. Grady Taylor, EVP, TriMega BTS is definitely important to us, but we also see peaks over other cyclical periods, like a new semester starting at college. Neil Ringel, EVP, Staples Advantage As a supplier of sanitary products to schools and universities, we see steady selling throughout the entire school year. Chrissy Sheehan, Education Target Market Leader, Kimberly-Clark

OPI Magazine | March 2015

Amazon has recently opened Amazon@Purdue, its first-ever staffed customer order pick-up and drop-off location. Located at Purdue University in the US state of Indiana, students there now have a new option for receiving textbooks and other college essentials.

Don’t forget to take part in the discussions on the OPI LinkedIn page

Big Interview | Weeks Lerman

Servicing its way to success by Andy Braithwaite andy.braithwaite@opi.net

you can make it in New York, you can make it anywhere, so goes the song, and Weeks Lerman is certainly a success story in the New York OP market with sales of around $90 million. That success is no doubt down to a move away from a reliance on traditional OP in the past few years, as Weeks Lerman has developed other categories such as breakroom, managed print, furniture and, more recently, jan/san and print hardware. At the same time, the firm has remained laser-focused on providing exemplary levels of service to differentiate itself from the competition. CEO Sid Lerman is the first to recognise the input and impact of his senior management team. COO Cindy Ciaccio, who has been with the dealer for 25 years, and Rob Paar, Executive Director of Logistics and Purchasing, are two key staff members that have helped drive change at Weeks Lerman. Ciaccio and Paar joined Lerman as OPI caught up with the New York dealership. OPI: Firstly, how did you perform in 2014? Sid Lerman: Sales were flat for the year at approximately $90 million. Some categories were up, others were down. For example, traditional OP declined while jan/san, coffee and print were up. OPI: Was that in line with expectations? SL: Our expectations, yes. Our hopes, no! But it’s no secret that technology is causing the use of fewer office supplies. We got into coffee and breakroom about seven or eight years ago and that’s become a substantial part of our business. And most recently, the janitorial supply field has become a very important segment to us – again, just replacing business that is going away because of technology. Traditional office products represent about 40% of total sales now, and that includes ink consumables.

OPI Magazine | March 2015

Serving the competitive New York market, Weeks Lerman has learned that going the extra mile on service is critical to success

“Traditional office products represent about 40% of total sales now, and that includes ink consumables”

OPI: How did you do on the bottom line? Cindy Ciaccio: We did OK margin-wise: we were up by about a point and a half. We work very hard to contain costs and we run a very lean machine. I think we utilise technology very well using the BMI OP Revelation platform, and we’re routinely meeting with our department heads in all areas of the business to try and use systems better, increase productivity and, again, drive down costs. Where that was probably most impactful was in the warehouse – Rob Paar and his team did a tremendous job of driving cost down there – and he also did a great job leveraging United Stationers’ capabilities with the software to increase productivity and drive down costs. OPI: Tell us more. Rob Paar: One of the things we have is barcode scanners and using technology there; that has led to big savings because there is less handling of the products. We have developed our software in-house; we have programmers and we felt it was easier to do it in-house and control and verify it rather than outsource that function to a 3PV. OPI: Really? CC: It’s relatively expensive to pay the monthly fees on those electronic point-of-delivery (POD) devices, as well as the investment in the devices themselves. We had a programmer that spent about six months developing the migration of our electronic PODs to smartphones. Putting that on smartphones and doing it all internally has been a huge thing for us. OPI: Can you quantify the savings you have been able to make? CC: We know that we have driven costs down in warehousing: that is reasonably easy for us to quantify and was about $750,000 between

Weeks Lerman | Big Interview

personnel, increased productivity – including the staging with United – and software. But it took us probably about three years to get to that $750,000. OPI: How did you leverage your relationship with United? RP: We made some very big changes to how they routed our trucks, how the products came in and the way that we unloaded them right into our staging area. We probably do two trucks a night with United, so that’s a lot of merchandise. We used our automated warehousing system to get merchandise that didn’t need to be handled more than once right into the truck staging area, so it didn’t have to get broken down in other areas – which is what we had to do before. We probably worked on that for about four months; United sent down personnel from its Cranbury facilities in New Jersey and I went to see them. United was very supportive, I must say; we were quite demanding and they did what they needed to do to get there for us. OPI: A nice plug for United! Is there anything that you feel they should be doing better for you and the dealer community in general? CC: From our perspective, there are things we’d like to see them do better product-wise. They don’t necessarily have yet a strong enough imported or lower-price alternative domestic product to keep their dealers competitive in the market. We’d also like to see them get lesser priced

w w w.opi.net | OPI Magazine

Big Interview | Weeks Lerman Cindy Ciaccio

“My belief is we’ll see a lot of these small [jan/ san] dealers consolidate or disappear”

alternative products in OP and jan/san quicker. If the Staples of this world can do it, then United can too. With Lagasse they have a full arsenal of jan/ san products – which is good – but they’re not necessarily the most cost effective. OPI: How would you describe the New York market at the moment? SL: About 95% of our volume ships to New York City and that’s where our sales people are focused. The market is certainly better than it has been; we’re seeing a resurgence in the Wall Street business and the financial areas; charitable and not-for-profits are making a big comeback; there are opportunities in education; and we have a large presence in healthcare. The opportunities are there, but it is still tremendously competitive. OPI: Who are your main competitors? SL: It seems like everyone gets to take a turn. Five or six years ago, Staples was the tough guy; more recently it was OfficeMax writing the big bonus cheques for converting customers – with the exception of the New York State contract where Staples did millions of dollars’ worth of products at a penny. But for us, it’s still WB Mason that is the most aggressive – pricing-wise and marketing-wise – in New York. Mason is difficult, it’s very aggressive and willing to take losses on the front end, and that’s just not our business model.

OPI: So how do you compete with that? SL: Part of it is trying to educate the customers that those prices don’t necessarily follow the length of the contract, and that somewhere, somehow, they have to be made up for. We’ve lost a couple of major accounts to Mason that came back within a

OPI Magazine | March 2015

year because they did see that there wasn’t sustainability with the pricing. One of the things that separates us is that we really service our customers in a way that other people are unwilling or unable to. And this value-added part of the sale has become a lot more valuable and a lot more meaningful to many of our customers. CC: A major customer of ours for the past 15 years is a leading healthcare establishment in New York City. Typically, they’ll go out to bid every three years and the big boxes very aggressively try to get this business from us. About four years ago, we signed a three-year contract; at that time the business was worth about $7 million a year. This healthcare establishment belongs to a buying group called Novation and, in preparation for ‘Obamacare’, they themselves were looking to drive costs down. They had a dedicated Novation rep working with Rob Paar here for about six months, consolidating not just the core list but the whole catalogue – and we’re talking about an environment where there are 12,000 end users. Within a year, we took $2.5 million in sales out of that contract with them hand in hand. The commitment we made to stand by them during this has meant that they haven’t put the contract back out to bid, and they also awarded us the coffee business. So there is really a level of trust there. For us, it was just a matter of business: “If that’s what you need, then that’s what we’re going to do for you.” OPI: If you compare your business today with, say, five years ago, what do you believe have been the biggest changes? SL: I’d say the need to evolve into selling other product lines. OP was our main category for many years, but the declines we have seen are not going to reverse themselves. Our big push was in coffee and breakroom, and now our focus is on jan/san. It’s easier to sell more items to existing customers than to go out and find new ones, and we are finding that our clients are really embracing our efforts to sell them jan/san products. The jan/san industry looks like the OP industry used to look like. By that I mean there are a lot of small jan/san dealers around the country. My belief is we’ll see a lot of these small dealers consolidate or disappear. I believe it’s a lot easier for us to compete with the small jan/san dealers because they’re behind the curve technologically speaking. They’re in for some surprises. OPI: What investments have you made in the jan/san category?

Weeks Lerman | Big Interview SL: In order for our sales reps to make intelligent sales calls, we really needed to have in-house expertise and we have a jan/ san specialist. Generally, the reps will take our in-house expert with them on those sales visits. We also spend time to make sure the reps know the products, so we give them training: when you have to talk about different types of vacuum cleaners, floor cleaners and level of concentrate, etc, that can get very technical so we want the reps to be able to give end users confidence in us.

SL: I’m not involved personally. What I will say is that I think there are too many dealer groups and they need to consolidate. They really do.

OPI: You have been active with acquisitions over the years, but nothing for a while. Why’s that? SL: The environment has shrunk in the OP industry and we really haven’t seen much opportunity in that space, but we are always looking. But I believe there is opportunity for consolidation in the jan/san industry.

OPI: Why not, in your view? SL: I guess it’s about the individuals and who gives up what, who leaves and who stays; I can’t think of another reason. Take AOPD, IS and TriMega – there is no need to have all three groups, in my opinion.

OPI: We’ve seen some office resellers buying jan/san distributors recently… SL: And I think we’re going to see a lot more of that. OPI: Would you look at that? SL: Definitely. The OP industry shrunk dramatically because the smaller guys just didn’t have the scale, and I suspect the same thing will happen in the jan/san industry. There is too much new competition and they don’t have the technological capabilities. But of course, consolidation doesn’t happen overnight. OPI: You are one of the largest dealers– if not the largest – in the TriMega group. To what extent have you been involved in the American Purchasing Alliance initiative overseen by AOPD? Rob Paar

OPI: Were you disappointed when TriMega and Independent Stationers (IS) didn’t merge? SL: Absolutely. There are too many groups and the manufacturers can’t handle all these shows and the expenses. It’s just a shame the groups can’t sit down in a room and get it done. It’s the right thing to do, but it just hasn’t happened.

OPI: Weeks Lerman has been mentioned in the same sentence as Pinnacle. Any comment on that? SL: No! Just that I know they’d like us to join! But what I’d really like to see is IS and TriMega merge. OPI: We rarely have an interview these days without referring to Amazon. Are you keeping an eye on them or are you concerned about Amazon? SL: Absolutely. The New York market always has a bulls-eye on its back and the first place where Amazon went to open a physical location was Manhattan. Of course we are worried. As soon as they find a way to implement services outside of UPS and FedEx, we will have to be concerned. But it’s not just them – it’s the Costcos and BJ’s and Walmarts of this world too, and it’s a concern that they keep looking in our space. OPI: Finally, the news has just broken that Staples has agreed to buy Office Depot. What is your reaction to that? SL: What we are basically seeing is the reduction of overcapacity in a declining industry. The combination provides enormous opportunities for cost savings, but the size and execution of the task is challenging. While demand for office products is declining, the competition from the likes of Amazon, Costco, BJ’s and Walmart is expanding. The office supply retail stores’ best days are behind them. Opportunities for the OP industry rest in other product lines like coffee/breakroom and janitorial supplies.

