Opi 269 may 2017 a by OPI

BIG INTERVIEW

Connecting the

business products world

Trevor Girnun Waltons May 2017

INSIDE THIS ISSUE l UK industry reacts to Amazon Business l Essendant’s new contract strategy l The future of

dealer groups l What’s new in facilities supplies? l Coffee consumables under the microscope

Special Issue

FACILITIES SUPPLIES Special Issue

CONTENTS 16 Big Interview Keeping it simple is Trevor Girnun’s motto at South African reseller Waltons 24 Hot Topic Are dealer groups holding up their end of the bargain in the supply chain? 36 Spotlight It’s a time of upheaval in Australasia right now 39 How to... The dos and don’ts of social selling 42 Event The Active Working Summit highlights the importance of healthy workplaces 45 Research This year’s State of the Industry Report presents a mixed bag of findings 48 Research What’s the appeal of Amazon Business? Piranha Business provides answers

Big Interview: Trevor Girnun, Waltons

It’s all change again at South African reseller Waltons. Just under a year into the top job, Managing Director Trevor Girnun has been spearheading a restructuring process that is all about simplification and decentralisation. Straightforward strategies and staff who are connected to the business are key to the firm’s success, says Girnun Special Issue

FACILITIES HOT TOPIC: THE FUTURE OF DEALER GROUPS SUPPLIES

FACILITIES SUPPLIES 28 Category Update The facilities supplies sector in the spotlight

Special Issue

FACILITIES SUPPLIES

32 Breakroom Environmental concerns are at the forefront of the coffee business at the moment

REGULARS

Special Issue

5 Comment 6 News

VENDOR SPECIAL

50 Generation Game Alliance Data

Special Issue

52 5 minutes with... Josh Allsopp

Special Issue

VENDOR SPECIAL

54 Final Word Kelly Perez

May 2017

While an air of optimism prevails, there is the acknowledgement that dealer groups need to up their game to keep pace with the rapid transformation of the industry and all it entails. Naturally, the dealer groups themselves for the most part said they were keeping up with the ever-changing OP landscape, with much emphasis resting on the introduction and implementation of new technology.

Special Issue

COMMENT The OPI team EDITORIAL Editor Heike Dieckmann +44 (0)20 7841 2950 heike.dieckmann@opi.net Deputy Editor Michelle Sturman +44 (0)20 7841 2942 michelle.sturman@opi.net Reporter Joshua Allsopp +44 (0)20 7841 2952 joshua.allsopp@opi.net OPI Special Correspondent Andy Braithwaite andy.braithwaite@opi.net Freelance Contributors David Holes david.holes@opi.net

SALES & 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 Marketing Manager Aurora Enghis +44 (0)20 7841 2959 aurora.enghis@opi.net

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

PRODUCTION & FINANCE Studio Joel Mitchell +44 (0)20 7841 2943 joel.mitchell@opi.net Operations & Production Eda Sismanoglu +44 (0)20 7841 2950 eda@opi.net Finance Kelly Hilleard +44 (0)20 7841 2956 kelly.hilleard@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

State of flux

his issue of OPI has the southern hemisphere at its very heart. Flick through the pages and you’ll find a whole host of articles and topics that are dedicated to this part of the world. Why not get started with this month’s Big Interview with Trevor Girnun (see page 16) and find out more about mighty reseller Waltons in South Africa going through yet another major restructuring – or simplification – process? Moving across the Indian Ocean, Australia (and to some extent New Zealand) is the place to be at the moment in terms of sheer action in our sector, with the country’s three main resellers all in a state of limbo (see page 36) and the threat of Amazon looming large. As we know only too well from the failed Staples/Office Depot merger, a deal in theory is certainly not a done deal in practice. What is perhaps more predictable is that any transaction in progress will be disruptive and, even if just temporary, good news for the country’s independent dealers.

Australia is the place to be at the moment in terms of sheer action in our sector On the topic of dealers, following the Office Power’s recent research findings on the future of dealer groups – which clearly rattled a few cages judging by the feedback we’ve had – we are taking a broader look at the role of dealer groups and their potential future (see page 24). As is so often the case, it’s a mixed bag of opportunities versus challenges. The same conundrum exists in another context – the facilities supplies sector, our special category focus in this issue. A proportion of this sector is very well established already for the business supplies sector – most notably the coffee and breakroom segment (see pages 28 and 54) – but there is still plenty of untapped potential out there too. And challenges. Talking of coffee, the UK market in particular has very recently seen a stream of – mostly negative – headlines about the environmental concerns around disposable coffee cups. Find out more about the issues and if/how they’re being addressed (page 32). Last but very much not least, let me introduce you to and officially welcome Joshua Allsopp to the OPI editorial team. Josh has proved to be a very quick learner of all things OP and is fast becoming our resident newshound (email him at joshua.allsopp@ opi.net). For a glimpse into Josh’s life, see this month’s 5 minutes with… (page 52). HEIKE DIECKMANN, EDITOR Have a great month!

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business products world

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. OPI is printed in the UK by

May 2017

Connecting the

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

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NEWS

Analysis: Essendant adopts new contract strategy

www.opi.net

The wholesaler has raised a few eyebrows in the US by bidding directly on large contracts

US wholesaler Essendant is on a potential collision course with the country’s independent dealer channel (IDC) after adopting a strategy of bidding directly for national contract business. Being involved in the contracts business is nothing new for Essendant: it has long supported dealers via what is now called its Vertical Markets Group, and it was a major partner of dealer group Independent Stationers (IS) when it won the US Communities cooperative contract in 2010. However, AOPD Executive Director Mark Leazer believes that recent changes at Essendant are a “paradigm shift”, now that the wholesaler is bidding on contracts under its own name as opposed to just providing bid, pricing and infrastructure support. Essendant bid on the recent US Communities contract that went to Amazon Business, but of more concern to Leazer is the outcome of the bid process for the major Premier group purchasing organisation (GPO) healthcare contract that is nearing its conclusion. Leazer admits that this type of “challenge” from Essendant puts AOPD and the wholesaler in a different relationship, although he is quick to point out that Essendant remains a strong business partner and supplier to AOPD dealers. This is also a topic of interest for TriMega, of course, which announced a strategic partnership with Essendant last year. While TriMega President Mike Maggio believes that Essendant should be focusing its resources on other initiatives, he said he hasn’t heard that much noise about Essendant’s new programme

from TriMega’s larger dealer members. “There is a lot of smoke, but not much fire,” he said, adding that there still appear to be question marks over how Essendant will implement its strategy. Grady Taylor, Managing Director of EPIC Business Essentials (EBE), the joint venture between IS and TriMega’s Point Nationwide, is also taking a wait-and-see attitude. “While Essendant has been clear about its intention to enter the space, a number of questions have yet to be answered,” he told OPI.

It is difficult to know if this is a good thing for the IDC or if we are just substituting a new competitor for an old one “One which is critical to us is who will service the business locally? Until we understand clearly how they are going to manage that, it is difficult to know if this is a good thing for the IDC or if we are just substituting a new competitor for an old one.” In a recent interview with OPI, Essendant’s President of Office and Facilities Harry Dochelli provided some insight into how this contracts initiative – which is called Access – will work. Essendant’s intention is to have the contracts serviced – in terms of

DEALER OPPORTUNITIES? Essendant argues that it is not looking to take business from the IDC, but is opening up new opportunities for dealers to compete in the larger contracts space. It also told OPI that it is responding to customer demand by providing a “comfort level” for GPOs and enterprise customers as a result of having a Fortune 500 company (ie Essendant) holding the contract. Whether these two lines of argument are coherent remains to be seen. It will be interesting to see the outcome of the new Premier GPO contract when that award is made, likely in the near future. Essendant is being open about its participation in that particular bid, meaning it is going up against the likes of AOPD and other independents (including EBE members) which piggyback on the contract held by Ohio-based dealer FriendsOffice in addition to the big boxes. The Premier contract has traditionally been a multi-vendor award, so one would assume that Essendant is hopeful of getting at least a ‘hunting licence’ to go after that business. All eyes will then be on whether it takes share from the big boxes or members of the IDC.

Xerox’s workplace revolution In a bid to reverse a decline in revenues, printer maker Xerox has embarked on what it describes as the largest product launch in its 110-year history. The company said its new ConnectKey portfolio marks a transformation from printers to workplace assistants. Akin to the transition of mobile phones to smartphones, the new range has turned printers into smart, hyperconnected machines utilising an app-based operating system. The company is clearly hoping the product launch will expand its reach and enable it to focus on small businesses and other growing areas which currently make up around $30 billion of the $85 billion printer industry.

NEWS

sales reps and last-mile delivery, for example – by “a premier group” of dealers that will have exclusivity in specific geographies. There are a few key areas that are not set in stone and which may change depending on the nature of a given contract. These include whose name is on the contract and how profit is split between Essendant and the servicing dealers. Nevertheless, on the face of it, the model would appear to be not dissimilar to the one used by IS on the US Communities contract. If Access is able to win business from Staples and Office Depot – which still have the lion’s share of the large regional and national contract business – then it will no doubt be viewed positively by the IDC. “We welcome any endeavours that bring share to the IDC,” confirmed Taylor. However, there are still concerns over possible channel conflict, similar to the dual-distribution challenges with Boise some years ago. “Is it in the best interests of either national wholesaler to be closer to the IDC’s end users and potentially competing with their traditional customers, namely us?” questioned Taylor. “We do not think so.” He continued: “Additionally, Essendant’s Enterprise programme was abruptly pulled about a year ago with very limited notice. How long is Essendant’s ‘attention span’ going to be for a programme that has historically not had instant results? What will be different [with Access]?”

IN BRIEF ADVEO closes French logistics site Pan-European OP wholesaler ADVEO has announced the closure of its logistics platform at Montierchaume, France. The group closed the 15,000 sq m (150,000 sq ft) facility as it was redistributing to other sites, and wanted to remove that level from the chain. The plant’s 37 employees have been made redundant. Canon Europe buys mobile printing platform Canon Europe has acquired London-based mobile e-commerce platform Kite.ly as it expands its mobile printing division. The move will enable the group’s B2B partners and customers to explore new business opportunities. Print service providers will be able to plug the Canon-Kite.ly solution into their existing infrastructures. Kyocera Germany under new management Printing supplies group Kyocera Document Solutions in Germany is under new management. Managing Director Reinhold Schlierkamp has stepped down and his role has fallen to previous Deputy Managing Director Dietmar Nick. Schlierkamp will continue to work for the group at its Meerbusch location (near Düsseldorf). New acquisition for Genuine Parts SP Richards owner Genuine Parts Company has bolstered its electronic materials arm with the acquisition of Empire Wire and Supply, a Michigan-based automation and safety products distributor. It is expected to generate annual sales of approximately $65 million for the company. Bunzl buys two safety equipment businesses Facilities supplies distributor Bunzl has acquired two businesses in the US and Italy to add to its safety products offering. California-based ML Kishigo sells high visibility clothing and other workwear to distributors, while personal protection equipment supplier Neri is Bunzl’s first foray into the Italian market.

May 2017

Antalis Paris float set for June The planned IPO of paper distributor Antalis is underway and should be finalised before the end of June. Parent company Sequana said the decision to float on the Paris Stock Exchange was first mooted in February as part of its strategic plan to exit creditor protection in the first half of 2017.

NEWS

OPI.NET POLL RESULTS Will Brexit impact your business?