“I think there are too many dealer groups and they need to consolidate”

For the full version of the interview with Weeks Lerman, check out opi.net or the OPI mobile app.

w w w.opi.net | OPI Magazine

Hot Topic | Oil Prices

The big (price) drop? OP companies across the supply chain might be waiting for the fallout from low oil prices, but there’s scant evidence this is going to happen soon

by Heike Dieckmann heike.dieckmann@opi.net

‘UP

like a rocket, down like a feather’. While this saying about energy prices is taken somewhat out of context here, the sentiment that when raw material prices go up, all parties in the supply chain suffer the consequences quickly, but when they go down, it’s rather more of a trickle-through effect, still holds true. Oil prices – and all the variations within that commodity (Brent crude, WTI crude, etc) – have been steadily going down since the middle of last year (see chart, right), dipping below $50 a barrel in January for the first time since May 2009. In the run-up to OPI going to press, they’ve rallied somewhat, closing at about $60 a barrel on 18 February. What is the impact that the OP industry at large is seeing as a result of this dip? Oil affects every part of the supply chain,

OPI Magazine | March 2015

starting with raw materials – anything from desktop supplies/accessories and inkjet cartridges to bulky products such as shredders are heavily resin-reliant in their manufacture. Then there’s the distribution aspect. Sourcing and importing/ transportation from China play a huge – and costly – role for all channel players, as does wholesale distribution in geographically vast regions like North America. So are OP players seeing the benefits from the drop in price? As a general statement, the answer is ‘no’. A recent OPI poll (see page 29) revealed that 39% of survey respondents said it “made no difference” to them in terms of margin benefits, while 30% commented that it was “too early to say”.

No price reductions Says Steve Lynn, SVP at US wholesaler SP Richards (SPR): “As a significant buyer of products in this industry, you would expect that, sooner or later, we’d see price declines on products as a result of falling oil prices and therefore falling resin prices. You would also expect that we'd see operational improvements in cost from declining transportation expenses. At this point in time, however, we haven’t seen either. “We are routinely asking our transportation people and our suppliers when we’re going to see some price declines. We do believe they’ll come, in both areas, late in Q1, maybe into Q2, but so far we haven’t seen any reductions at all.” EVO Group CEO Robert Baldrey over in the UK agrees: “Manufacturers that make products

“As a significant buyer of products in this industry, you would expect that [...] we’d see price declines on products as a result of falling oil prices [...] – we haven’t”

Oil prices | Hot Topic with plastic in them should benefit from considerably cheaper raw material prices. We expect our vendors to be coming to us with good news and reductions on those prices coming through the supply chain, but we haven’t seen anything so far.” Unsurprisingly, on the part of some vendors, there’s the perception that resin prices were far too high in the first place. One European manufacturer who wishes to remain anonymous, told OPI: “Margins for producers of plastic office products have been dangerously low since 2009 and the current cost of plastic raw materials is still very high: PP is still 40% more expensive than during the first quarter of 2009; PE 45% and PS 50% more expensive. The current decrease is therefore a very welcome breath of fresh air that will – unfortunately for the whole OP industry – not last because producers of raw materials decided to turn off the raw material tap.” He explains: “Prices of plastic raw materials might increase significantly in March because producers of those raw materials agreed to decrease their production in order to counteract the recent price declines. This could even bring about a shortage of raw materials in the short term.” German manufacturer edding is also unlikely to be drawn into price negotiations,

Average Crude Oil Spot Price ($)

120

100

($)

Source: World Bank

0 Jun 14

Jul 14

Aug 14 Sept 14 Oct 14 Nov 14 Dec 14 Jan 15

The average crude oil spot price (of Brent, Dubai and West Texas Intermediate, ie WTI) dropped to $47.11 per barrel in January of this year, down from $108.37 in June of last year and from $102.10 in January 2014 – a decrease of 53.86% over the course of a year. This is a small fluctuation, however, compared to the volatility of 2008, when prices peaked at $145 in July only to come down to $30.28 on 23 December the same year.

as CEO Per Ledermann points out: “We do not change our pricing based on short-term developments in the commodity markets. If we did, we would have had massive price increases over the last few years at short notice. Also, the effect of oil prices specifically within our products is only indirect, through price changes in plastic components for example, which usually take time and tend to diminish while dribbling through the supply chain.”

Using up inventory Existing inventory levels have been another reason for the delay in lower prices coming through, says Joe Hartsig, SVP and Chief Merchandising Officer at United Stationers: “Resin prices are down slightly, but suppliers continue to work through raw materials in their supply chains that were purchased prior to oil and gas prices coming down. We are watching the situation carefully and working closely with our customers and suppliers to understand short and longer-term impacts.” It’s likely that old inventory has by now been used up, but for those sourcing from China – and many do, for branded as well as private label products – there are other issues as well. One is Chinese New Year which took place at the time of OPI going to press. As SPR’s Lynn says: “It’s hard to get anyone in the Far East to move on anything this close to Chinese New Year, but we believe we’ll see some cost decreases after that.” Acme United’s CEO Walter Johnsen sees another potential reason that stops price decreases coming through: “We’re getting our resin – and our steel for that matter – from state-owned factories in China and that’s not a normal market because pricing is w w w.opi.net | OPI Magazine

Hot Topic | Oil Prices completely controlled. Maybe the Chinese government is picking up savings, but our factories certainly aren’t seeing any of them. “We’re the biggest scissor maker in the world and we’re very good at product sourcing, but we still can’t get any cost savings, so I guess that we’re probably quite representative of what’s happening in the market.”

Currency concerns One of the most crucial factors in the overall debate is that of local currencies and how they compare to the currency of oil – the US dollar. The Canadian dollar and the euro are two good examples where currency values have fallen so substantially that any monetary benefits as a result of sourcing lower-priced goods from China have been more than negated. As Richard Scharmann, CEO of Austria-based PBS Holding, says: “Yes, we’ve been seeing a positive impact on some oil-based products, but on the other hand have to deal with the substantial losses of the euro. In terms of Far East sourcing, the weak euro far outstrips any benefits from lower material costs.” Thorsten Koehler, Managing Director of Carstensen Import-Export from Germany, adds: “As an importer of goods from China, I haven’t seen any change in prices as a

The Port of Oakland on the mainland shore of San Francisco Bay in California is one of the 29 ports affected by the West Coast labour dispute. Janney analyst David Strasser believes that the conflict will result in costs of billions of dollars for resellers such as Staples which will have to resort to having more product airfreighted to stores and/or face out-of-stocks. result of lower cost for resin-based products. The devaluation of the euro has more than absorbed any advantage that oil prices may have had and merchandise in effect is becoming substantially more expensive for us. I’ve had some enquiries from our customer base about price reductions, but that’s

The manufacturer’s view

OPI: Have you come under pressure from your customers to reduce prices in light of severely reduced oil prices? Janet Collins: We have been asked by at least one large customer to consider reducing prices, but we are not complying. We have not experienced any decrease in distribution costs as a result of the oil price decrease. To the contrary, we are under pressure to accept increased costs from most of our raw material suppliers. In addition, our labour costs are rising, primarily due to the new health insurance laws in the US and their impact on small businesses. We are working hard to improve our efficiency and internal processes to only pass along nominal price increases to our customers.

container transportation costs as well as raw material costs are not so relevant for us in that sense, but the cost of the few items that we do import from China has actually risen because of labour cost increases. From a US distribution/freight standpoint, we use LTL (less than truckload) carriers, which are less likely to see a decrease in prices, because the LTL supply chain involves more overheads and handling costs. In contrast, truckload (TL) shipments include a higher percentage of the total cost than fuel surcharges, so when oil prices drop, the effect on TL costs is much greater than for LTL. Interestingly, UPS is apparently imposing a 4.5% price increase on many independent dealers in the US.

OPI: How important is the price of oil for you, from a raw material as well as distribution point of view? JC: In our product category, the raw material costs of aluminium and wood are very important and they are both increasing substantially. And if any of our competitors have found a way to decrease the price of porcelain, I’m all ears. We are mostly American-made, so

OPI: Is the long-running truck driver shortage in the US affecting you? JC: Yes, it’s definitely impacting our business. FedEx is telling us that they are 30% over capacity, causing us to find alternative carriers that charge more and may not be as reliable. With fewer trucks and drivers, carriers can put a premium on quality handling and expediency.

OPI speaks to Janet Collins, President of GMi Companies, about the challenges she is facing and how her firm is addressing them.

OPI Magazine | March 2015

Oil prices | Hot Topic Exchange Rate Comparison US Dollar/Euro

0.9000

0.8000

($/H)

Source: www.oanda.com

just nonsense when the currency has been devalued by 20% – and it's not over yet.” For German companies not reliant on currency-dependent imports and focusing instead on local production, it’s a different story, with the country’s economy as a whole benefiting from the oil price slump (despite the negative repercussions of struggling exports to oil-rich countries), and business confidence generally up and consumers in a spending-happy mood. Indeed, it’s arguably end consumers who are benefiting the most at present. With more money in their pockets as petrol prices have come down – in some countries considerably so – they are able to spend more on other things, feasibly including office products. Says United’s Hartsig: “We are monitoring the uptick in consumer spending as end users and small businesses save on petrol prices. This will most likely lead to higher spending across discretionary categories such as technology and furniture.”

0.7000

0.6000

Mar 14

Transportation issues The same spending confidence is certainly not evident across the business community at large, as companies battle with a whole range of issues, many of them revolving around transportation. Some of the challenges that, in one way or another, affect all players in the business supplies channel, are these: § Diesel fuel prices in the US have decreased, but not nearly as much as petrol prices at the pumps. As such, the benefit for diesel-filled trucks is less pronounced. § Fuel surcharges on container rates from China are being lowered, but not substantially. One manufacturer, for example, is seeing 10%

OPI poll results To what extent have lower oil prices helped improve your margins?