Yes, positively 10%

45% Pagewide is new disruptive threat, says Photizo Pagewide inkjet printing is set to have a profound effect on office printing, according to industry consultants Photizo. Photizo Senior Consultant Tim Strunk believes that pagewide inkjet could do to laser what laser did to daisy-wheel and dot-matrix many years ago. Taking the lessons from the 1980s, Strunk said that – assuming print quality is acceptable – there are other compelling factors which could see pagewide inkjet displace laser printers, especially mono devices. One of these factors is device consolidation – meaning that enterprise customers can greatly reduce the size of their print fleets by doing away with mono laser machines because pagewide inkjet will do the same job. It will also fulfil many colour needs, although colour laser will still be needed for higher-end jobs. The advantage is a much reduced investment in the number of machines, an argument that ties in nicely with the growing managed print services market. Other advantages of pagewide inkjet are the potential for substantially reduced R&D costs, lower servicing costs due to simpler mechanisms, less power consumption and waste, and the overall lower cost of printing. If things pan out as Strunk predicts, the uptake of pagewide in the office will lead to “massive” industry consolidation as those manufacturers that don’t have the technology figure out how to get it.

www.opi.net

Sealed Air sells Diversey Care

Packaging solutions firm Sealed Air has agreed to sell its Diversey Care division and part of its Food Care arm to global private investment firm Bain Capital. The $3.2 billion sale comes after Sealed Air announced the spin-off of the division into a separate company, renamed New Diversey. Earlier this year global manufacturer Henkel was reportedly in talks and bidded against private equity firms to buy the division. The deal is estimated to generate net cash proceeds of $2.5 billion for Sealed Air which will be used to repay debt, repurchase shares and fund growth initiatives. Diversey Care and the related food hygiene businesses generated sales of around $2.6 billion in 2016. The transaction is expected to close by the second half of 2017, subject to regulatory approval.

45%

Yes, negatively

WHO’S WHO IN OP

Top 100 new 2017 entry: Robert Baldrey, Managing Director, Staples Solutions UK & Ireland Robert Baldrey has been named as Managing Director of Staples Solutions’ operations in the UK and Ireland. The former EVO CEO and experienced OP industry senior executive officially started in his new role – which he has taken on an interim, open-ended basis – on 31 March, almost 12 months after leaving EVO. He will report to Netherlands-based Hervé Liboureau, who has assumed the position of Head of Commercial at Staples Solutions, as new owner Cerberus finalises its senior management team. Staples Solutions in the UK and Ireland now comprises the contract and direct/online operations after the retail unit of the former Staples UK subsidiary was sold to private equity firm Hilco at the end of last year. Baldrey told OPI that he was looking forward to the challenge of turning Staples around in the UK and Ireland, following a difficult period where the business suffered from a “tricky” ERP implementation and the uncertainties surrounding the attempted acquisition of Office Depot, and the subsequent decision by Staples Inc to sell its European operations. However, he pointed to the strong brand name that Staples still enjoys in the UK and supply chain efficiencies from the new distribution centre in Rockingham as two areas of potential for the company.

Xerox enters digital label printing Fuji Xerox Asia Pacific is teaming up with Durst Industrial Services and entering the digital label printing business. It will provide digital label printing solutions with ultraviolet digital inkjet label presses to make print jobs less time-consuming and more profitable. Samsonite buys eBags Luggage and accessories maker Samsonite has acquired online-only bag retailer eBags as it continues its e-commerce expansion. The $105 million deal comes just over a year after the acquisition of high-end luggage retailer Tumi for $1.8 billion.

billion

ESTIMATED AMOUNT OF PIECES OF PLASTIC IN TODAY’S OCEANS

Staples up for sale? In April, the Wall Street Journal reported that Staples was in talks with private equity firms about a possible deal. Investors were excited by the news and shares rallied to a three-month high. Since US regulators scuppered plans to merge with Office Depot last year, the group has embarked on a leadership reshuffle and slashed costs. It has been struggling to compete with large online rivals such as Amazon for a share of the business supplies market and saw its North American sales tumble by 7% last year. Many saw the tie-up with Office Depot as an opportunity for the reseller and forecast $1 billion of annual synergies. But a future merger is still out of the question, say experts, as the Trump administration and its focus on jobs is unlikely to ease antitrust regulations. On the face of it, with a clean balance sheet and annual cash flow of around $900 million, it seems a good candidate for a buyout. Valued at $7.6 billion – a 30% premium to its pre-spike market cap – it could be a bargain for any venture capitalist. But Reuters Breakingviews US Editor Jeffrey Goldfarb reckons that the internal rate of return would fall short of the usual buyout target for private equity groups and would require “exemplary execution in a tough business at a company that’s currently shrinking”. Sources close to the matter have cautioned that the discussions are still very much in their infancy and may not result in a deal.

May 2017

MooreCo regains control Greg Moore, CEO of US viscom and furniture vendor MooreCo, has bought back control of the firm with a financial partner.

FIVE 50 TRILLION US annua the lly in

OfficeMax deal could cost jobs 150 jobs could be cut in Australia and New Zealand if a proposed merger between OfficeMax and Staples in those countries goes ahead, says New Zealand-based worker union First Union. It is calling on the Commerce Commission to investigate the proposed merger and not allow it to proceed.

r cups discar pe de a p

Energy award for Staples Staples has been named a 2017 Energy Star Partner of the Year – Sustained Excellence Award winner for its continued leadership in protecting the environment through superior energy efficiency achievements. It is the eighth year in a row the company has been honoured.

CCL Industries has acquired two European direct-to-consumer, software-powered online digital printing businesses for its Avery unit. Netherlands-based Goed Gemerkt is a manufacturer of personalised labels for the Benelux and German markets. Germany-based Badgepoint, meanwhile, is a manufacturer of premium name tag systems and accessories for the German market. Combined 2016 sales for both businesses were around $16.1 million. In 2016, about 10% of Avery’s sales came from its direct-to-consumer businesses. This followed acquisitions such as Mabel’s Labels in the US last year and pc/nametag and Meetings Direct – also in the US – in 2015.

ated numbe ro tim s E f

PC market hit by falling consumer demand IT research group Gartner found that quarterly PC shipments fell below 63 million units for the first time since the 2007 financial crisis, blaming plummeting consumer demand. It revealed that worldwide shipments totalled 62.2 million units in the first quarter of 2017, a decline of 2.4% compared to the same quarter last year.

Acquisitions for Avery

NEWS

IN BRIEF

NEWS

Analysis: Amazon Business lands in the UK Independent dealers ready to play to their strengths to combat the e-tailer’s B2B offering

www.opi.net

In a move that was widely expected by the business supplies industry, Amazon Business finally arrived in the UK to much fanfare at the beginning of April. A well-orchestrated media campaign ensured that the mainstream and financial UK press gave the launch plenty of coverage, with the Daily Mail rather dramatically running the headline, “Amazon’s bid to conquer the UK office supplies market”. Of course, the arrival of Amazon Business does not mark the beginning of an office products strategy from Amazon. “There’s been an office category and focus from Amazon for many years, so this isn’t fundamentally new as an offering,” pointed out EVO Group CEO Steve Haworth. Plus, office supplies per se is just one of many B2B categories that Amazon Business will sell in an offering it claims exceeds a hundred million products, and also includes areas such as industrial safety, jan/san products, and laboratory supplies.

PROMISING START Amazon Business first launched in the US in April 2015. It generated more than $1 billion in sales in its first year (although Amazon has not provided an update to that figure for some time now) and now serves more than 400,000 businesses. More recently – in December 2016 – the platform started up in Germany. Amazon says that more than 50,000 business customers in the country are using the service, while over 10,000 business sellers have “accessed the Amazon Business Seller feature set to sell their products to business customers”. They are impressive numbers although we don’t know how much the customers are buying or the sellers selling, but there is no reason to think that Amazon Business won’t have a similar kind of start in the UK. Alex Dunn, Managing Director of UK dealer group Superstat, believes that Amazon Business could have “a significant impact – especially at the smaller end of the [reseller] market”, but that dealers can lock in customers by offering value-added services not offered by the global e-tail giant. Julie Hawley, Managing Director of the Office Friendly dealer group, has a similar message. “Dealers need to focus on a ‘solution sell’ basis to their customers,” she told OPI. “Add-on services to support the products they sell and setting themselves up as experts is the way forward.” Superstat and Office Friendly are both promoting a number of services they offer which will help members

counter Amazon Business and enable them to play to their strengths. Indeed, the arrival of Amazon Business may well provide a boost to dealer groups in the UK as a whole, as resellers reassess this new market threat and their strategic options. Haworth remains bullish on the sustainability of the independent channel. “As a route to market, the traditional business supplies channel should be confident in the value it adds both for end users and manufacturers, and not overreact [to Amazon Business],” he stated. “The ‘death’ of this channel has long been predicted and, whilst the market is intensely competitive, the challenges of price transparency and new disruptive entrants are not new. I remember similar reactions to those I’m hearing now when Office Depot and Staples aggressively entered the market in the mid-1990s!”

There’s been an office category and focus from Amazon for many years, so this isn’t fundamentally new as an offering Philip Lawson, CEO of the BOSS trade association, also believes Amazon Business might be a catalyst for a positive evolution of the independent channel. “Amazon will help ensure that the smartest dealers in our industry, of which there are many examples, will survive and prosper,” he noted. “Business buyers [will] continue to realise that the service they get from their expert account manager and customer service team saves them real time and money, whether they order online or not.” The association has already scheduled a meeting with Amazon Business to discuss the supply to Amazon by manufacturers and other vendors (including wholesalers), and Lawson is looking forward to engaging with Amazon. “It is right that we have as open a dialogue with Amazon as possible, as that should serve the industry as a whole better than just ignoring its presence,” he told OPI.

Geosure is a location-sensitive personal security app that provides a safety score on the health risks, political uprisings and environment threats around the world. It uses crowd-sourced information about an area which could prove invaluable when travelling solo or visiting a new place.

Newell Brands strikes deal to sell match business Consumer goods group Newell Brands has agreed to sell its fire starters business to grilling products manufacturer Royal Oak Enterprises. The deal – which is expected to close by Q2 of this year – includes the divestment of its Pine Mountain fire starters and fire logs business as well as its Diamond matches, fire starters, lighters, toothpicks, clothespins and clothes lines business. The group will retain its Diamond plastic cutlery unit. It follows the acquisition of New Zealand-based food storage container manufacturer Sistema Plastics for $460 million. It is one of the fastest-growing brands in the food storage market, with annual sales of around $145 million. Earlier this year, Newell agreed to sell its Rubbermaid consumer storage business to United Solutions, a supplier of home and office plastic products.

$32.7

Estimated worth of the global office and commercial coffee services market by 2021

Japan Pulp and Paper (JP) has agreed to take a 51% stake in two Australian and New Zealand companies. JP, the country’s largest paper trading house, plans to merge the operations of Australasia’s biggest paper merchant, Auckland-based PagePack, with Melbourne-based KW Doggett, the region’s third largest. The merger may come as soon as July and the two businesses will become JP subsidiaries. The $64 million acquisition is in response to a shrinking domestic paper market in Japan. The group also plans to acquire the remaining 49% over the next few years, which could swell acquisition costs to nearly $180 million. JP said the strengthening of its business base in the Oceania markets had become a matter of urgency as it aims to boost sales in the region. The transaction is similar to the takeover process of US-based paper merchant Gould that began in 2010 and was finalised in 2015. The Australian paper sector is starting to see a lot more Japanese ownership, with Nippon the owner of major local manufacturer Australian Paper.