Helped substantially

Helped somewhat Made no difference

26%

39%

Too early to say

30%

May 14

Aug 14

Oct 14

Jan 15

surcharge cost reductions for container imports into North America, after some “very aggressive chasing”. § Ancillary costs of transportation companies, including maintenance or equipment (tyres, for example) have increased – more dramatically than diesel fuel prices have declined. § The ongoing truck driver shortages across North America and Europe are expected to get worse rather than better. As such, the labour cost for employing truck drivers is expected to increase rapidly, as are training and insurance costs. § Shipping companies FedEx and UPS have raised rates for a number of their ground, air and international services for 2015. They also increased surcharges for select services like additional handling, delivery to more remote areas and delivery confirmations. § The nine-month-long port strike on the West Coast of the US has been causing massive disruption to importers and exporters. 29 ports, which handle more than 70% of US imports from Asia, have partially shut down for several days, hampering movement of nearly half the country’s containerised freight. Many OP companies are currently waiting for goods from China, ready for the spring season. One manufacturer that OPI spoke to warned that it was too early to come to any conclusions about the effect that the falling oil price – as well as that of other commodities like iron ore – will have on the OP community at large. That is clearly true, but it’s safe to say nobody should sit back and relax, waiting for negotiations to start in Q3 when prices for 1 January 2016 are decided. There'll be some action before then. w w w.opi.net | OPI Magazine

Dealer Spotlight | Caley Office Group

Scottish dealer Caley Office Group is looking to double in size after a major acquisition in 2014

“The fourth quarter 2014 was our busiest-ever quarter”

by Andy Braithwaite andy.braithwaite@opi.net

2014

will no doubt go down as a pivotal year for Glasgow-based Caley Office Group. In April, Caley Print and Stationery – as it was known then – acquired fellow Scottish dealer Office Integrations, increasing sales by around 70% overnight to almost £6 million ($9 million) and making it the largest independent office reseller in central Scotland. Much of the rest of the year was spent focusing on integrating Office Integrations into the business. This not only included bringing the two IT systems together – a task made easier by the fact that both firms were already using the Prima platform – but an investment of £250,000 to move into a new state-of-the-art headquarters in the centre of Glasgow. "The premises move is absolutely key to what we can now achieve," explains founder and Managing Director Craig Porter. "We've made only one acquisition in 19 years, but it was a sizeable one. We have now made the move, and if we acquire again we won't need another one. A lot of the hard work has been done Glasgow and the building blocks are in place – I believe we can double our size over the next five years with the premises we now have."

OPI Magazine | March 2015

Porter is targeting organic growth, but is not ruling out further acquisitions either, even south of the border into England. Expectations for the existing sales force are high following a recent reassignment of sales and prospection territories. In addition, a recruitment campaign has been underway for several months – including local radio ads – as Caley looks to add new sales talent.

Balanced portfolio Following the Office Integrations acquisition, Caley Print and Stationery rebranded to the Caley Office Group. It now has a nicely balanced portfolio of businesses that include office supplies, full-service print (litho, digital and large format), business interiors, graphic and website design, clothing embroidery, confidential shredding and promotional products. Porter says that it was always his intention when he established the business as a 'one-man band' in 1996 to be more than 'just' a stationery or a print company. "It was a long-term ambition of mine to provide everything you need for an office under one roof. A lot of our competitors can claim to be printers, graphic designers and office or furniture suppliers, but rarely do they make the investments to back that claim up," he argues. "We have reinvested continually in the business, and we are one of the very few in Scotland that can tick all those boxes and have everything under one roof. Somebody recently commented that we have seven great companies under the group banner, which is exactly how we market to our customers: Caley Print (print), Office Integrations (OP), Caley Interiors (furniture), Caley Creative (design), Caley Confidential (shredding), WebCart (online trading) and Caley Canvas (canvas and wide format prints).

Caley Office Group | Dealer Spotlight As well as adding scale, the Office Integrations acquisition has skewed Caley's product mix more towards the office supplies side, but this does not concern Porter. "We are seeing organic sales declines of office supplies," he notes, "but if we continue to be proactive and win new customers, then we can offset that." While looking to add to the customer base, Porter points to being able to win share of wallet with existing print customers by offering them other categories such as traditional office supplies, jan/san, coffee and furniture, the last of which already represents about 10% of Caley's sales. "There was a big negative impact with furniture during the financial crisis," admits Porter, "and it has only been in the past few months or so that we have seen significant expenditure again.” Caley has a strong relationship with furniture supplier Imperial, which includes working together on projects with values in excess of £150,000. "They have a level of quality and attention to care that we have not seen with other furniture suppliers," says Porter. The eyes of the world were focused on Scotland last September as the nation voted whether to remain in the UK, and the referendum appeared to have an impact on Caley's sales. "It did seem that some customers were holding off spending in the run-up to the referendum and that some pent-up demand was released at the end of the year," notes Porter. "What that meant was that the fourth quarter 2014 was our busiest-ever quarter." Local competition tends to be fellow independent resellers as opposed to the large contract stationers, although Porter notes customers using online resellers such as Amazon or Euroffice more frequently as they become more used to ordering online.

Standing by Spicers Ever since it was founded, Caley has used Spicers as its main wholesaler, something that seemed natural given the close proximity of a Spicers regional distribution centre in the Glasgow area. The link to the wholesaler was reinforced in 2013 with the arrival at Caley of Darren McIntosh as Commercial Manager following a 13-year spell at Spicers. Caley is currently a Spicers Brilliant Partner. "I've been a supporter of Spicers since I started the business in 1996 and that hasn't changed," says Porter when quizzed about the recent supply issues at the wholesaler. He continues: "They brought in Greg Michael who told me bluntly and factually

Caley invested £250,000 ($384,000) in moving to its new headquarters that they would fix things in 4-6 months, and he wasn't far off with that forecast. We supported Spicers throughout, although I have to acknowledge VOW during that time; they could have turned their back on us, but they still supported us when they could have said no." Porter says that Caley still lost business as a result of the Spicers issues, but managed to reverse that scenario by "going out and proactively looking for new business". While service is not quite back up to the high levels that Caley has become accustomed to over the years, Porter says he is committed to continuing to support the wholesaler "as long as internal fighting and poor stock levels don't impact our business". Both Porter and McIntosh are watching developments in the UK wholesale channel with interest and so far have not encountered competition from OfficeTeam following its merger with Spicers and the creation of SPOT. In fact, they are more concerned with competition in the small business space from the EVO Group that VOW now belongs to (for more on developments at EVO, see also ‘Positive EVO-lution’, page 34). Meanwhile, the focus for the next 12-18 months is firmly on going out and trying to win new business, "with one eye on the cash flow to make sure we're not taking on any new clients that are a bad credit risk".

Caley Office Group Fact Box Founded: 1996 Founder & Managing Director: Craig Porter Headquarters: Glasgow, Scotland Annual sales: £6 million ($9 million) Staff: 40 Primary wholesaler: Spicers

w w w.opi.net | OPI Magazine

Sponsored Interview | The BP Group & The Highlands Group

A transatlantic vision

The Business Performance Group CEO Luke Chapman and The Highlands Group CEO Bob O’Gara explain how their transatlantic alliance is a win-win deal for business supplies manufacturers and dealers in the US and Europe

Both

US-based manufacturer rep group The Highlands Group (THG) and UK-based business development firm The Business Performance Group (BPG) were looking to move into each other’s respective markets, but required a partner that already had an established client base with a different, but complementary, service proposition. A chance meeting at the 2013 European Office Products Awards dinner in Frankfurt between the two firms set in motion a major advancement in how agencies support resellers. OPI: What is the BPG/THG proposition? Luke Chapman: We are working hard behind the scenes to create programmes that can span any of our range of services, from telemarketing and lead generation or end-user demand creation, through to field support at reseller and key end-user level or e-marketing and content management for the e-tail sector. Bob O’Gara: We are three growing businesses – The Highlands Group, The BP Group UK and The BP Group US – that, when viewed together, offer a compelling proposition to suppliers and resellers in both the US and UK markets. We are pushing our businesses to become not just simply a provider of outsourced selling for manufacturers, but also a provider of services that support the reseller community at large.

OPI Magazine | March 2015

OPI: What does the alliance offer in terms of helping to solve dealer/ supplier issues? BO’G: Manufacturers are happy to invest in dealer/reseller programmes when they can see a clear ROI. Historically, this information has not been easy to come by, either because it was unavailable or not in the interests of the reseller to share it. Moving forward, the dealers that are willing to share their outbound sales information will derive an enormous benefit from manufacturers/suppliers that will invest marketing funds to help the dealers sell a more profitable mix of products in existing categories as well as new categories of products. OPI: Has anything surprising happened over the course of the partnership? LC: It has been surprising how quick the market has been to accept the model. We both believe that the OP industry will evolve even more rapidly (think Staples and Depot), which will only support our model and its viability for the channel and associated channels in the future. BO’G: Channel blurring across all B2B markets is a challenge and opportunity for all players in the OP market. While our background is in the office channel, we believe that successful players in the B2B

Luke Chapman

“We are engineering the company for the future B2B marketplace”

The BP Group & The Highlands Group | Sponsored Interview OPI: What brands do you have and what brands are you expecting to take on? LC: In the UK we represent a range of major manufacturers including Avery and KCP, and at this stage we have around ten in total. We also support a range of new market brands and some specialists in the FM sector. The categories will grow considerably during 2015 with some new channel partners. Our goal is to emulate our US market, which is a basket of key vendors across all of the major product categories.

market will work across multiple product categories and multiple resellers in the future. We are racing to build a world-class B2B sales and marketing organisation so we can help our partners win as this convergence takes place. OPI: How similar/dissimilar are the US and UK markets? LC: The US and UK markets are structurally similar but the cultures differ a great deal. I believe the US has a more entrepreneurial feel while Europe still has a more conservative nature. BO’G: At first glance it is easy to think that they are quite similar. Both have two wholesalers, there are many independent dealers, and Staples and Office Depot are factors. A deeper look, however, quickly disabuses this. The two wholesalers in the UK are also contract stationers and Staples and Depot are not nearly as influential in the UK as they are in the US. Finally, suppliers in the US are much more deeply engaged at all levels of the channel in the US. OPI: What have been the biggest challenges? BO’G: Introducing brand advocacy into the UK market has been challenging as we are asking suppliers to pay for something new. Fortunately, we had Avery and Kimberly-Clark Professional (KCP) agree to work with us on a test basis to prove that brand advocacy could provide a desirable ROI if conducted properly. Now that the model is proven, we have enjoyed a surge of interest from suppliers wishing to invest in the channel.