Askul lowers guidance due to fire impact

Japanese business supplies reseller Askul has lowered its sales and earnings guidance for the current financial year due to the recent major fire at one of its distribution centres near Tokyo. The company has lowered its full-year sales forecast by almost 4% to ¥335 billion ($3.1 billion), while operating income is now expected to be ¥8 billion, almost 16% lower than previously forecast. In addition, Askul has booked an extraordinary loss of more than ¥10 billion to cover the loss of inventory and equipment, restore the site to its original condition and other fire-related expenses. The blaze ripped through the Askul Logi Park facility on the outskirts of Tokyo on 16 February and burned for several days before being finally extinguished on 28 February. The fire had relatively little impact on Askul’s third quarter operating performance as it broke out just a few days before the end of the reporting period. Total company sales for Q3 were up almost 10% year on year to ¥251 billion while operating profit was down slightly to ¥6.7 billion – although this operating profit decline was in line with budget and due to investments in logistics and sales promotions. On the B2B side, MRO and medical supplies were up in the double digits, while cleaning and breakroom products also registered strong growth. Sales of stationery also increased, Askul confirmed. E-commerce and private label continue to be two strategic priorities for Askul: the percentage of orders placed online in the third quarter rose 160 basis points year on year to 80.2%. The number of own brand products rose to almost 7,700 and these accounted for more than 20% of B2B sales during February 2017.

Projected worldwide IT spending in 2017

$3.5 trillion on May 2017

billi n

Australasia acquisition for Japan Pulp and Paper

NEWS

BEST IN APP

Business services specialist Commercial Group has announced the imminent launch of two new divisions. The group’s Commercial Technology arm will help businesses select IT hardware solutions, while the Commercial Creative unit will involve a rebrand of the recently-acquired Wiles Greenworld Systems to provide colour management support and managed print services for the creative industries. The expansion follows record sales of £50 million ($63 million) after a series of major account wins led to a strong final quarter for its office supplies division. The company’s Commercial IT Services and Commercial Print arms also both won weighty new contracts, while Commercial Interiors landed its largest project to date, worth more than £800,000. Following what it called a “promising start” to 2017, sales this year are forecast to exceed £60 million.

Büroring unveils group focus shift Germany-based dealer group Büroring has announced a reshuffle of its Büroprint group at its recent premium partner conference. It is now looking to form seven distinct divisions within the group, in areas such as ‘process optimisation in administration’, ‘process optimisation in sales’, and ‘group benchmarking’. It is hoped these specific groups will allow its active partners to intensively tackle topics within their most relevant segment. That wasn’t the only change Büroring announced. As of July 2017, Büroprint will also scrap its differentiated basic and premium membership to form one kind of partnership. The new active partner groups will be launched in the second half of 2017.

BIRD FEED

@LouiseMarshall6 So proud that @Brother_UK won the Employer of the Year award at tonight’s #TBDMasters – here’s @PhilJones40 picking up the #award @DanPipPap Gotta love chasing pigeons around the office after a night shift #pigeongate #officelife

Eakes buys jan/san firm US office products dealer Eakes Office Solutions has bought jan/san firm Janitor Depot. Based in South Sioux City, Janitor Depot has been locally-owned for the past 15 years, offering janitorial equipment, supplies, paper products and food service items. Eakes will retain the Janitor Depot staff including founder Brad Figge, who will continue to provide customers with service, sales and support from the current location. The dealer is also hiring Mike Klassen as a Furniture Sales Specialist, boasting more than 36 years in the industry. The acquisition will broaden Eakes’ services in north-eastern Nebraska and Iowa and is its 13th location serving the Midwest. It is the company’s third acquisition in just over a year. Eakes President Mark Miller said: “Brad Figge and the team at Janitor Depot have a wealth of knowledge in the janitorial industry. We are excited to utilise that knowledge to achieve the next level of satisfaction for all of our customers with janitorial needs.”

NEWS

Commercial Group to expand after strong 2016

@Emzebum Not sure I would’ve wanted to take delivery of what was originally in this box... #officelife @JPAFurniture Is this the latest MUST HAVE desktop accessory??? Red is our JPA office puppy, keeping us all grounded!! #wellness #smiling #officelife Follow us on Twitter @opinews

$49.4 $4 $ 49 4 9...4 9 4 Estimated worth of the global facility management market by 2020

May 2017

billion b illllliio

BIG INTERVIEW

The

ART OF

simplicity

Simplification and decentralisation are the name of the game at South African reseller Waltons according to Trevor Girnun, the new man at the helm

www.opi.net

t’s all change again at South African reseller Waltons, part of the Office and Print division of the country’s Bidvest conglomerate. And the man tasked with the job is Trevor Girnun, Managing Director of Waltons since the middle of last year. Having had very long-serving management members for many years – John Farrell epitomised Waltons for several decades – the past few years have seen a much higher staff turnaround at the top, all eager to eradicate legacy systems, keep up with the fast pace of today’s business supplies sector, and maintain and improve profitability. How to achieve all of the above is clearly very much in the eye of the beholder, as OPI’s Heike Dieckmann found out when she recently caught up with Girnun.

OPI: Let’s start with a bit of background as most of our readers won’t be familiar with you and you’ve been at Waltons for less than a year. TG: Sure. I’ve actually been at Bidvest my whole working career. I started in 1991 at a Bidvest company called Buffalo Tapes which is part of its industrial division. I started in a warehouse picking goods and managed to work my way up that organisation to eventually become Managing Director. I left Buffalo Tapes in 2010 and moved to stationery manufacturer/wholesaler Silveray as Managing Director. My role at Silveray was to try and reinvigorate the whole business: look at the processes, systems, disciplines and challenge everything. It was an oldish business and there was a lot of legacy stuff that no longer worked. There was a lot to do, but we managed to pretty much give it a complete overhaul. I believe the business today is in really good shape, with sounds systems, processes and disciplines in place and a young, exciting management team that is pushing boundaries.

OPI: Is that success the reason you were drafted in to lead Waltons? TG: Well, I guess if I had done a shocking job they wouldn’t have asked me. But before we talk about Waltons, I want to stress that what we achieved at Silveray wasn’t down to me, but a whole team of individuals, so the credit should definitely not come to me. OPI: OK. So what’s your remit at Waltons? You’ve been in the job for just under a year now. TG: It’s more of the same I think, but at Waltons it’s a bit more complicated, because there are a lot of working parts to it, more locations, a lot of outdated processes, etc. My first task was to develop a plan and identify what fundamentally needs to change in the organisation, so in the first few months I spent a lot of time learning, understanding and developing that plan in conjunction with my superior at Bidvest Office and Print. One thing that is hugely important in my opinion is to have the right human capital on board, so we can

BIG INTERVIEW Trevor Girnun

execute the plan. We’ve worked hard on that and I’m happy that we’re starting to develop a very good team and implement certain parts of our strategy. OPI: It seems you’re going through another full-scale Waltons overhaul. When we spoke to Dave Jenkins – your predecessor before Dave Crichton took over on an interim basis – in 2014, he was in the middle of a three-year restructuring plan. Is this still the same plan? TG: There’s a fundamental difference in how we see the business now. It’s probably going to take us a similar amount of time to implement and be successful in the changes we’ve identified, but that’s where the similarities stop.

OPI: What is the overriding strategy that you’re pursuing now? TG: One of the core fundamentals is to uncomplicate what should become quite a simple business. Take a look at our business model: in several instances we’ve got distribution centres (DC) in relatively close proximity to little depots and our so-called combo stores. Why should we service a commercial customer by delivering product from our DC to the local depot and then to the customer? Why

May 2017

OPI: Why the complete change of tack? TG: Just as an example, we don’t want to be in a business with too many layers. We prefer flat, very simplistic structures and people who are connected to their businesses and are masters of their own jungle.

We prefer flat, very simplistic structures and people who are connected to their businesses and are masters of their own jungle

OPI: OK. Let’s have some facts and figures. Do you still have five warehouses? TG: Yes, our main DCs are in Johannesburg, Durban, Cape Town, Port Elizabeth and Bloemfontein. In terms of the regions I just alluded to, we have the Inland region, the Cape (Eastern and Western Cape) and KwaZulu-Natal (KZN). OPI: What about staff? How many people work for Bidvest Waltons? TG: We currently employ about 2,000 people. OPI: That’s fewer than in the past I believe, isn’t it? TG: It is. Unfortunately, in any turnaround and clean-up of an organisation it’s an area you need to look at. And in legacy businesses in particular, you often find that there’s an abundance of staff in certain areas where positions are duplicated. We are addressing that while also bearing in mind that people are very important and that we live in a country where jobs are desperately needed. But we also want to run a business on world-class fundamentals; talented people are important and we want a culture of excellence in our business, not one of mediocrity. Bringing the right calibre of people in will take us to the next level.

of a hotchpotch in terms of store locations, store size, etc. If we’re going to play in the retail space, we need to become hardcore retailers. It’s a learning curve and we’re still at the beginning of where we need to be.

Talented people are important and we want a culture of excellence in our business, not one of mediocrity

BIG INTERVIEW Trevor Girnun

not do it directly? It’s a duplication of both cost and effort and needs to be reviewed. Essentially, we want to empower the regions. We envisage a very limited head office here in Johannesburg, with only the bare essentials of what we need. Instead, we want our people in the regions to run the business as if it were their own and be rewarded on that basis as well. Decentralisation and simplicity are totally core to our strategy.

OPI: What about your combo stores you referred to earlier; what’s happening with them? TG: It is our intention to review our entire supply chain as part of our overall strategy of simplification and aggressive expense management. In line with this, combo stores that do not make sense in terms of proximity to major DCs will be reviewed. That said, combo stores in strategic lcoations will be retained. OPI: Do you foresee a time when you don’t have a retail presence at all? TG: I’m not sure. I don’t see our overall retail strategy changing fundamentally in the short to medium term, but who knows? OPI: Dave Jenkins mentioned franchising stores and his plans for that three years ago. I assume that’s off the cards now? TG: It is. We don’t believe in franchising and there is no plan.

OPI: What about Waltons’ coverage outside South Africa – has that changed? TG: It has. Bidvest Waltons has a substantial presence in Namibia. But a few years ago, Bidvest took all the South African affiliates in Namibia and listed them separately on the Namibian stock exchange. So while I retain a role on the board, it’s not in an executive capacity, the Namibian business doesn’t report to me and doesn’t form part of our revenues, so it’s pretty standalone in that sense. We also have a relatively new operation in Botswana. OPI: Zimbabwe and Zambia were also mentioned a few years ago. I’m guessing those plans have been abandoned? TG: That’s correct, we don’t have a presence in either country.

May 2017

OPI: What’s your business model in terms of commercial versus retail? TG: We’re predominantly a commercial stationer, that is our focus, so at the moment we’re 80:20 commercial/retail. We still have a retail footprint with 34 stores, but we’re assessing that footprint in terms of which stores are profitable. Overall, we are trying to better understand the retailing space. We believe it’s an area that we could improve on, particularly given the strong competition. Our strategy in the past has been a bit

Trevor Girnun BIG INTERVIEW

Simplicity is our focus right now, as is decentralisation and all the fundamentals working well

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OPI: How has your product mix evolved both on the commercial side and in retail? One-stop shop, services and solutions seem to be on everybody’s radar these days… TG: Again, the first phase is to simplify what we have. We are in all the major key categories any office products company needs to be in and we are dabbling to a minor extent in the jan/san and breakroom sector. But these adjacent areas are not really a major focus for us, and right now we want to do what we do extremely well rather than adding to the pile. That said, I attended a Staples CEO alliance conference a couple of months ago and they spoke quite extensively about ‘beyond office supplies’ and I like the idea of where they’re going. But we’re not there yet – simplicity is our focus right now, as is decentralisation and all the fundamentals working well. Only when we’ve accomplished that we will decide whether we do or don’t play majorly in those other areas.

OPI: Talking about Staples – has your relationship changed as a result of Staples pulling out of pretty much all of its international markets? TG: No, it hasn’t changed at all, because we have never dealt with the US side, but always had a relationship with Staples’ European arm, so we continue to operate with the new European owner Cerberus Capital Management. It’s a good relationship, we converse a fair amount and from our perspective we would like to learn and that’s exactly what we’re doing from a company like Staples. We want to be a learning organisation and I don’t think there’s been enough of this attitude at Waltons in the past.

OPI: Is that broadly the extent of your relationship – learning and best practice sharing? TG: Staples is a world leader – they’ve been doing things, moved in certain directions, seen stuff happening in their markets that are bound to happen in ours sooner or later, so I believe we’re really benefiting from the relationship. As for servicing their customers – that’s already happening and we continue to look for further opportunities in this area. OPI: Financials in the past few years have been far from outstanding. In Bidvest’s most recent half-year results it said that the Office and Print division had solid performances, and margins and expenses were generally well controlled. Is that true for Waltons specifically as well? TG: I think Bidvest is very forthright in acknowledging what’s happening at Waltons within the Office and Print division. We are a work in progress and currently in a turnaround process, so I don’t think those comments speak directly to Waltons’ performance. OPI: OK, let me phrase it this way: is Waltons a growing company? TG: I can’t comment on specifics. What I would say is that Waltons is profitable; it’s not a loss-making company. That said, it’s by no means profitable enough because of the ineffeciencies we still have and are now addressing. OPI: Let’s talk about your customers. Where’s the main focus? TG: It’s a real mix – big and small corporates, SMEs and then we have the whole schooling segment which is very sizeable for us.

OPI: What are the core challenges in the South African market overall? TG: We are facing what the rest of the OP world is facing – a declining industry – so it’s about trying to reinvent yourself in that space, look to new areas, etc. Specifically from a South African perspective, we have the challenge of a very difficult economic climate that currently prevails. The South African economy is showing GDP growth of about 1%, so it’s a tough space to be in right now. There’s also a lot of political uncertainty which doesn’t help. But we don’t want to get too sidetracked by the macro situation. We believe we have a plan that can be successful irrespective of what’s happening on the political or economic stage.

BIG INTERVIEW Trevor Girnun

TG: Not really, but maybe that’s something we need to look at more closely going forward.

OPI: It must be hard to disassociate yourself from that though. With the value of the rand down significantly, it must have a substantial impact on imported goods, for example? TG: It’s something that has to be managed at all times – these are the challenges for anybody in the South African business environment and we’ve learned to deal with them as best we can over many years.

OPI: Does the school business fall under the commercial or the retail umbrella? TG: It’s both and it’s quite a varied part of our business. From the commercial point of view, it’s signing up specific schools or supplying stationery suppliers in bulk with school products. Or there are back-to-school (BTS) boxes based on an individual learner basis whereby parents get a school list and tick off exactly what they want for their kids and we then pack that box and deliver it to the school. But there’s also the retail side when parents walk into our retail stores to purchase products. We see a significant uptick in revenues during the BTS season and it’s an important time for us. As with most areas, I believe we can do bigger and better things in this segment.

OPI: What about higher education – are you playing in that area?

OPI: Overall, what does the competitive landscape look like for Waltons? TG: It’s definitely changed from a couple of years ago. A lot of local companies are now dabbling in e-commerce, so that is putting pressure on us to up our game as well. And of course we compete with all the major retailers.They are all big in the stationery space, particularly in the BTS season when they compete very aggressively. We also compete with the buying groups and independents within or outside those groups. To be totally frank with you, while we respect all of our competitors, our success is going to be determined by whether we are or aren’t implementing our strategy well, not by what the competition is doing. OPI: Let’s wrap up with that strategy. What’s the timescale on it? TG: There’s no specific timescale, but I would say a maximum of three years. We’re working hard on our plan, getting the right people in the right places and putting great systems and disciplines in place. We’re on track, we’re happy with what we’ve done so far and where we’re going.

May 2017

OPI: How does the school business work in South Africa? Are there regional, multiple school contracts that you bid for? TG: No, it’s school by school. We compete with everybody else and it’s a very competitive space to be in. We offer schools what we believe is a good value proposition, but of course you win some and you lose some. The academic year in South Africa finishes in December, so from a commercial point of view we start getting very busy from October with the schools directly and with the box supplies I mentioned. The busiest time from a retail perspective is the first two or three weeks of January.

OPI: No matter what market we’re talking about, there’s always the topic of e-commerce. What’s its relevance at Waltons? TG: It’s important. We know the trends and where they’re going, and quite simply we have to play in that space. We are doing it already, but we could be doing it in a bigger and more efficient way. That’s on the B2B side. As regards B2C, we have a presence there too, but it’s basic and that’s perhaps where we see opportunities in the future. We don’t have Amazon in South Africa, of course, but we have other substantial online platforms.

HOT TOPIC

Collective

POWER

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It’s one of the age-old questions in the industry – are dealer groups holding up their end of the bargain as supply chain mediators or is the future simply bypassing them? – by Michelle Sturman

o make sense of the current global dealer group landscape, OPI asked numerous players in the business supplies industry for their input on a variety of issues within their own markets. Responses were received from all sectors of the industry and around the globe, with the notable exception of some major wholesalers. While an air of optimism prevails, there is the acknowledgement that dealer groups need to up their game to keep pace with the rapid transformation of the industry and all it entails. Naturally, the dealer groups themselves for the most part said they were keeping up with the ever-changing OP landscape, with much emphasis resting on the introduction and implementation of new technology. As UK-based Office Friendly Sales Manager Keely Shepherd remarks: “Just look at how much Office Friendly has changed over the past year and the investment we’re putting into new technology. We’ve evolved our service offering in so many ways.” Australia’s Office Brands CEO Gavin Ward agrees, saying that as a group it is driving significant change in technology, systems, business processes and product expansion. However, he does admit that, while there are dealers welcoming all its initiatives and growing their business, there are also many members that struggle to embrace new market segments, technology and marketing. “This remains our greatest challenge – getting members to understand the need for change, including working with others on an adoption plan. It would be fair to say that a large section of the group can become overwhelmed by such significant change at a relatively rapid rate.” Australia is a particularly good example of where all of the above will undoubtedly become more of a pressing issue due to the recent upheaval in the country. Indeed, ASA Australia General Manager Siobhan Tagell says the industry finds itself in a rare

environment, with consolidation in the marketplace, the continued growth of the country’s dominant OP reseller Officeworks as well as its potential sale or IPO, along with the planned sale of the two largest corporate players to a private equity firm (see page 36 for more details on the Australian OP landscape). That said, she adds: “The biggest change in the market is the continued advancement of e-commerce as a way to market. I believe the dealer groups are, independently of each other, trying to tackle this in their own way.” AMAZONIAN STRENGTH On top of everything else happening in this market, unlike dealer groups based in North America and Europe that have had to deal with Amazon for years – and now Amazon Business in some countries (see page 10 for information on the UK launch) – Australia is only now having to realise the potential impact Amazon will have on the business supplies industry. Tagell says ASA Australia is not going to be complacent or dismissive of the threat, and is working on strategies and plans to differentiate and get ready for its impending arrival. Recognising that Amazon is “one of the best websites in the world”, Ward will steer Office Brands members to focus on their customer service and communication. “That service and knowledge, using smart systems to help our people respond to each customer’s individual needs, will be at the core of how we work to reinforce the engagement with our largely loyal SMB customer base.” (See ‘Dealing with the issues’ for more thoughts on the imminent launch of Amazon in Australia). Meanwhile, the UK OP industry will have to get a handle on Amazon’s B2B platform – Amazon Business – which launched in the country last month. Numerous UK dealer groups told OPI that their strategy will follow the same lines as their Australian counterparts in so much as encouraging dealers to

forever. “We think that the catalogue is an essential sales tool and valuable as a reference guide. Not everyone prefers to use online methods, although this will probably change over time,” notes Abacus Stationery & Office Supplies Partner Mark Dilley. Those in favour of the catalogue believe it still fulfils a valuable purpose in today’s business world for one simple reason: it ‘sits on the desk of customers’ and may prompt them to buy something. Additionally, there is still resistance from some quarters over the value of digital media as a sales and marketing tool. As Soennecken’s Business Unit Manager Wholesale Jens Melzer explains: “Digital marketing media is being sent to customers and in the worst-case scenario it disappears without being seen properly by anyone.” However, Melzer also encourages dealers to use more digital marketing services in combination with traditional efforts, including catalogues. The consensus is that at least for the foreseeable future, a mix of both printed and digital material is the way forward. Interestingly, what was not mentioned by any of the people OPI spoke to is the well-documented

HOT TOPIC Dealer Groups

concentrate on offering solutions and value-added services to their customers. What the increasingly pervasive nature of the online giants has done is highlight the necessity for dealer groups and dealers alike to take e-commerce more seriously. Online retail has caused much consternation over the years, with the attempt to take on the pure-play e-commerce entities such as Amazon. This is particularly true in terms of building out full product lines on dealers’ webstores and general all-round improvements with regards to e-commerce offerings. Some dealer groups are making digital headway, however. In the US, TriMega and Independent Stationers have been jointly working on the EPIContent initiative along with the National Office Products Alliance. “While it is still at an early stage, the goal is to create an e-database of non-wholesaler products that dealers will be able to load onto their own e-commerce platform,” explains Independent Stationers CEO Mike Gentile. To make projects such as this workable, it is also incumbent on dealers to play their part in making the systems work. Suburban Stationers President

The biggest change [...] is the continued advancement of e-commerce as a way to market Bob Shulman believes that while dealer groups are doing a decent job in terms of encouraging members to improve online offerings, he sees some dealers struggling to fully execute their own e-commerce strategies, even when resources are to hand. “Dealer groups can only do so much, but the EPIContent campaign has the potential to make dealer adoption of these e-commerce offerings that much greater,” he says. OLD VERSUS NEW With the obvious and deliberate push towards digital, where does this leave the humble catalogue? By all accounts it’s still going strong and apparently relevant (although not everyone agrees with this assertion). Having said that, even resellers that value the catalogue believe that its format will not hold out

and unrelenting march of millennials into positions of purchasing power. There are many studies that back up the digital native moniker of this age group and their preference for online purchasing (see Generation Game on page 50 as an example). On the other hand, as TriMega President Mike Maggio states, progressive dealers are already using an entire range of on and offline marketing tools to target their customers as well as prospects. The use of diverse marketing tools and services by dealers is only going to become increasingly imperative in the battle to still be relevant to customers as time marches on. It will also be up to each dealer group to retain its competitive advantages by providing up-to-date products for members.