OPI: What are your priorities for 2015? LC: For BPG UK it is to continue expanding the range of suppliers and dealers we work with. In the US, it is to build on the foundation we laid down in April 2014. BO’G: We are completely revamping our field go-to-market strategy to better reflect what our channel partners are asking for. Our field sales team will be introducing a range of marketing tools to dealers to help drive their business with the brands we support. We are building an inside sales team to offer greater support to our suppliers and to more efficiently cover the market. This year is going to be one of the most transformative in our company’s history. We are engineering the company for the future B2B marketplace.

The Highlands Group acquires The Business Performance Group The Highlands Group (THG) purchased 80% of The Business Performance Group (BPG) at the end of Q1 2014. A portion of the purchase price was shares in THG for BPG founder Luke Chapman – now a partner in the parent company. There were three motivating factors that drove Bob O’Gara THG to take a controlling share in BPG: 1. BPG provided a point of entry into a key market – the UK. 2. THG saw an opportunity to introduce the BPG model into the US, where it has proved to be a huge success. 3. The BPG platform has informed how THG approaches brand advocacy – introducing supplier-led digital marketing campaigns coupled with telemarketing – by going beyond simply selling to dealers and also devising marketing campaigns to work with dealers to sell products to end users. Now, 12 months later, BPG has cemented its position in the US and THG has proven its brand advocacy business model in the UK and is looking further afield to continental Europe. While the cost of sales in Northern Europe and Germany in particular are quite high, THG believes its model is well-suited to these markets. “We will need some far-sighted and innovative suppliers to join us in proving this. If we can get this accomplished, we would like to launch in the German market in 2016,” says THG CEO Bob O’Gara.

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Education Special Interview | Jim McGarry

Educating the market LEADING

US trade association Education Market Association (EDmarket) has been busy re-energising and transforming itself under the leadership of Jim McGarry. One of his initiatives has been to provide support to the office products dealer channel as more OP dealers diversify into the educational supplies market.

OPI speaks to EDmarket CEO Jim McGarry about developments and opportunities in the education market JM: EDmarket has been hard at work supporting the dealer channel and exposing the membership to growth areas. We launched a new website – EDmarketdealer.com – to help raise

“Last year [at EDspaces], the schools in attendance had over $11 billion in ongoing building or renovation projects” OPI caught up with McGarry following this year’s EDexpo trade show in Atlanta, Georgia, in February for an update on EDmarket and on the opportunities in the education space for OP resellers in the US. OPI: Jim, to start with, what has been the main focus for you and the EDmarket team over the past 12 months? Jim McGarry: 2014 was a big year for the Education Market Association with the transition to our new name (formerly the National School Supply and Equipment Association) that more accurately reflects our mission to provide events, opportunities, resources and leadership that improve student outcomes by advancing the educational products marketplace. Our main focus has been on improving the ROI for both EDexpo and EDspaces, our annual industry events. OPI: What have been the notable achievements that you can highlight?

OPI Magazine | March 2015

awareness of the dealer channel, and have been actively recruiting education bloggers for EDexpo to help showcase dealers as the best way to acquire all the amazing products available for today’s students. EDmarket wants to highlight as many opportunities as possible for growth and success, so our members can be a valued resource to their customers. One of the most exciting growth areas we are spotlighting this year is the Makerspace movement

which is finding its way into schools that are increasingly focused on science and engineering. These Makerspaces encourage students to design, experiment, build and invent, tapping into many of the products our members already sell. The EDexpo exhibit floor in Atlanta in February featured a Makerspace for attendees to see, touch and create just like the students do, and attendees were treated to a General Session by Makerspace expert Sylvia Martinez. We are looking at bringing a similar space to EDspaces to demonstrate a collaborative learning environment. OPI: Are there any new projects or initiatives you can talk about? JM: 2016 marks the 100th anniversary for our industry trade association, an awesome feat for any organisation! But rather than rest on our laurels, the EDmarket leadership is continuing to look for ways to bring value to the

Jim McGarry

Jim McGarry | Education Special Interview marketplace. Much like EDmarket iQ is a central database of customers, the organisation is looking to be the central data resource for manufacturers and resellers in this space. OPI: How did the EDspaces show in Florida go last October and what, for you, were the highlights? JM: EDspaces continues to grow in terms of momentum and importance. School districts and colleges that are building or renovating their facilities are turning to EDspaces to see what’s new, learn about emerging trends and make the connections that matter for their projects. Last year, the schools in attendance had over $11 billion in ongoing building or renovation projects. OPI: What can we expect at this year’s EDspaces in New Orleans? JM: Our planning committee has some exciting new initiatives in store for New Orleans. Ten years after the devastation caused by Hurricane Katrina, the city has been able to rebuild and improve its once-failing public schools. The Committee on Architecture for Education is working closely with EDmarket to showcase the rebirth of New Orleans with tours of its best schools, an ‘EDfest’ party that includes New Orleans food, music

The biggest opportunity is for the dealers to become a resource to their local schools and create a relationship with and experience for administrators and teachers, so they have a knowledgeable alternative to surfing the web for resources, information and products. OPI: What was new at the EDexpo event 2015? JM: The most significant change for EDmarket this year was our efforts to revitalise EDexpo with the enthusiasm and excitement that the customer brings to an event. This

“OP dealers know they need to diversify if they want to stay relevant in today’s competitive market” and fun, and of course, sessions that tap into the spirit of revitalisation and community engagement. OPI: What are some of the dynamics in this sector of the market and what are the opportunities for dealers? JM: Where to start? The education market is changing as fast as every other industry. Technology continues to disrupt traditional teaching methods and product procurement channels. Classroom design is focusing on much more flexibility and personalised learning. In the US, the pros and cons of Common Core State Standards are being debated passionately.

year’s event included 50 education bloggers from across the US who walked the show floor, tweeting, blogging and sharing all they see and learn during the exhibition. There were also curriculum directors, principals and key purchasing influencers attending the EDexpo Leadership Institute and visiting the tradeshow to see all the latest innovations for students and teachers. The success of this new strategy lies in raising awareness of the distribution channel and injecting the dealer into the discussion as the preferred source for the incredible amount of supplemental products and learning materials to help the

teachers and students improve student outcomes. OPI: What about participation from the office products dealer community? JM: For the second year, Independent Stationers (IS) hosted its National Education Conference in conjunction with EDexpo to expose its dealers to the best gathering of professionals in our industry. Just like the educational product dealers, OP dealers know they need to diversify if they want to stay relevant in today’s competitive market. And with the nearly 1,000 exhibitors in the combined EDexpo/ CAMEX events, there were unlimited opportunities to find new products to enhance their current offerings. OPI: How has this relationship with IS been evolving? JM: The EDmarket/IS alliance provides an opportunity to participate in the US Communities contract, opening up sales opportunities within school districts, other public agencies and non-profits all over the US. We currently have over 70 members that belong to both organisations. OPI: Are you doing anything else with office products dealers in addition to this alliance with IS? JM: We are in conversations with other organisations in this space that are interested in tapping w w w.opi.net | OPI Magazine

Education Special Interview | Jim McGarry into the expertise our dealers and manufacturers have with the education market and looking for new opportunities. OPI: Looking at the education market in the US, how was 2014 for the education reseller

Businesses with physical locations are realising that in order to create customer loyalty and remain viable, they have to go one step beyond traditional customer service and deliver a unique shopping experience – whether that means a greater variety of products, in-store

“There is a very strong trend in becoming a B2B sales organisation and creating more direct relationships at the school district level” channel and how are dealers performing? JM: It depends who you ask. We have definitely seen a rise in the number of independent retail-oriented businesses closing their doors, but there are just as many members that have found a way to create a unique experience for customers by providing a great space to shop and diversifying their business to appeal to customers outside the main target market. There is a very strong trend in becoming a B2B sales organisation and creating more direct relationships at the school district level. OPI: How did dealers do in the 2014 back-to-school (BTS) season? JM: Back-to-school continues to be where many of our dealers make the majority of their income, but the fourth quarter is important too, with holiday shopping accounting for a solid sales season. Anecdotally, dealers had the best BTS season since the recession of 2008. OPI: Last year, there was talk of Amazon becoming a factor in the education space, even bidding on some contracts if I recall correctly. How much of a threat is Amazon to the traditional education dealer and what can/ should dealers be doing? JM: We all know the pressure independent retailers in every sector are facing from Amazon and other online competitors. The members we see doing best are the ones that are finding unique and clever ways to get the customer to see value in their products and services.

OPI Magazine | March 2015

teacher and parent workshops, expanding the customer base beyond the parent and teacher, or positioning their business as a community resource. OPI: To what extent has there been consolidation in the education channel over the past year or so? JM: We have seen some businesses being bought and sold, but the wider trend has been resellers that have closed retail operations or switched all their business to direct sales, online or catalogue sales. OPI: I saw recently that School Specialty is now offering security training for schools. What is the demand for these types of services, and to what extent is this something that smaller resellers/dealers can get involved in? JM: With the heightened security measures in place in K-12 and college campuses, the demand for

items such as metal detectors, ID badges, security systems, cameras and alarms is increasing. Safety and security are top concerns for new and renovated buildings, and we are seeing more of those products being requested by the school and architect community. OPI: Are there any other niche areas that could be worth pursuing? JM: Areas such as jan/san, security solutions and sustainable products that help support a school or district’s renewable energy initiatives are worth investigating. OPI: How are traditional products holding up in the face of digitisation? JM: Students today are experiencing a whole new way of learning, but despite the influx of technology in the classroom, supplemental materials are still needed to complement all the new digital content. In some cases there is a trend away from the computer screen towards more hands-on learning – this is why the Makerspace movement has so much opportunity. So the opportunity we see is when these digital products are paired with a physical product that students can interact with in a whole new way of ‘blended’ learning. EDmarket has been working with the Education Technology Industry Network of Software & Information Industry Association to encourage collaboration between digital and hands-on products.

Interview | Robert Baldrey

Positive

EVO-lution With integration in full flow, Heike Dieckmann speaks to Robert Baldrey about competitive fears, Truline and, of course, EVO Group’s core competitor

WHEN

the two main OP wholesalers in the UK last summer both became part of much larger multichannel entities – now SPOT and EVO Group – it rang the death knell for the pure wholesaling model in the country. For better or worse was the initial question, particularly for the many independent dealers that were caught in the crossfire. Spicers – the SP in SPOT – dealers especially found themselves in a quagmire, given the long-running service issues they’ve had to put up with, now further exacerbated by a potential conflict of interest with OfficeTeam (the OT bit) which is clearly in the driving seat at the new entity (see Hot Topic, OPI December 2014/January 2015, page 20). The EVO Group too, formally created in October 2014, has been on an ongoing integration path, coupled with the – mostly positive – fallout from Spicers’ problems and the myriad of concerns arising from the dealer community. Several of the wholesale-related questions were addressed at VOW’s recent Green Light event (see ‘Green Light for VOW’, page 42), but OPI took the opportunity to catch up with EVO Group CEO Robert Baldrey to ask some more… OPI: Could you give me a short update on the Supplies Team/ office2office (o2o) integration in terms of management team, name, location, etc. Robert Baldrey: Sure. Former Banner Business Services Managing Director Richard Costin has been named Managing Director of the combined Supplies

OPI Magazine | March 2015

EVO Group | Interview Team Solutions (STS) and Banner businesses as of the beginning of this year. There have been – and there are currently – no plans to change locations. With regards to the name of the combined business, we are currently working with an agency to conduct a thorough review of the brands to arrive at one name for the Banner and STS business. OPI: Like with the Spicers/OfficeTeam merger, there’s been talk of VOW’s larger dealers potentially seeing a conflict of interest with o2o under the same company roof. What dialogue are you having with these dealers? RB: We are not aware of any issues. As you know, the Banner and Supplies Team businesses are very heavily focused on large corporate sector and public sector customers, so we haven’t so far and don’t expect in the future either to engage much in this type of dialogue with our dealer customers. The channel management programme that we’ve had in place for about three years now is also really effective at proactively preventing potential issues arising. OPI: How do you plan to leverage the Truline model across the whole of the EVO Group, and what synergies do you see between the bokz initiative and Truline – will Truline effectively become the last mile solution for bokz? RB: The well-established, value-added service offered by Truline was clearly one of the attractions of the o2o business and an exciting addition to the group’s service portfolio, but there’s more to bokz than just a final mile delivery service. There are limited synergies between Truline and bokz. The programme features a final mile delivery service, yes, but that’s not all. Bokz is designed to improve efficiency, increase sales and, most importantly, help dealers grow. OPI: Under o2o, Truline was made available exclusively for Advantia dealers. What is the situation now and what are your short and medium-term plans with regards to the brand as a whole and extending its services to other dealer groups? RB: Discussions with our dealer groups are of course confidential, so I won’t go into specifics. It is still very early days, but it’s safe to say that we see the potential to bring new services to our supporting

dealer groups and other customers by making best use of the services available across the group. As it does today across the whole of the o2o customer base, we see Truline offering a final mile delivery service across the EVO Group where it makes sense. The ‘Truline Solution’ that Advantia dealers take advantage of is much more comprehensive than this and we certainly have no immediate plans to change this. OPI: There’s a perception in the market that really small dealers don’t matter to the big wholesalers anymore; that credit limits and delivery charges imposed make it difficult to do business with them; that it’s all about VOW+ Partners (and indeed Spicers Brilliant Partners). How would you respond to this criticism? VOW’s National Sales Director Martin Weedall himself said during your recent Green Light event (see also page 42) that the wholesaler is positively discriminating towards VOW+ Partners… RB: It’s not just about size; we are simply committed to supporting those dealers that support us; that give us the vast majority of their wholesale spend and follow our VOW+ programme. And since you mention Green Light – it was there where, for the first time, we opened a VOW event up to non-VOW+ Partners to try and engage with all of our dealer customers, regardless of size. That said, we strongly advise that smaller dealers align themselves to a wholesaler and leverage their relationships, rather than just cherry-pick from within the market on a day-to-day basis depending on price and availability. And if a dealer wants to realise its growth potential at a more accelerated pace, bokz is a good solution. It’s aimed at the £1-£2 million ($1.5-$3 million) dealer and the programme takes away all the back-office complexities and lets smaller dealers focus on nurturing their customer relationships and opportunities.

“We see Truline offering a final mile delivery service across the EVO Group where it makes sense”

OPI: How much have you been able to benefit from the supply issues at Spicers – business won as a direct result of the Spicers problems, number of dealers that swapped to VOW as their first call wholesaler…? RB: We have obviously seen some short-term uplift in our numbers as a result of the supply issues at Spicers. Contrary to popular belief, however, we took no pleasure in watching from the sidelines as Spicers w w w.opi.net | OPI Magazine

Interview | Robert Baldrey struggled to recover their service levels and fill rates, because we believe that, as wholesalers, we share the responsibility of supporting a strong independent dealer channel. I think that the significant market share growth and new business wins VOW enjoyed in 2014 were much more a result of the long-term relationships and recognition of what VOW has to offer over and above the standard services of a wholesaler – with services like PACT and the VOW+ programme – rather than being specifically linked to what Spicers is going through. OPI: But a number of sizeable dealers have moved the majority of their business to VOW last year? RB: Yes, they have. All I can say is that we had an all-time high number of new dealer wins last year and yes, most of these wins came from Spicers. OPI: So how aggressively are you going after Spicers dealers, now that they may see a conflict with OfficeTeam – more so than they would potentially with o2o/ Supplies Team? RB: First up, I would agree that SPOT is competing more directly with the wider Spicers membership because of the nature of their customer base. It would also be fair to say that we are aware of increasing concerns and nervousness surrounding this ‘conflict’. That said, our preference will always be for dealers to choose to work with VOW, based upon our proven credentials and the merits of our compelling suite of marketing and sales support services rather than simply because they do not like the alternative. We believe that the financially underwritten service promises we have just announced at Green Light demonstrate our true commitment to providing a second-to-none wholesale service and in building long-lasting relationships with dealers. OPI: Have there been any capacity issues at VOW last year as a result of the spike in demand? RB: No, we’ve had no capacity issues as a result of extra demand. We have experienced some impact from the rapid changes in demand when there was a lack of availability through Spicers. I think it is also fair to point out that certain vendors struggled to keep up with the increasing demand in 2014, both from our own growth and from the short-term spike in demand coming from Spicers’ problems.

OPI Magazine | March 2015

VOW+ Partners had the chance to ‘Meet the [EVO] Board’ during a session hosted by OPI’s Steve Hilleard at the recent VOW Green Light event. From left: Andrew Gale – CFO; Steve Forde – Group Merchandising Director; John Burkill – Group Logistics Director; Robert Baldrey – CEO; Steve Haworth – Group Sales and Marketing Director; Ian Newton – Group IS Director; Adrian Butler – Managing Director VOW

“Last year we saw it as our role to support all dealers, not just ours. We knew from experience how dark and deep the hole was that Spicers was in” One of the problems was that Spicers wasn’t consistently out of stock on items – it varied from week to week and was unpredictable. Where the vendor was common to both businesses, that was slightly easier to deal with, but where you had a similar product from different vendors, the VOW vendor suddenly saw a huge spike in demand that, on occasions, it struggled to fulfil. And that was understandable because the vendor knew it was a transient situation that was unlikely to be sustainable when Spicers sorted itself out. Like I said, we need two well-run and functioning wholesalers and last year we saw it as our role to support all dealers, not just ours. We knew from experience how dark and deep the hole was that Spicers was in and how hard it is to get out of it again. It was a tricky situation for us because obviously we don’t work together, so it was hard for us to predict how much demand there would be at any given time and react to it. The pure wholesaling model – in OP terms – might be a thing of the past in the UK, but the practice of wholesaling business supplies is alive and well and and we take our responsibilities to our dealers very seriously.

Event Review | Paperworld 2015

Mixed reaction to new Paperworld format What strategy will Messe Frankfurt adopt for 2016? expectations. “It seems there was less traffic. However, the quality of meetings was good and the new concept of Hall 3.1 was appreciated,” he added. Safescan Managing Director Dick van Baarlen also noted lower, but higher quality, traffic in 3.1, and was pleased with the results. “We met a lot of our current distribution partners and came across potential new ones as well, and we are quite happy about the direct results of this latest Paperworld,” he said.

Relevance

ThERE

was quite a bit of interest at this year’s Paperworld trade show in Frankfurt with the debut of a new hall format reserved exclusively for members of German trade association Verband der PBS-Markenindustrie (Paper, Office and Stationery Brands Association) that was branded as Paperworld Plaza. Located in Hall 3.1, Paperworld Plaza is Messe Frankfurt’s solution to meet the needs of the members of the OP brand manufacturers’ association that want to exhibit at the trade show every two years. And while not all of its members are German – exhibitors included vendors such as Acme, Exacompta Clairefontaine, Jalema and Safescan – the vast majority of the 26 firms that were present in Hall 3.1 (out of a total of 47 members) were from Germany, and visitors and other exhibitors that OPI spoke to generally referred to 3.1 – somewhat resentfully – as “the German hall”. The hall was nicely laid out, it has to be said, with wide aisles, large booths and a spacious and

OPI Magazine | March 2015

comfortable central area reserved for Plaza Academy presentations and a visitor lounge. It was a pleasant – almost relaxing – place to be, in contrast to downstairs in Hall 3.0 where it felt a bit like a hotchpotch of vendors from different product groups had been thrown together in the same place. Falk Butterwegge, Head of Office Supply, Stationery & Online International Sales Consumer & Craftsmen at vendor tesa (a 3.1 exhibitor), said that this year’s Paperworld was in line with

However, van Baarlen raised some concerns about the relevance of Paperworld to the office/business supply reseller sector. “The office products industry is clearly changing, from office products to products for the office,” he stated. “You see this at other trade events such as distributor and buying group shows, where a wider range of vendors, in facilities management for instance, are present. But this is still not happening at Paperworld where it’s only office products. I therefore doubt if the Paperworld concept in its current format will be sustainable.” Vendors in Hall 3.0 that OPI spoke to were also generally pleased with

Amazon targets German dealers Local office supplies dealers in Germany can increase sales by conducting business on Amazon’s Marketplace platform. That was the message from the global e-tailer as it exhibited at Paperworld for the first time. Some of the information given during a presentation certainly gave food for thought: sales of office supplies and stationery on Amazon Germany have grown by 70% in the past three years to about H1.1 billion ($1.24 billion); the site attracts 32 million unique visitors a month; almost 80% of all product searches (overall, not just in the office supplies category) start on Amazon; and the Marketplace platform in Germany handled about one billion orders in 2013.