May 2017

GOT WHAT IT TAKES? Not everyone is convinced however that all dealers groups have what it takes to keep pace with the times. PBS Holding CEO Richard Scharmann thinks that some won’t be able to execute on their ideas: “Process optimisation and automatisation along with competitive online marketing can only be provided from a very powerful and capable central infrastructure, so high-end logistics, competitive online solutions, and centralised marketing are the key features which dealer groups are often not able to provide.” ADVEO Corporate Marketing Director Pablo Aranguren believes that the current dealer group format is not sustainable, in particular the lack of adoption of digital services such as innovative e-commerce solutions and product content

Dealer Groups HOT TOPIC www.opi.net

We all need to evolve and the kind of support dealers need is changing with the market, the industry and the world

management. “Only those dealer groups that achieve the right scale or which rely on the right partnerships to cover those needs for them will still be competitive, responding to the increasing power of the end customers and the bargaining power of the vendors.” [In what may be considered unfair discrimination], dealer groups also feel the heat from wholesalers which are sometimes accused of muscling in on dealer group territory. Take the recent announcement by Essendant about its foray into enterprise contracts, for example (see Analysis, page 6). “The wholesalers are big and necessary supporters of what we do in national account sales, although there are certainly some competitive forays now underway,” admits AOPD Executive Director Mark Leazer. It will be interesting to see how this develops, but it’s hardly anything new. While the debate over the separation of offerings between dealer groups and wholesalers has been going on for time immemorial, the relationship between the two also doesn’t always sit well with others. One reseller told OPI that the dealer groups need to “stop pandering” to the wholesalers by only chasing the dollar. The same reseller also suggested that dealer groups need to stop continuously seeking new members and instead focus their energy on existing members. Perhaps the key to making the entire supply chain happy is specialisation. US-based Pinnacle, a group for large dealers, is a case in point. In the past few years, it has grown its membership substantially as it has obviously found a niche that needed to be catered for.

Leazer certainly thinks so: “The ‘all things to all people’ approach may be unsustainable going forward. There is more efficiency within models where like-minded dealers are in the same group, and not having to serve multiple masters. Efficiencies go out of the window when groups get pulled in too many directions.” Soennecken’s Melzer disagrees. “We believe in the individuality of dealers, which is one of the main USPs of the local business compared to the pure-play online retailers. Therefore, a dealer group must offer a broad portfolio of services to then fit the needs of individual dealers, which is almost impossible to achieve with specialisation.” WINDS OF CHANGE Superstat Managing Director Alex Dunn believes that with the onset of potential industry changers such as Brexit and Amazon Business in the UK, the more relevant dealer groups become as dealers need to band together. “We all need to evolve and the kind of support dealers need is changing with the market, the industry and the world. The pace of change is increasing and that means we all have to adapt even faster wherever we are in the supply chain, but being part of a collective provides some protection,” he says. That said, the UK dealer group landscape is particularly crowded and Dunn does expect to have fewer dealers in five years’ time due to market pressures, consolidation and industry transformation. Nectere Managing Director Paul Musgrove certainly thinks there will be consolidation in the UK marketplace for both dealers and dealer groups, the latter of which will have to become very lean or merge.

or services groups as I think they will all need to become. They need to offer a great set of services that deliver value and ROI for members. If we can do that, the future should be bright.” Others suggest that investment in technology will be paramount. As ASA Australia’s Tagell points out, with a savvier customer on the other side of the transaction, smarter and progressive operators will prevail. Ultimately however, as TriMega’s Maggio states, while it does things differently than in the past so the group is relevant in the future, its primary purpose and strategic vision remains the same. “We are, first and foremost, a buying group and we believe that now, more than ever, progressive independent dealers need that resource.”

HOT TOPIC Dealer Groups

So, what’s a dealer group to do to ensure its survival both now and in the future? While individual comments varied, the overriding answer was consolidate. “There is a need for consolidation as most markets globally have upwards of three groups all providing similar support and services with individual infrastructures and costs, which in time will not be sustainable,” says Australia-based Office Choice CEO Brad O’Brien. Services should be key to the survival of the species, according to Synaxon UK Managing Director Derek Jones. He says that as most reseller and dealer businesses can’t survive only on product margins now, services have become a critical part of the business mix. “It’s no different for dealer groups,

DEALING WITH THE ISSUES OPI asked a number of dealer groups about specific challenges in their respective markets and how they are planning to deal with them. EUROPE What effect do you think Brexit and Amazon Business will have on dealer groups? Office Friendly Sales Director Keely Shepherd: Brexit has already forced us all to think differently. Following the recent pricing fluctuations within the UK marketplace, dealer groups have had to work extremely closely with members to try and minimise the impact. Rather than go head to head with Amazon, we have to encourage our dealers to focus on their own strategy. We remind them to offer those value-added services, solution-sell and keep the personal touch. By promoting the aspects that Amazon can’t match like free deliveries, a no-quibble returns policy etc, we can keep our competitive advantage. Nectere Managing Director Paul Musgrove: I don’t think Brexit will affect anything, except if inflation changes. The industry is still about local dealers for local markets. As for Amazon Business, we all survived when Viking arrived in the UK, and while a few dealers fell by the wayside, the industry got a handle on it. Amazon Business will skim a chunk of the market and will always be a threat. We must up our game and free dealers to create relationships that service businesses. Pressure also needs to be put on the software houses and wholesalers to help dealers get a million items on their websites. Dealers need to get to this point and be as beguiling as Amazon.

Office Brands CEO Gavin Ward: While Amazon is one of the best websites in the world and will undoubtedly bring a new level of expectation on delivery and price, it is just a website. We will be focusing on the service and communication that we have with customers to add value, based on our intimate knowledge of them, their industry and their purchasing habits. Our customer is, and will remain, at the centre of our world. If we do that job well, we believe we can retain and grow our customer base. Office Choice CEO Brad O’Brien: For us, it’s about working and ‘protecting’ our patch. There’s no doubt customers will try Amazon, but our strength is our engagement and connection with our customer base and community. We are therefore assisting our dealers to ensure they understand their clients and their behaviours through business intelligence, and that they continue to have a profile and presence through proactive customer retention and prospecting strategies. This is in addition to ensuring our e-commerce experience is a seamless process and our product offering delivers on our business solutions mandate.

May 2017

Synaxon UK Managing Director Derek Jones: Will Brexit impact the IT and OP channel? It’s too early to say for sure. There may be short-term implications due to currency fluctuations, but in the longer term I’d expect business to settle down. As far as Amazon Business goes, this is just part of the trend towards the automation of the supply chain. It’s no different to what is happening already: big online retailers buy in volume from the broadliners and undercut the rest of the channel. This goes back to the issue of major distributors being focused on the big spenders.

AUSTRALIA What plans are you putting in place to deal with the arrival of Amazon? ASA Australia General Manager Siobhan Tagell: I can only speak with authority on my own group and I can say that ASA Australia members are Amazon-proofing their businesses. We are not going to be complacent or dismissive of the threat, and are working on strategies and plans to differentiate and get ready for their impending arrival.

CATEGORY UPDATE

FACILITIES SUPPLIES

The facilities supplies sector is enormous and its boundaries continue to expand. OPI seeks an update from some industry experts about this huge category

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Special Issue

he facilities supplies (FS) sector is still seen very much as a key growth area for resellers in the business supplies arena. But it’s such a diverse, catch-all term that defining it and fully maximising the potential in its key sub-categories can be tricky. OPI investigated the overall opportunities in FS, which include the MRO, jan/san and PPE & Safety segments, while also taking a specific look at the breakroom category. The term ‘one-stop shop’ may be somewhat overused at times, but in a sector as broad as FS it does seem that suppliers which can truly offer this service in all these different product categories are at a distinct advantage compared to those with a narrower focus. As Debbie Nice, Category Director at UK wholesaler VOW, admits: “FS is a key focus category for us and one in which we’ve seen double-digit growth for the past five years. Being a wholesaler that can deliver a one-stop FS solution, we continue to win business on the solid premise of offering a broad range of products and services. Our customers are looking for a convenient way to procure all their supplies and it’s our view that this sector will only continue to grow in the OP channel as we take market share from specialists that can predominantly only supply one category.” And it’s those dealers prepared to commit to the category that are discovering methods to take on

Special Issue

VENDOR SPECIAL

the traditional FS suppliers. “Whether it is through national brand suppliers that only offer product through redistribution, specific one-off buying programmes direct to dealers or partnering with alternative suppliers and regional/local suppliers, OP dealers are finding ways to compete,” says Tom Hoffmann, Director of Purchasing at US dealer group TriMega.

Dealing with expiry dates in the food sector means you have to get sufficient throughput of sales to be able to stock it profitably At fellow group Independent Stationers (IS), the FS market continues to grow at a double-digit pace, with the bulk of the growth driven by demand for towel and tissue products and breakroom supplies. However, both these ranges present particular challenges for dealers according to Director of Merchandising Mike Foster. “It requires significant space to be in the towel and tissue area and dealing with expiry dates in the food sector means you have to get sufficient throughput of sales to be able to stock it profitably.”

FACILITIES SUPPLIES Special Issue

VENDOR SPECIAL

In the UK, VOW is seeing a big growth in demand from its resellers for coffee beans and ground coffee, with the barista-style blends such as Nescafé Azera and Millicano proving particularly popular. “Tastes are changing and we’re all becoming coffee snobs,” says Nice. “Coffee machines are a hot topic and the self-serve pod solutions are faring better than ever, with a big expansion in the number of high-quality machines that are increasingly convenient and efficient to use. Machines that don’t require any plumbing still represent an untapped market opportunity as these are ideal products for reception areas and boardrooms. Customers are also looking to us to resolve their serving requirements with products such as disposable cups and this continues to be a big growth area for us.”

The big untapped Special Issue sub-category is water –

CATEGORY UPDATE Facilities Supplies

Special Issue

particularly the five-gallon VENDOR bottles and the filtered SPECIAL drinking water systems

As well as European and US firms, antipodean dealers are also benefitting from the increase in FS sales among the traditional OP community. Australian dealer group Office Brands, for example, has seen a 6.1% overall rise in sales in this category over the past year, with the jan/san sub-sector a star performer, increasing by 8.8%. “It’s the core focus of our marketing campaigns,” comments CEO Gavin Ward, “and we’re specifically targeting this area for further expansion.” COFFEE COUNTS Back to the breakroom, the drinks, snacks and catering equipment that comprise the main products in this category continue to make up an important slice of the overall FS pie. But it’s the coffee market within this sector that many resellers are most excited about. In the US alone, office coffee is worth over $5 billion a year. This area clearly represents a tremendous opportunity for OP dealers anywhere and is a category where they could be offering a product as well as equipment and service proposition.

But coffee is not the only drink with which money can be made. “Dealers really need to embrace the overall beverage side of breakroom if they want to continue seeing large growth in this category,” says Foster. “The big untapped sub-category is water – particularly the five-gallon bottles and the filtered drinking water systems. The wholesalers are good at providing the typical snacks and foods, but they’re not extensively selling equipment in this area because it requires training. “It’s not something a company just orders, you have to sell it to them based on their specific water needs and then supply the correct quantities on a continuing basis, all with the appropriate chemicals that need to be added. Energy drinks and flavoured waters are also up-and-coming items that firms now want to buy through their OP dealer.” HEALTHY HABITS There seems to be a distinct geographical divide in opinion about whether the ‘healthy snack’ market offers a significant growth opportunity in OP. In the US the view is that this market is being driven by the increasing influence of millennials in the workplace who are demanding ‘better for you’ products. This is forcing firms that want to retain a younger workforce to seriously re-evaluate their snacking and beverage offerings, consequently producing growth in this area.

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Facilities Supplies CATEGORY UPDATE

Snacks are becoming a focal point in the breakroom, with employers often supplying such offerings as a ‘perk’ of employment. “With the company culture of large tech firms like Google becoming more visible, these perks are now expected by many millennials,” says Hoffman. “For years it’s been said that if you get the coffee business you also get the cups and creamers. Now that’s being expanded and dealers are often adding on the breakfast bar and snack business too.” Taking the offering even further, in Australia Office Brands is trialling the provision of fruit baskets as an outsourced service with a margin. Although at the moment this business is still very small, it is showing there is demand for healthier office foods out there. In the UK, meanwhile, VOW’s Nice tells quite a different story. “We’re constantly surprised that there isn’t more interest in healthy snacks for the office. As such, we don’t stock fresh or chilled food and instead focus on the longer-life products that are higher in sugars and preservatives. “Indeed, we are seeing resellers experience growth in demand for a wider range of sweets and confectionary as well as breakfast solutions. Consequently, we’re likely to concentrate on these areas together with developing product lines that complement the serving of traditional foods. “We also see promise in innovative breakroom storage solutions that are important where space is often at a premium. We believe that the overall addressable market for office breakroom is around £500 million ($624 million).”

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Amazon will launch in our [Australian] market in September 2017 and is reportedly focusing on grocery as its major category

THE WAY AHEAD Overall, companies expect to experience continued success in the FS market and are focusing much of their attention on ensuring that they maximise all the opportunities. However, there are likely to be bumps in the road ahead. Ward mentions the long shadow of Amazon that’s now falling across the Oceania region: “Amazon will launch in our market in September 2017 and is reportedly focusing on grocery as its major category. I suspect this will strongly impact on our ability to grow the breakroom category further.” Foster remains more upbeat. “I believe that a substantial part of a dealer’s growth is going to come from the FS categories, particularly breakroom, safety and MRO products, all of which could lead to some large profits.”

CLEANING UP IN OZ Worldwide cleaning industry association ISSA is holding its inaugural Cleaning & Hygiene Expo in Melbourne, Australia, from 9-10 May. OPI spoke to Oceania Manager Kim Taranto about the key components and themes, and the reasons why ISSA has chosen to hold an event in the region. OPI: This will be the first time you’ve held an ISSA exhibition in Australia. What has prompted this? Kim Taranto: The ISSA Cleaning & Hygiene Expo in Australia is the culmination of a chain of events set off by the merger between the National Cleaning Suppliers Association (NCSA) and ISSA. The former President of the NCSA, Stuart Nicol, was responsible for forging this partnership between the two associations and became ISSA Oceania’s Advisory Council Chairman. It’s thanks to his forward-thinking that the expo came about. It’s part of ISSA’s remit to change the way the world views cleaning and Australia has always been on our radar. Stuart saw that this merger presented a golden opportunity to make this expo a reality. There were already two competing trade shows – Ausclean Pulire and CleanScene – in the region, but it had become clear that having two events was financially unsustainable, logistically unworkable, and didn’t deliver enough value. So ISSA took on the mission of joining them together and uniting what was a fragmented industry under one banner. A partnership was then formed with Interpoint Events to create this single trade exhibition where all sectors of the industry could come together. OPI: What are the core themes and events of the seminar schedule and workshop line-up? KT: As this is our first event in the Oceania region we want to attract a wide audience and offer a broad choice to both exhibitors and trade show attendees. The Education Theatre will host various first-time events never before presented at previous cleaning industry exhibitions. This will include two keynote speakers, ISSA certified training courses and a collaborative lunch hosted by the Facilities Management Association on the topical Cleaning Accountability Framework (CAF). CAF is an independent, multi-stakeholder initiative that seeks to improve labour and cleaning standards in Australia. There will also be seminar sessions catering to building service contractors, healthcare workers, carpet and restoration technicians, plus many more. OPI: What, in your opinion, are the key priorities for companies in the Australian cleaning industry today? KT: The key priorities centre on those innovations that will increase productivity efficiencies. Because of high labour rates in Australia, contractors in particular are looking for cost-saving efficiencies that will make their employees’ jobs easier and faster, while at the same time still maintaining a high standard of quality. Another priority would be forging more partnerships and alliances. Working together can make this industry great and it’s the only way forward to raise the profile of the cleaning industry in this region.

Kim Taranto

OPI: What are likely to be the key innovations that manufacturers in the Oceania region will be looking to highlight specifically? KT: We’ve already seen a taste of the future in the innovations showcased at the ISSA/ INTERCLEAN North America Expo at the end of last year. This began to highlight the technical advances made possible by robotics and augmented reality. I expect further developments in these areas to be a major focus of the show.

FEATURE

The environmental impact of drinking coffee may not be on everyone’s radar, but it’s been attracting a lot of media attention recently. OPI investigates the story behind the headlines

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t’s no secret that the world is coffee crazy, with over nine billion kilogrammes of it drunk worldwide in 2016 alone. The US is the leading coffee-consuming nation in the world – 64% of adults drink it at least once a day adding up to an incredible 140 billion cups every year. A considerable amount of that global consumption is now sourced from coffee shop chains and every day millions of people think they’re doing the right thing by throwing their used coffee cup into a recycling bin. But they might be making a mistake – coffee cups, as a matter of course, aren’t easily recyclable. The take-out cups from popular brands such as Starbucks, Caffè Nero and Costa Coffee are impregnated with polyethylene to make them waterproof. But this plastic is difficult to remove, making these cups almost impossible to recycle in bulk in a standard processing plant. It requires specialised facilities that are often in short supply – only two plants exist in the UK, for example – though it’s noticeable that countries such as France and the Nordic region where legislation is tougher are far more advanced in this area.

RECYCLING DILEMMA Most cups aren’t even made from recycled material in the first place and use up a huge quantity of virgin-paper pulp. After a brief useful life containing coffee for a few minutes, they’re thrown away, creating waste and leaving a big carbon footprint. If you dispose of a cup in a public recycling bin, it’s highly likely it’ll be diverted to landfill or sent for incineration. In the UK, some seven million cardboard coffee cups are thrown away daily, with just 1 in 400 being recycled. A government enquiry has been launched

Special Issue

FACILITIES SUPPLIES

Special Issue

VENDOR SPECIAL

to look into the environmental damage this is causing and support possible solutions. Technically, these plasticised containers can already be recycled. And the fact that it can be done means they are often described as ‘recyclable’ and some even show the ‘Mobius-loop’ symbol – the three arrows in a triangle. But in reality, only a tiny proportion will ever actually be reused – a fact most coffee drinkers are unaware of and one which the coffee shop chains haven’t been particularly forthcoming about. To date.

After a brief useful life containing coffee for a few minutes, [disposable coffee cups] are thrown away, creating waste and leaving a big carbon footprint It’s not just coffee cups that are attracting negative environmental headlines at the moment. The aluminium and plastic coffee pods or capsules used in single-serve machines such as Nespresso are difficult to recycle too, so most of them end up in the bin and are being sent to landfill, where they can take hundreds of years to biodegrade. The problems are not insurmountable and a lot of initiatives seem to be launched at the moment, undoubtedly spurred on by all the negative publicity that’s been flooding several of the big coffee-drinking nations. Specialist recycling facilities can process hot drink cups, for example, by soaking them in a warm solution

ENVIRONMENTAL EVOLUTION Despite these headwinds, some initiatives may hold promise. Costa Coffee is evaluating a product from Smart Planet Technologies, known as reCUP, for use in its stores. This hot-liquid paper cup uses a mineralised-resin coating on its interior surface rather than polyethylene and is fully processable in traditional paper recycling plants. In the meantime, Costa is also implementing an in-store recycling scheme for its 2,000 UK store locations that will bring the cups to specialist recycling centres that can accept standard paper cups. McDonald’s is introducing a similar initiative. In the US, Starbucks has recently come under fire for failing to deliver on a promise it made in 2006 to make its cups more environmentally friendly. The company has responded by saying its cups use 10% of recycled fibre and its hot cup lids are now recyclable. But there’s a very long way to go with introducing a fully-recyclable cup for all its global markets. Some Starbucks stores tested out a new recyclable coffee cup called Frugalpac in the summer of 2016. This cup contains a thin plastic liner that is lightly glued to the inside and naturally floats away from the paper in the re-pulping process. Starbucks claims the pulp can be recycled up to seven times. Other cups lined with polylactic acid (PLA) – a biodegradable polyester derived from renewable resources such as corn starch or sugar cane – are

another option being marketed by several different companies. Rather than making them recyclable, it makes them fully compostable (see also ‘A Manufacturer’s View’, page 35). A scheme to boost disposable coffee cup recycling has recently been launched in the City of London in an attempt to prevent over five million cups a year from the Square Mile ending up in landfill (see tweets below). The City of London Corporation, meanwhile, in conjunction with Network Rail, coffee chains and some employers, is introducing dedicated recycling facilities in offices, shops and streets and aims to recycle approximately half a million cups each month.

FEATURE Breakroom

to separate the polyethylene from the paper fibre. UK waste management firm Veolia, meanwhile, has unveiled plans to develop a new paper-pulping facility that can deal with a greater proportion of disposable cups and reprocess the material into products such as egg boxes and coffee cup holders. Recycling experts maintain that there are contamination problems that still need to be overcome. Cups containing residual tea or coffee can easily contaminate other types of recycled paper and the plastic lids often get thrown into the mix, meaning additional sorting is necessary or quality can be adversely impacted. Environmentalists further question whether the energy, water, haulage and sorting costs of recycling would actually make the process economically or environmentally unsustainable.

Nestlé’s coffee pod giant Nespresso is also attempting to address the issue of recycling its coffee capsules POD PROGRESS Nestlé’s coffee pod giant Nespresso is also attempting to address the issue of recycling its coffee capsules. When they buy the pods, customers are being provided with a storage bag that can take up to 200 used capsules, which can them be dropped off at a collection point or be left on their doorstep for collection. The used pods are then sent for recycling. Compostable coffee pods are another solution being developed by a number of firms, among them UK start-up firm Halo Coffee which claims to have developed the first fully-compostable pod for home Nespresso machines. With awareness of the issues now hopefully greater than ever, all of these initiatives are likely to ultimately ease the environmental burden that disposable coffee cups and pods place on the planet. But in addition to addressing merely the end consumer, the B2B market has an equally important role to play, especially as the breakroom is becoming an ever bigger category for resellers in our sector. Read on to find out what two industry experts in the sustainability field have to say about the topic.

May 2017 33

Breakroom FEATURE

THE RESELLER VIEW Wiles Greenworld, part of UK-based Commercial Group, started doing a lot of work around disposable coffee cup recycling last year when the topic initially got into the public domain in a big way. We talked to several of the major recycling companies we use to see what their approach was. What London, UK-based Bywaters – which deals with a lot of the first mile recycling in the capital where a good proportion of our clients are based – said, for example, was interesting in the fact that they don’t actually segregate these cups. They treat it as a low paper recycling grade and if you mix the cups in with your other papers it’s fine – the chemical lining of the coffee cups just gets washed out during the normal process. As long as the quantities of coffee cups are comparatively low, as they probably would be for a small or medium-sized business, it’s not actually a problem. THREE-PRONGED APPROACH Our approach is three-pronged: firstly, for those customers where staff bring in their disposable cups from the high street coffee chains, we recommend that they check with their recycling provider to make sure that they can treat that type of waste and don’t send it down other routes like creating energy from waste or so. At Wiles Greenworld we also have our own waste recycling streams, the first ones of which were set up by company founder [and now CEO of dealer group Office Club] Toby Robins in the 1990s. The majority of these are free for our customers to use as a sort of backloading offer because we have our own brands and our warehouse with its own recycling centre. This means the quantities we store are high enough in volume and weight for it to be worthwhile for recycling companies to come and collect from us. Secondly, for customers that want to go down the disposable route and buy those products themselves we offer biodegradable cups from a company called Vegware. It’s a compostable product, so can enter the food composting recycling stream. There’s still work to be done here, but essentially these cups can go into your food waste stream.