Paperworld 2015 | Event Review their participation at this year’s Paperworld. HSM is a member of the aforementioned trade association, but chose not to exhibit in Hall 3.1 and keep its traditional spot in 3.0. “From our perspective it was a good and productive show as we were able to connect with many of our partners from around the world; we were pleasantly surprised with the strong participation from both the Asian and South American markets,” Bob Ouellette, Head of Sales, Office Technology at HSM, told OPI.

Global focus On the Paperworld Plaza concept, Ouellette added: “We think the concept is an interesting one to highlight the German-specific brands; however, we felt that we wanted to be recognised as a global company and therefore chose to remain in Hall 3.0. As for it impacting traffic, we did not see any decrease in overall traffic as a result of the change. Our initial review indicates that we actually saw an increase in traffic versus last year’s show.” HK Wentworth Group Marketing Manager Karen Harrison felt that Paperworld was the right launch pad for the new AF Sprayduster Zero product. She said that visitors were more “savvy” in the way they booked appointments in advance, but questioned the effectiveness of Paperworld Plaza. “I think people understand that the organisers don’t want to miss out on large German industry players

OP leaders turn out for Plaza Academy Leaders from the European OP industry took part in a series of interesting presentations as part of the Plaza Academy on the third day of Paperworld. Office Depot Europe’s VP Merchandising & Procurement Olaf de Boer underlined the importance of vendors and resellers working together to focus on the needs of the customer. He maintained that by doing so, growth could still be achieved in categories that are in secular decline. EVO Group CEO Robert Baldrey, Euroffice CEO Simon Drakeford and Jalema Sales & Marketing Director Frank Demarteau (pictured below with OPI CEO Steve Hilleard) then took part in a panel discussion on the topic of change in the OP industry. Some key takeaways included the continued need to take cost out of the channel, to question existing models, and to make the most of opportunities in adjacent product categories. ADVEO CEO Millán Álvarez Miranda ended the day with a keynote speech. He provided data from new market research carried out by ADVEO which revealed that employees are still very much attached to their place of work and to the office supplies they use – in fact, high quality supplies are considered something of a perk and make employees feel valued. Of course, Álvarez Miranda is only too aware of the impact of digitisation and the challenges facing the market, but he still believes that ADVEO’s fundamental business model will not change. “In 2020, our business will be similar – we will just be selling different products,” he told the Paperworld Plaza audience. COLOP, the new hall set-up had no impact. “People and organisations that wanted to get in contact with COLOP at Paperworld came as usual,” he said. Grupo Portucel Soporcel Brand Manager Ricardo Ferreira thought this year’s Paperworld was busier than in 2014, with more foot traffic and more general visitors. “The hall where the paper makers were

“I […] doubt if the Paperworld concept in its current format will be sustainable” exhibiting at the show, and how putting them in one hall helps them plan as they only want to attend every two years,” she commented. “But it begs the question if this is an international show, or a German and international show. Maybe the show should be every two years, and it would be interesting to see a poll from both exhibitors and visitors on this subject.” (For more on AF’s Sprayduster Zero launch, look out for a video of Harrison on opi.net.) For Franz Ratzenberger, Head of International Sales & Marketing at

included clearly attracted more attention and that translated into a higher number of people coming to the exhibitor stands,” he told OPI. “In our case, it was also a prime opportunity to have in-depth discussions with some of our key partners, not only from Europe but also from other regions of the world.” Official visitor figures from Messe Frankfurt show that attendance at Paperworld 2015 was almost identical to last year – 42,152 this year versus 42,145 in 2014 – while visitors came from 148 countries in 2015,

compared with 138 a year ago. No doubt those numbers will be used to underscore the success of this year’s event and the new Plaza concept.

Course of action However, what will happen next year? The Plaza arrangement with the German trade association is for every two years and, given the size of the 3.1 booths, the absence of these exhibitors would surely leave a big hole in Paperworld’s budget for next year. Messe Frankfurt’s VP of Consumer Goods & Entertainment Cordelia von Gymnich told OPI that meetings would take place shortly after Paperworld to determine the course of action for 2016, but surely a longer-term and more viable solution for the OP category is to have a separately-branded hall (‘Workworld’, for example) that meets the needs of the expanding product and service portfolio of the modern business products reseller. The next Paperworld in Frankfurt will be held from 30 January to 2 February 2016.

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Event Review | BETT 2015 Anyone keen to witness the huge range of developments in education technology was at the London ExCeL in January for the BETT 2015 show

THE

A great BETT BETT

BETT show (BETT standing for British Educational Training and Technology) is the largest exhibition of its kind in the world. Now in its 31st year, the event took place at the ExCeL Exhibition Centre in London, UK, from 21-24 January. Over four days, the movers and shakers in education mingled with manufacturers, politicians, educational gurus, students and teachers to get hands-on with the latest learning technologies available. The 2015 event drew a record-breaking crowd with visitor numbers up 6% from last year. Exhibitors – over 600 in total – ranged from tiny app and software developers to global giants such as Samsung and Fujitsu, and covered every age group, from early years through primary and secondary schools and onto higher education. There was also a big focus on special educational needs.

Interaction Several enormous halls full of exhibitors enabled visitors to get up close with the products available and try them out first-hand. Event Director Debbie French felt that getting in touch with your inner child was key: “There’s a real element of interaction going on. Leaving your adult shoes by the edge of the stands and having a go gives you a great idea of the potential it all has,” she said. A full agenda of speakers in the so-called BETT Arena also kept visitors informed and entertained. Notable among them was Jimmy Wales, founder of Wikipedia. He was

OPI Magazine | March 2015

Sir Bob Geldof

impressed by BETT’s sheer scale and said: “It’s freakin’ massive. The number of people here is enormous, it’s a really important show.” Other guest speakers included musician and political activist Sir Bob Geldof, David Hoare, Chairman of OFSTED, and the Right Honourable Nicky Morgan, UK Secretary of State for Education. The four exhibition days were interlaced with a host of seminars on topics including ‘The role of social media in higher education: good or bad?’ and ‘Utilising and integrating mobile technology to improve teaching and learning’, reflecting the fast pace of change and the increasing role played by technology in the classroom. A straw poll of visitors showed that they appreciated the ability to cover so much ground in a short space of time. Matthew Byatt, Partner at business sales specialist Acuity Advisors, remarked: “Having all of these stands under one roof just makes it so convenient to see the whole breadth of technology available and to be able to compare and contrast.” Geoffrey Diggles, Director of IT Systems at a secondary school in the north of England, found the show

inspiring and commented: “If you want to enhance what you’re doing then it’s really important to make the effort to come to events like this, otherwise you’re just going to stay doing the same thing with the same technology.” Exhibitors also found the event worthwhile, saying that they not only got to talk directly to customers, but additionally networked with other manufacturers and learnt what other educational technology is available. Others relished the opportunity to get their name ‘out there’ and the chance to access the international market – visitors arrived from 127 countries, up from 112 last year.

Better learning Professor Stephen Heppell, CEO of Heppel.net and an online education expert, summed up the BETT experience: “Each year BETT used to show a steady evolution, but now the pace is such that each year feels like a decade! That has made it way more important than just a trade show and way more exciting, too. Everybody is building their own recipes, but this is where you come to get the ingredients for good learning. And they don’t just deliver better learning, they deliver astonishing learning. If you want people to be astonished by your kids, come here first.” The 2015 show concluded with a bang on the final day, with the high-octane ‘explosions-based computing show’ combining an unusual but heady mix of computer coding and loud pyrotechnics! BETT 2016 will be held at the ExCel again, from 27-30 January 2016.

Event Review | VOW Green Light

Green light

for VOW

VOW’s inaugural Green Light event was pronounced a resounding success

VOW’S

annual conference, held at the Hilton Metropole in Birmingham, UK, on 23 January under the overall ‘Get Switched On’ umbrella theme, was a different affair to the wholesaler’s usual event set-up. The core difference was that it was broadened out to the reseller community at large for the first time, rather than just involve its VOW+ Partner customers. And with 80 exhibitors and 400 dealer delegates in attendance, it was the biggest VOW event ever held. Opening it up to a wider base was a smart and timely decision, given parent Vasanta’s recent merger with office2office, the formation of the EVO Group and the many questions that these activities have thrown into the ring. It also allowed smaller dealers to learn more about programmes such as bokz in workshops that ran throughout the afternoon alongside the exhibition. VOW Managing Director Adrian Butler in his opening address gave a short run-down of why the merger made sense, but largely concentrated on the wholesale part of the business. In a recap of 2014, he referred to the need for good communication, something that wasn’t always achieved last year and which has to be improved on. He also mentioned service as being an area that came in below expectations,

OPI Magazine | March 2015

referring specifically to fill rates and lines picked. The key priorities for this year, Butler added, were “being a wholesaler, category development and reseller support”. That said, in financial terms, VOW had a good year, with VOW sales

entertaining football analogy-ridden keynote speech, VOW+ Partners further had the chance to air their questions in the ‘Meet the Board’ afternoon session hosted by OPI’s CEO Steve Hilleard. And about 100 partner principles did so in a cordial and constructive discussion with plenty of questions from the floor being met with comprehensive responses from the seven EVO Group board members in attendance. The afternoon, which comprised a mix of workshops and seminars as well as the well-attended exhibition, concluded with a presentation by EVO Group Sales & Marketing Director Steve Haworth, who discussed the key market dynamics faced by the OP industry today. With daytime proceedings completed, the evening entertainment kicked off with pre-dinner drinks

The key priorities for this year [are] “being a wholesaler, category development and reseller support” up 6% and those of VOW+ Partners up 15%. Plenty of growth came from categories such as furniture (15.9%) and facility supplies (11.9%), offsetting decreases in EOS, paper and traditional OP.