Jonathan Withey, Lead Sustainability Consultant, Wiles Greenworld

Thirdly – and this is what we would recommend above everything else – we advise our customers to not have disposable coffee cups in the office and instead go down the more permanent cup solution. KeepCup has become a good partner for us. This Australian company is very much focused on the lifecycle of its producs. KeepCups look very appealing and the UK-produced cups come in a variety of ranges. It’s not the cheapest solution, but we’re looking at some corporate branding for our larger customers which is a nice touch. It’s a good story and some customers are really engaging with it. Essentially, if you market it in the right way, have the right conversations with your customers and explain the benefits, you will get engagement, uptake and sales from it.

We advise our customers to not have disposable coffee cups in the office and instead go down the more permanent cup solution

One of the many variations of the KeepCup

Overall, we’re seeing a fair bit of consumer demand for more sustainable practices in terms of recycling and waste disposal. Part of my role is to go to our customers as a consultant and give recommendations that minimise our environmental impact from a product point of view. And the coffee cup and coffee pod disposal conversation is a huge one right now. The UK on the whole is majorly behind in terms of legislation to drive increased recycling rates and other sustainability initiatives, compared to countries such as France, Germany, Switzerland and the Nordic regions. In my opinion, it’s going to be consumer demand and the responsible attitudes of businesses that will fundamentally drive any changes. With Brexit on the horizon, it will also be interesting to see how many of the European laws in general and on sustainability in particular will ultimately be re-enacted.

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OTHER CATERING CULPRITS

The environmental issues around coffee consumption are currently taking centre stage in the media, but it shouldn’t be taking all the flack. The food and catering industry is responsible for other sustainability problems too. Plastic bottle recycling is one pertinent problem. In Europe more than 1.8 million tonnes of bottles are recycled each year, but that still only represents 59% of those used and much more could be done. In France specifically, plastic crockery and cutlery is to be banned unless it is made from biologically-sourced materials. The law comes into force in 2020 and is part of

a French environmental initiative aimed at tackling climate change. The backlash against plastic is part of a growing trend in several parts of the world. It’s reported that India is responsible for an astonishing 60% of the plastic that is dumped in the world’s oceans every year and its government is taking measures to address this. India’s capital city Delhi has introduced a ban on disposable plastic and in Karnataka, a state in the south-west of the country, no wholesale dealer, retailer or trader can now use or sell plastic carrier bags, plates, cups, spoons or plastic wrap.

OPI will explore this topic and others, such as the most environmentally-sound approach to coffee grounds disposal, in our annual Green Thinking supplement later in the year. If you have any views on these issues, please contact OPI’s Editor at heike.dieckmann@opi.net.

FEATURE Breakroom

THE MANUFACTURER VIEW OPI: Emerald is a company that prides itself on its sustainability. What’s your view on the disposable coffee cup and pod debate? Ralph Bianculli: Every year six million trees are cut down just to make coffee cups and North America is the biggest consumer of disposable cups by some margin – we use about 65-70% of the world’s total. The vast majority of these cups are polyethylene-lined. The biggest challenge with recycling them – they are 90% made out of paper pulp – is that they cannot go into the same recycling stream as traditional paper because of the plastic lining that constitutes about 10% of the overall product. To be able to recycle these cups, they have to be put through a process called hydropulping whereby the polyethylene lining is separated from the paper. There are certain recycling groups in the US that will take those cups, separate the different materials, re-bale the paper products and resell them. Hydropulping is a new and innovative industry, but it’s an intensive process, costs a lot of money and I wouldn’t say it’s entered the mainstream yet. What we at Emerald – as well as other sustainable companies – prefer is to make polylactic acid (PLA)-lined hot cups which means they can be composted in commercial composting facilities. This is becoming an option in a number of progressive US cities such as San Francisco or increasingly now New York City (NYC) because of new legislation. OPI: So are all Emerald disposable cups compostable now? RB: We’re definitely concentrating on the composting side. However, we’re also taking a completely different look at the manufacture of cups. We’ve just run the first production of tree free hot cups, so instead of using traditional paper pulp, we’re using bagasse, a by-product of sugar cane. The finished goods are made in the USA and the results we’ve had so far have been fantastic. If lined with polyethylene, the cups could still go to a hydropulp facility, but if we’re using PLA, these cups are also fully compostable. I believe this is going to become increasingly mainstream, as research shows that we’re fast running out of landfill space here in the US, and we need to channel organic waste out of landfill and into either commercial composting facilities or very sizeable biodigesters. Some municipalities and local/regional governments have already passed laws on composting organic waste. NYC has recently passed law 1162-A, which mandates that food manufacturing/ consumption facilities divert their organic waste to a composting site or use an on-site biodigester to divert the organics into water.

Ralph Bianculli Jr, Managing Director, Emerald Brand

You need to use a cup between 65 to 80 times to have a positive environmental impact over using a paper cup From an environmental perspective our research shows that you need to use a cup between 65 to 80 times to have a positive environmental impact over using a paper cup. As such, our stance is to create a disposable cup, aka our new sugar cane-based hot cup, as sustainably and with as low a carbon footprint as possible. OPI: What about the coffee pods – there’s also a lot of debate around their recyclability? RB: Yes, from the data I know less than 15% of these pods are recycled. The vast majority are going straight to landfill. Composting here is the answer too, in the mid and long term. There are already coffee pods out there that are made from 100% compostable zero waste material. Reunion Island has recently come out with its first compostable single cup solution that is more cost-effective than the mainstream pods on the market. And Massimo Zanetti has introduced the first compostable pods to fit in Keurig machines, I believe. There are doubters, of course, and clearly it’s subjective, but I believe the taste of the coffee coming from all-natural, 100% compostable agricultural-based coffee pods as opposed to that coming out of a plastic container is much better. You can definitely taste the difference. I would also argue that the health implications are better.

May 2017

OPI: Do you see demand for compostable products and if so, who’s driving it? RB: It’s a mix. I would say that end users are driving the change through proactive vendors like ourselves while everybody in the middle of the chain – distributors, wholesalers and resellers – are largely reacting to the demand that’s being generated through educating these end users.

OPI: What about reusable cups – would that not be a better option all round, ie eliminate the waste completely? RB: That’s a great question and we’ve done a lot of research on reusable mugs. I have a biased opinion I realise, but by the same token I’m also very entrenched in sustainability and as such am trying to be objective. There’re a number of economic issues with reusable cups, certainly in the B2B space. The first one is that most reusable mugs are ceramic ones, so they are expensive to begin with, at least a dollar for just one mug. Secondly, there’s a tremendous amount of breakage as well as plain and simple pilfering which adds further to the cost as an employer has to replace them or – depending on the policy – charge employees to do so. Thirdly, there’s the washing of the mugs. Say, you have 2,000 people in your office and 60% of them drink coffee every day. That’s 1,200 cups at the very least going through a very water-intensive process, using detergent, labour and often paper towels to dry them.

SPOTLIGHT

A time of change in

AUSTRALIA

Market dynamics are changing in Australia with a major shake-up in the reseller channel. OPI asks the country’s leading industry executives for their take on the situation and what it could mean going forward – by Andy Braithwaite

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he Australian office products market finds itself in the unusual situation of having its three largest resellers – Officeworks, Staples and OfficeMax – up for sale at the same time. Private equity (PE) group Platinum has agreed to acquire Staples and Office Depot-owned OfficeMax, although the latter agreement in principle may still run into regulatory hurdles. Meanwhile, it also looks increasingly likely that Officeworks will be taken public by its owner Wesfarmers. That’s a lot of moving parts in a market which has already seen recent consolidation with ACCO’s acquisition of a 100% stake in Pelikan Artline, and wholesaler GNS buying Perth-based WA Stationery Wholesalers and promising more to come. “Clearly, there are concerns in the Australian office products market at present given the three largest resellers are for sale,” notes Craig Blight, Managing Director of manufacturer and distributor Cumberland Corporation. “Volume decreases in key categories and Amazon on the way, among other things, have the industry a bit spooked. However, moving forward I think there will be more consolidation on both the reseller and supplier sides, which in the end will make the sector stronger.” With Staples having been up for sale for some time, the agreement with Platinum did not come as much of a shock. “I was not surprised at all; it appears to be a world and very much OP industry trend at present,” says industry consultant Andrew Penfold. “PE firms have massive funds available to them and would be able to outbid any industry players and/or other local companies. I understand there was some interest by local PE funds but at, I assume, lower multiples. It’s interesting a US fund would be so interested in Australia/New Zealand, and I do wonder whether it may have some type of grander plan beyond these two countries.” Questions over Platinum’s motives have also been raised by Dominique Lyone, founder and CEO of

Australia’s largest independent contract stationer COS. “My main concern is what their time frame and level of commitment to the sector are,” he states. “It is unclear what their agenda is.”

I am hopeful that the process of both Staples and OfficeMax being on the market will bring a new level of sanity to the competitive environment GAME CHANGER? Despite turnaround efforts, Staples’ sales in Australia have reportedly fallen by around a third to A$800,000 (US$606 million) since Staples Inc took full control of Corporate Express in 2010 and it continues to rack up losses. As Gavin Ward, CEO of dealer group Office Brands, suggests: “Platinum will not have invested to break even or make a loss, so I am hopeful that the process of both Staples and OfficeMax being on the market will bring a new level of sanity to the competitive environment in Australia. I have no doubt

SOLD?

Australia

SALE / IPO?

SOLD?

our industry puts in more effort towards selling these categories. The office products industry is in a much better position than others to build business in new adjacencies and to prosper.” If Platinum fails in its efforts to acquire OfficeMax, the challenge will be significantly harder, suggests Ward. “They will need to bed down the existing operation, cut out any excess if possible and then focus on those weaknesses. There is potential, but the task of generating the types of profit normally sought by PE firms will be a challenge. I do see that this will create opportunity for the rest of the market though.” It would also raise questions about the future of OfficeMax. Lyreco would be a potential suitor although, understandably, Liénard declined to comment on that particular topic. With the ACCC set to investigate a Staples/ OfficeMax tie-up and the future of Officeworks still to be decided, it means continued uncertainty in the market. As Ward remarks: “I believe such takeovers inherently create instability in companies and the loss of good people and intellectual property. I have no doubt this will create opportunity for our members and particularly players like COS.”

If [Platinum also succeeds in acquiring OfficeMax] then we are all in trouble – vendors, resellers and customers alike Stability has been a key factor in Officeworks’ impressive performance over the past few years. “It is a wonderful example of the benefit of a consistent strategy,” says Lyone. “Officeworks is focused on a clearly-defined customer segment and is doing the operational basics well.” Will Officeworks be destabilised after a change of ownership? And how long will it take Staples and OfficeMax to set themselves on a consistent and profitable course assuming for a moment that the deal gets regulatory approval? For a closer look at the potential challenge to a merger of Staples and OfficeMax in Australia, see the recent article on opi.net, ‘Could Australian regulators scupper mega office products merger?’