Positive discrimination One of the key takeaways of the day was VOW’s support of its VOW+ Partners. National Sales Director Martin Weedall, preceding and following Butler on stage, said he and his team would “positively discriminate towards VOW+ Partners” and referred to its ‘Partner Promises’ that would see VOW+ Partners reap financial benefits in the areas of fill rates and pick rates if service drops below a certain level. He also guaranteed price stability for select lines – all with immediate effect. After Baroness Karren Brady successfully managed the difficult task of amusing the audience as well as provoking thought in a very

followed by the Gala Dinner and the VOW+ Partner awards ceremony, hosted by Welsh comedy actor and funny man Rob Brydon. The winners of the awards were as follows: • VOW+ Partners of the Year: ACS Business Supplies, Professional Office Supplies and Braley Business Systems • Facilities Supplies Reseller of the Year: Commercial • EOS Reseller of the Year: ACS Business Supplies • Furniture Reseller of the Year: Complete Office Solutions • VOW Partner of the Year – Ireland: Codex Office Solutions This concluded a day packed full of information, education and networking. Whether all the questions have been answered is perhaps debatable, but the overall atmosphere was positive and buoyant. When OPI spoke to EVO Group CEO Robert Baldrey, he was keen to make Green Light a two-day event, eventually hosting the annual BOSS Awards in the same setting – a tempting combination for the industry as a whole. For an in-depth chat with Baldrey about the EVO Group, see ‘Positive EVO-lution’ on page 34.

Category Analysis | Education

The education sector is huge – from nursery to university, it represents an enormous market of diverse needs and opportunities. But the OP industry must be nimble if it is to gain maximum advantage

by David Holes

“POTENTIAL”

was a word heard repeatedly when OPI spoke to the key players supplying the education sector. This global behemoth of an industry promises perennial rewards, but realising its potential and gaining a foothold in a tightly-regulated market presents considerable challenges, particularly for smaller operators. But those that have managed to find an inroad are experiencing strong growth, especially with an increasing number of students now entering the education system.

OPI Magazine | March 2015

As David Garrod, Channel Marketing Manager at Henkel in the UK, remarks: “Population growth [in the UK] means the amount of pupils is increasing [see population chart, right], particularly in primary schools. This is set to continue for the next few years and is providing growth opportunities in many areas. New, larger buildings and classrooms are going up which, in turn, means larger orders for furniture, technology and traditional stationery. Quite simply, the more pupils there are in schools, the more Pritt Sticks, for example, they will need to adequately provide for those pupils.” This is, of course, an ongoing opportunity if suppliers are light-footed enough to ride the wave as it rolls through the different

educational tiers. Garrod explains: “The growth now may be in primary schools, but six years down the line those children will be moving into secondary schools, presenting future growth opportunities there as well.” It’s a similar situation in the US as Neil Ringel, EVP of Staples Advantage’s B2B division, points out: “Education enrolment continues to grow and educational establishments need to brace themselves to accommodate more students and teachers. As such, procurement officials need to evaluate and finalise budgets and start planning.”

Growth sector Feedback received from across the globe is positive in all parts of the education supply chain. Dealer groups in particular report encouraging progress from their members. Chris Brown, Operations Manager at Australian dealer group Office Brands, says: “Education is one of our largest growth sectors and we certainly don’t see it as anything like mature yet. As a group, around 10% of our members participate in the education category and those that are serious about this market are experiencing growth across most areas.”

Education | Category Analysis US dealer group Independent Stationers (IS), meanwhile, is the holder of the US Communities School Supply Contract (see 'Procurement processes', page 46). The group’s VP National Accounts Kevin France is equally bullish about the prospects: “IS is poised for a good year. Dealing in the education market is different, not difficult. Business of any kind is about relationships and those have to be developed and nurtured before they bear fruit.”

Differentiate Multichannel Canadian operator and dealer group Novexco is also positive. CEO Robert de Montigny says: “The education category represents the most important retail category for the majority of our members and what differentiates them from the competition is the personalised service they offer. The school bag category represents our best performer in this market.” Tim Beaumont, Managing Director of dealer group NEMO across the Atlantic in the UK, points to service as the real differentiating factor. He says: “We believe there is a real opportunity in the education sector for our members and we can blow the traditional suppliers out of the water with our levels of customer service.” For many manufacturers too, education is becoming ever more

important. Says Beth Wright, Chief Commercial Officer of Visual Communications Products at Bi-Silque: “Our viscom products are used daily in the school environment and our resellers have refocused and invested significant amounts in this area. We are supporting them with targeted marketing, specialist training and new products developed for specific uses in the K-12 and higher education markets.”

“Dealing in the education market is different, not difficult” Even those not currently major players in this category are alive to the possibilities it represents and keen to climb on board. Tombow is a prime example for this, as Greg DiLaura, Director of Sales – North America, points out: “The education sector is not a big part of our business to date, but we have identified it as a strategic initiative for our sales team in 2015. Our product focus is more in the art world, so the trend that interests us is a general return to art education in schools.” But competing in the education arena can be far from easy as significant barriers and challenges are thrown up, particularly to new entrants.

Population Growth 2005-2014 ■ USA ■ UK ■ EUROZONE ■ AUSTRALIA

(%)

NEMO’s Beaumont strikes a cautionary note: “There are some serious pitfalls in this sector. You need to have a great understanding of the education world, its culture and buying patterns. You need marketing tools that speak its language and obviously have the products it wants to buy. The traditional education suppliers are often great monoliths that do not adapt to change and they can be

arrogant in their approach. We’ve found that people in education like to buy from local companies if possible and often the buyers live in the local community.” Staples’ Ringel backs this up, highlighting a lack of cash as a major hurdle: “Challenges in the education space are universal – from tight budgets to decentralised procurement processes, universities and schools are more conscious than ever about minimising spend. However, this can be a great opportunity to show value to customers by doing more with less.” Positioning yourself as a specialist is one way of addressing the challenges. Says de Montigny: “The biggest challenge is to differentiate ourselves from the competition, mainly the big boxes. To do so, we not only carry a wide range of products, but also a selection of specialised merchandise. We also make sure that we always offer a range that meets the industry’s latest fashion trends. In 2015 we are developing the right marketing tools to rise above the competition and be recognised as an education specialist.” Investing time and energy in the category and looking beyond immediate returns is vital, stresses Office Brands' Brown: “Education offers huge potential for independents, but they must understand that this is very much a relationship sell as it touches a lot of individual purchasing people. Building these relationships, going back week after week, maybe for months, may be necessary before

Source: Trading Economics

w w w.opi.net | OPI Magazine

Category Analysis | Education you see the first dollar. Change is uncomfortable to most people, so it’s natural to try and avoid it. That barrier is ever present in the education market.”

Technology trends Without doubt it’s the tremendous technological rate of change that everyone OPI spoke to mentioned as the key trend in this sector. Interactive whiteboards and flat panel screens, tablets, laptops and Chromebooks are all now increasingly part of the education scene. It represents both challenge and opportunity to many. The traditional writing instrument manufacturers have seen this technological shift hit sales. As Ken Newman, Director of Marketing at Zebra Pen, acknowledges: “For Zebra Pen, children’s migration from pen and paper to a keypad and computer screen is of great concern – the art and teaching of writing is being impacted by advancements in technology. Schools don’t instruct kids on cursive writing [anymore] and in college most students takes their notes on a laptop. Despite those challenges we believe that we have developed some products like the StylusPen – a pen on one end and a stylus nib on the other – that will succeed.” Henkel has adopted a slightly different approach, as Garrod explains: “The increasing use of technology challenges the amount of crafting done in schools. In response to this Henkel developed a strategy that complements technological advances rather than competes with them. We have a big focus on increasing the amount of arts and crafts teachers do with their classes and on the Pritt website we’ve created a range of activities for teachers that make it easier to integrate arts and crafts into their lesson plans.” Manufacturers of technology products are obviously pleased with the way the market is trending. Ronan Clarke, Joint Managing Director of Smarter Surfaces, the manufacturer of

Procurement processes The way educational establishments procure their products can represent a real minefield. Resellers can find themselves picking their way through a maze of national and local authorities, while negotiating a morass of ever-changing red tape. Chris Brown, Operations Manager at Office Brands outlines how this can vary in Australia depending on the type of school you are dealing with: “One of the biggest challenges in the education market is that state schools fall under government contracts which are constantly awarded to the large multinationals. As a group we support our members going for state or national tenders, but each time they find they lose out to these large organisations. Most state schools are locked into this system unless they are able to demonstrate savings or added value, and for most schools this extra effort required by overworked staff means this falls into the ‘too hard basket’. “However, private schools are different in that they have a business manager who is looking for savings and the added value our members offer. As such, we have a large number of private schools serviced by our members right across Australia.” Jan van der Velde, Marcom Manager at Legamaster, also remarks on the need for a flexible country-by-country approach: “We deal with many different countries and the way we conduct our business depends on the practices and realities that exist locally. In some markets procurement is completely centralised and controlled by the government, but in others – like the Netherlands – schools get annual budgets that they can decide how to spend themselves.” In Canada, a similar problem exists, based not on the type of school, but on varying practices between different Canadian provinces. Says Novexco's CEO Robert de Montigny: “In Ontario our members have to go through public tenders in order to do business with educational establishments. But in Quebec the situation is different and members deal directly with each and every school to get their business. As such, our members tend to be part of the local community and may be represented at school board level.” Independent Stationers’ (IS) US Communities School Supply Contract enables it to provide school supplies and teaching aids to the 55,000+ participants throughout the US. It’s estimated that this agreement generates purchases of $50 million annually for the dealers in the IS network. Despite the strength this gives the dealer group, VP National Accounts Kevin France explains that it still has to flex the way its members pursue contracts: “The challenges any supplier or vendor faces is that the school decision-making process can be either centrally or site-based. Specifically, this means that multiple vendors can be servicing a single site, leading to fragmentation and a lack of consistency for the end-user experience. Sadly there is no ‘one size fits all’. I wish it were that easy. Old-fashioned bids are still solicited despite the approval nationwide of cooperative contracts.” Kevin France Smart Wall Paint in the UK, believes the education sector is in major transition, with digital education leaders bringing about huge change. He reports: “Online networks like TeachMeet are giving teachers the outlet to share ideas and best practice and, notably, educational thought leaders are very active on social media. A recent study by the Economist Intelligence Unit reported that 90% of education leaders believe that technology has made them more imaginative and creative at work, with 80% saying it had also made them

“Change is uncomfortable to most people, so it's natural to try and avoid it. That barrier is ever present in the education market”

OPI Magazine | March 2015

more productive. It’s likely that technology-enabled learning will see the role of teachers and lecturers in the classroom changing rather than disappearing.” Bi-Silque’s Wright sees the use of interactive boards, tables and projectors as continuing to grow, creating increased collaboration in the classroom: “We are at the forefront of this trend and continue to invest in developing products that fit educators’ needs and support growth for our resellers. "However, interactive visual communications products need to be simpler and also have a use in a traditional way. For example, our latest product can be used as an interactive board and projection screen or double as a dry-erase

Education | Category Analysis up massive revenue opportunities for suppliers. Huge markets exist for distance and vocational learning, for example language lessons, which could be penetrated by digital solutions.” National Curriculum changes, including the requirement for pupils to learn to write code, has made technology Bi-Silque's viscom products combine interactive and traditional learning access for students more important than ever. Gilly Blackburn, Head of Technology at UK wholesaler VOW, says: “Tablets are being introduced in ever increasing numbers and with that comes the need to support schools and colleges on security and access issues. The Lapcabby range was developed in consultation with teachers and provides a safe way to keep multiple tablets charged, synced and in one secure place.” 3D printing has also been added to board, giving users the best of all the National Curriculum and is now worlds,” she adds. a big seller, adds Blackburn: “Brands Alongside the trend for having such as St3di, Ultimakr, Makerbot and central classroom-interactive solutions, the use of mobile devices is also starting to pick up, according to Jan van der Velde, Marcom Manager at manufacturer Legamaster in the Netherlands: “Early adopters like the UK and the Netherlands have already started using tablets Verbatim all offer relevant options to and smartphones in the classroom. the education market, but it’s the 3D Our completely new education print consumables that are going to solution Tango Teach offers the ideal be the major growth opportunity for combination for using such devices resellers in this arena, rather than the in a teacher and student-friendly printers themselves. environment and adds value to their “The key technology growth use in the classroom. areas include interactive boards. "Suppliers offering the best We've introduced the Cleverboard combination of hardware, software to the VOW catalogue this year, a and content are likely to be the product that incorporates the latest winners in the future digital touchscreen technology into the landscape,” he says. screen, enabling it to be dual or multi-touch. Blurred lines "Smaller spend items such as And as education goes digital and document cameras are also becoming becomes accessible on any platform, increasingly popular for projecting the line between home learning and individual work onto classroom walls school learning is blurring, he adds: or boards, with the Ipevo range of “The ability to access education educational document cameras one content on any platform also opens good example.”

Even manufacturers of lower tech solutions are optimistic about the education market. Mike Fogarty, CEO of Wizard Wall, sees its main obstacle as being relatively unknown: “Wizard Wall, a portable dry-erase surface, defies categorisation and our biggest challenge is to get someone to use it for the first time. With the saturation of electronic products, we are seeing some push back and low-tech solutions like ours are being well received throughout all levels of education because of ease of use and low initial costs.”

Ahead of the game Despite the global onward march of technology, there are significant differences between countries when it comes to adopting new teaching methodologies and technological solutions in the education sector. Most people OPI spoke to say that the UK, Australia and the Netherlands are leading the field, with the US and others somewhat behind curve. Bi-Silque’s Wright sees this as a chance to expand its reach: “For interactive products the UK has outpaced all others. The US lags behind significantly so there is

“It's the 3D print consumables that are going to be the major growth opportunity for resellers [...] rather than the printers themselves” certainly further opportunity for us in North America. Emerging markets such as Brazil and other South American countries are also very focused on the adoption of technology which means there are lots of other potential areas of growth throughout the world.” But even within the US, technology adoption often varies, with some states more advanced than others. Kris Dixon, VP Business Development at MooreCo, says that even within an individual state the localised nature of funding means that facilities can vary between different school districts presenting “widespread and unpredictable opportunities”. Huge potential in a fast-changing market – that sums up the state of the education market for the OP space. w w w.opi.net | OPI Magazine

Your OPI

5 minutes with... Tom Ashburn, Membership Development Representative, Independent Stationers

Describe what you do in less than 20 words. I help grow our dealer group by adding more members, explaining the value of membership and helping facilitate implementation of the programmes and services we offer.

“There are a lot of places that need help”

The first record you bought. Foreigner 4 on vinyl.

Your first full-time job. I worked as an account rep in a behavioural health hospital right out of college.

What business book would you recommend as essential reading? I think my all-time favourite is Stephen Covey’s 7 Habits of Highly Effective People. It’s a must-read and applies to all facets of life.

The worst job you’ve ever had. In high school I worked one summer as a roofer where I learnt to appreciate hard work and overcame a fear of heights.

If you could change one thing about yourself, what would it be? I’d be more giving of my time and helpful to different local charities because there are a lot of places that need help.

If you weren’t doing your present job, what job would you like to be doing? I’d like to be a coach – football or golf – because I like working with young kids and have a passion for competition and playing sports.

If you could invite two famous people for dinner, who would they be and why would you invite them? Vince Lombardi for his leadership, ethics and values, and President Ronald Reagan.

The worst moment in your career. When I had just started out, I missed a flight to an important event. Later at dinner, I was scolded in front of our staff – I was so embarrassed.

Have you got a claim to fame? I once gave my four-month-old chocolate labrador puppy mouth-to-mouth resuscitation after he ‘drowned’ in our pond; he lived to be 14 years old and turned out to be very obedient and loyal.

Your biggest achievement. When we launched the RDC programme, I encouraged one of the larger dealers in the industry to not only leave its existing group and join us, but also to embrace the new model and change, and I helped them with the implementation. They’re still members today! What do you think will be the biggest single issue affecting the OP industry over the next five years? Clearly the internet has evolved and will continue to be a major part in dealers’ businesses, but I think content and data will become a more major factor, allowing dealers to expand their offering to their customers. What do you like best about the OP industry? I like the relationships you build; my favourite is when I see a new member who recently joined and who thanks me for getting them set up because of the positive impact that group has provided to the business... Told ya so!

If you had one day to live, what would you do? I’d cash in all my investments and go around to everyone I love and just give them money and a hug.

Have you ever done anything dangerous or daring? I bungee-jumped off a bridge three football fields high with a dog leash wrapped around my ankles in Queenstown, New Zealand. Very scary and I wouldn’t do it again!

What sports team do you support? Indianapolis Colts. I remember the day the Mayflower trucks were heading to Indy from Baltimore in 1984 and how excited it made everyone. www.opi.net | OPI Magazine

Your OPI

Final word Your industry, your opinions Brad Summersell, EVP, Educators Resource

The school market is underserved and ripe…

WHEN

I was asked by OPI to write a piece about the school market and what our supplemental educational product category has done for the OP channel, two words came to mind immediately: underserved and ripe. It’s underserved because there are far fewer independent dealers servicing the full assortment of school categories than there were just a few years ago. Along with this lack of attention, it’s ripe because educational spending is projected to increase substantially through 2022. (See also ‘School of thought’, page 44) The US school market industry has seen over 500 local bricks-and-mortar teacher stores close their doors over the past seven years. Why? A large percentage of those businesses were built on half of the overall spending on school materials from out-of-pocket teacher spending ($500-$750 per teacher). Some of that contracted due to economic conditions and more continues to shift towards online ordering solutions. The other half, which is generated through discretionary school spending at the building level, is not enough to sustain the investments in inventory and space after multiple years of decreasing sales at the cash register.

What does all this mean? New schools, new classrooms, millions of new teachers and fewer competitors equal more opportunities for independent dealers to grow in the school market. Only a small percentage of independent OP dealers have fully engaged and allocated resources to service their local schools. Our independent OP dealers grew 55% with us in 2014 over 2013, the largest of any of our customer groups.

One-source solution Those dealers and others are beginning to pick up more school business by allocating the required resources to an underserved market. Many independents already have district relationships and service schools with the product solutions at their disposal. But it’s not enough to break through. Why? Because school buyers want a one-source solution which requires the thousands of supplemental teacher aids beyond the disposable commodity products. Paper, ink/toner, jan/san, breakroom and business products are simply not enough in the eyes of a school buyer. The successful independent must also have a patient long-term view for developing their school market business. It’s highly seasonal and requires more than just one contact per building; it requires higher catalogue saturation than OP, and trust must be earned over time before school buyers switch their primary source. Thus, the rep compensation plan needs to be in line with the uniqueness of the school market. However, the sales cycle needs to be year round, as your approach cannot be built around instant gratification. Being able to provide the breadth of supplemental teacher aids is a springboard which opens the door for independents to reach the full spectrum of the market. So ask yourself: why am I not fully engaged in a growing market with fewer competitors when I’m already sending my sales rep into the building?

“Paper, ink/toner, jan/san, breakroom and business products are simply not enough in the eyes of a school buyer”

The good news The market is still there. Education spending is projected to grow and customer service from the local dealer is still highly valued by school buyers. Schools haven’t suddenly stopped using basic and supplemental school supplies. Yes, some technology has replaced, or is in the process of replacing, textbooks and supplemental books, but the more than $13 billion industry is set for additional spending. The 2014 report by the National Center for Education Statistics (NCES) projects the following trends nationally: • Current expenditure is projected to increase 27% up to $699 billion from 2009-2010 to 2022-2023. • Current expenditure is projected to increase 18% up to $13,900 per pupil from 2009-2010 to 2022-2023. • Total elementary and secondary enrolment is set to increase 6% between 2011-2022. • The total number of elementary and secondary teachers will increase 13% between 2011-2022. • Pupil/teacher ratio is set to decrease from 15.5 in 2011 to 14.7 in 2022.

OPI Magazine | March 2015

Want the Final word? Email editorial@opi.net

IN THE NEXT ISSUE • Big Interview with Eurofﬁce’s Simon Drakeford • Reseller consolidation – where will it end? • Who won this year’s EOPA? Find out who and why...

Office Products International ISSUE NO.2 4 7

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Big Interview Sid Lerman, CEO, Weeks Lerman p18 March 2015

MARCH 2015

And then there was one p10

Staples and Depot in mega merger

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The effect of oil prices p30 Interview with EDmarket CEO on OP â&#x20AC;&#x201C; is there one? p22 p44 The potential of education