May 2017

A GREAT FIT The consensus is that a Staples/’Max merger makes sense. “They’re a great fit,” states Ward. “OfficeMax is strong in New Zealand, Staples isn’t. ’Max is strong in education, Staples isn’t. But Staples has better strengths in the corporate segment. This is a logical marriage and was previously endorsed by the ACCC [the Australian antitrust regulator].” Liénard agrees. “The deal makes sense from an investor standpoint, combining the two volumes and benefiting from synergies that are potentially even bigger in a vast market like Australia. Nevertheless, the integration of these two entities down under will be a long and very difficult process. We know how complex it is already for experienced industry players to integrate and it will not be any easier for Platinum.” “I would think it makes perfect sense,” adds Mark Gartner, owner of distribution business Lectronic Trading. “A larger critical mass and cost rationalisation may go a long way to sorting out their profitability issues. I understand there are rumblings as to whether the ACCC will give it the go-ahead, but I can’t see that a lot has changed since it was previously given the nod.” Lyone, meanwhile, is less than enthusiastic about this PE involvement in the market. “If [Platinum also succeeds in acquiring OfficeMax] then we are all in trouble – vendors, resellers and customers alike,” he warns. “Private equity firms are here to maximise profits in a short period of time. Staples and OfficeMax coming together, along with ACCO’s acquisition of Pelikan in 2016 and a fall in the Australian dollar of 25% over the past two years... of course I am concerned.” Cumberland’s Blight remains optimistic, however. “I’m not so sure it’s all doom and gloom,” he says. “I think there are emerging categories which will help the industry prosper in the future. Other sectors (cleaning, packaging, etc) may suffer as

SPOTLIGHT

that there are opportunities to grow margin here; Officeworks has been doing it for many years, and new management [at Staples] may see this as an opportunity to change the game.” This is a view shared by Lyreco’s Asia-Pacific Managing Director Greg Liénard, who has overall responsibility for the reseller’s operations in Australia. “I think this [acquisition] is a positive evolution,” he says. “I am certain Platinum will be making sure that Staples goes back to the level of profitability it enjoyed in the past, and it will mean a more professional competitor. I think the whole market suffered from some local decisions taken by Staples in the past three years.” Liénard also believes there may be an “area of opportunity” for vendors to renegotiate new terms on their global agreements with Staples, which presumably will no longer apply once the Platinum transaction closes. It is something that is hard to judge, however. The search for better profitability might hit vendor margins, as would a Staples/ OfficeMax combination if that deal went through. What Platinum does with Staples in the short term largely depends on the outcome of its bid to acquire OfficeMax. Office Brands’ Ward says this is the “number one issue” facing the PE firm as it “would clearly have the most significant impact on improving efficiency and profitability for both organisations”.

European 7

14-16 June 2017 The Westin Grand Berlin

An invitation-only conference for C-level executives with a focus on the European business products industry “The European OPI CEO Forum is one event that I always prioritise attending. It’s an insightful blend of current industry challenges and the wider future trends. I always return to the day job with lots of ideas, food for thought and a broader perspective of the changes that successful companies need to embrace. It’s also a one-stop shop to network with the key leaders shaping our industry.” Simon Drakeford, CEO, EO Group

OPI EUROPEAN FORUM l The European Forum is not a large conference, but a small, closed forum for CEOs and senior level executives at leading resellers, manufacturers and wholesalers of business supplies. l

The European Forum will feature speakers and moderators of an extremely high quality to stimulate thought and debate.

The European Forum offers a unique opportunity to spend quality networking time with fellow leaders in the business supplies sector.

PAST ATTENDEES

Attendees at recent OPI European Forums include senior representatives from companies such as: 3M, ACCO Brands, Acme United, Actionable Intelligence, Advanced Workplace Associates, ADVEO, ALSO International, Amazon France, Amazon Germany, Amazon UK, Arnos Australia, Avery, BIC, Bi-silque, Bong, Brother, Bruneau, Bureaucrat, CEP Office Solutions, Clover Technologies Group, COLOP, Corwell, CPD, Daymon Worldwide, ECi, edding, Esselte, EO Group, Everything Office, EVO Group, Exacompta, Fellowes, First Base Group, Forrester Research, FusionPLUS Data, GMK Markenberatung, Gruppo Buffetti, Hamelin, HP, Highlands, HSM, ICIDU, Interaction, International Paper, Lyreco, M2, MBP Group, MEDIUM, Messe Frankfurt, Moorside Office, nectere, NEMO Group, Newell Brands, Office Club, Office Depot, Office Friendly, OP Network, OP Resource, Oresa Ventures Romania, OTTO Office, PBS Holding, Pilot Corporation of Europe, Printus, ProBuro, Really Useful Products, RTC Proffice Experience, Rubbermaid Commercial Products, Ryman, Smarton Belkanton, SPOT Group, Staples, Stewart Superior, Superstat, tesa, TC Group, UOE, Victor Stationery, Waser + Co, Westcoast, Wulff Beltton, Xerox.

For more information about this event, please visit www.opi.net/EF2017 If you would like to be considered for an invitation, please email steve.hilleard@opi.net

€

£ €

HOW TO...

The social selling

LIFELINE

In the final part of our How to… guide on social selling, Thierry Gillmann summarises how this method can tear down walls while also warning of the potential pitfalls

ll sales representatives across the world agree: it is becoming increasingly difficult to contact decision-makers. Traditional methods such as bombarding a potential customer base that did not ask for letters, emails and phone calls have clearly shown their limitations. Social selling to some extent tackles this problem and throws sales people a lifeline through social networks, particularly professional ones. Their prospects may very well be among the more than 400 million LinkedIn users in the world. Long gone are the days when a profile on this platform was created just to post a CV. Today, users of a professional social network join essentially to stay abreast of things and meet people who could be useful to them in a professional context. Indeed, one of the reasons for accepting a request to connect to a commercial profile on LinkedIn is to identify the person rapidly as being capable of keeping us informed and/or being useful.

Broadly speaking, these networking places facilitate the discovery and qualification of new prospects; improve the conversion rate; and simplify and humanise the commercial relationship. PREPARE THE CONVERSATION Social selling holds a wider interest for sales representatives. First of all, it provides them with a complete picture of the company they are interested in: its modus operandi, relevance and values. Sales reps are therefore better prepared for the conversation they will hopefully have eventually. Using Google to find out who they are going to meet no longer suffices: reps need to study their prospects much more closely in order to adapt to them optimally. But social selling should not be mistaken for a mere tool. It concerns behavioural modification first and foremost, putting customers at the centre of attention and offering to help them to succeed.

SOCIAL SELLING DON’Ts

Social selling [...] throws sales people a lifeline through social networks, particularly professional ones

May 2017

• Create a false profile or several profiles (one for your friends, one for your customers is the most common mistake made). • Not check the image your targets can have of you (if only by typing your name into Google) • Lie about your career or education • Invite new contacts without personalising your invitation request • Build your exchanges on commercial interactions • Not be authentic • Request false recommendations from your friends • Flood your network with spam or any inappropriate content • Invite several dozen contacts per day • Share strictly promotional content

Social Selling HOW TO...

SOCIAL SELLING DOs • Design the dissemination framework A social network is not enough to embark on a social selling strategy. You will need a correctly designed dissemination framework, adapted to your target group – a framework that inspires confidence and generates conversions rapidly. If your website or blog is at the centre of your framework, prepare it to receive qualified visitors. It must be responsive (and mobile-friendly), feature content that is easy to read and share, simple and efficient to use, and capable of guiding the visitor to a conversion tunnel. You will also have to implement a curation strategy. • Deploy a real editorial strategy You need to use the aforementioned framework to provide content for your customers and prospects. To avoid it ending up in the spam folder, you should produce and disseminate two to three such weekly content pieces – one a week at the very least. To produce this content, you have to be able to rely on teams that are capable of defining your editorial line, but that can also write, find catchy phrases and illustrate the content (with diagrams, computer graphics or videos, for instance). It is a lot of work, which will have to be outsourced entirely or in part.

• Train the sales teams Once you have a well-oiled production machine – and only then – it is time to bring your reps into play. Put in place training schemes to ensure a minimum level of comprehension of the objectives, tools and processes. Call on an external specialised firm to help you get the right message across among the most intractable persons. • Measure the effectiveness There is no progress without measuring, among other things, the number of leads generated by the approach, the conversion rate (compared with the conversion rate of leads from other channels), the proficiency in the approach or tools by the sales representatives, and the ability of the content to generate conversations. • Improve continuously Social selling will usher you into the era of continuous improvement. Find the best tools (with integration between LinkedIn and CRM, for instance), improve the content, test new vehicles, discontinue those which are not working properly, invest in dissemination through paid media (advertising of your content online), and share successes with the sales teams, so that everyone knows and works on their areas for improvement.

Thierry Gillmann is an advanced content marketing evangelist with an entrepreneurial background. He is CEO of Voicings, a French content consultancy boutique specialised in B2B and technology sectors.

SOCIAL SELLING TESTIMONIALS “Everything moves faster on social networks: contact, interactions, measuring the value of the relationship, etc”

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Sales manager for a software publisher in the public sector

“I was a bit hesitant at first. But I quickly felt equally at ease with meetings on the telephone as face to face. I must admit that I cannot imagine my professional life without it” Development manager of a consultancy firm

“It is all about making it easier to contact prospects... not direct selling. The aim is to be able to meet those people afterwards face to face, in real life” Key account manager of an industrial company

“The aim remains the same: manage to arrange a meeting, at the end of which a purchase order is signed. It is the way to reach this objective that is changing” Sales manager for a software publisher in the public sector

“The relationship is ‘closer’ and more human, more akin to an oral than a written conversation” Artist manager/ gallery owner

“The success of social selling also requires an overall digital communications strategy” Communication manager of a large service company

EVENT

ACTIVE WORKING SUMMIT

STEPPING

A healthy office environment is gaining momentum as a major driving force in today’s workplaces, in particular the mantra of ‘sitting is the new smoking’ – by Michelle Sturman

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itting is not really the new smoking – it doesn’t pass on any secondary effects, and employees often cannot control how long they sit in the working environment. But that aside, office desk sitting is becoming one of the largest factors and strongest messages in the fight for healthier workplace surroundings. While recent headlines have been screaming about ‘sitting is the new smoking’, the theory has been criticised by some as just “another way to control us”, or “pushed by the creators of office furniture”, and the lack of published scientific research on the matter has certainly hindered any real progress. Until now. There is a substantial and growing amount of peer-reviewed data that has been conducted worldwide, and is now coming to fruition and being released into the public domain. At the recent Active Working Summit in London, UK, experts from around the world shared their research. As information was revealed to a diverse audience, it became clear that all the evidence points to the same conclusion: reducing sedentary behaviour – especially the amount of time spent sitting – in the workplace can lead to increases in health and well-being as well as productivity at work.

LOSSES AND GAINS It doesn’t take a genius to figure out that unwell employees are likely to require days off sick, which results in millions of missed working days and billions in lost revenue. In other words, an unhealthy workforce not only impacts on employees themselves, but also a company’s bottom line and even the economy at large. At the event and referring to a Financial Times report from April 2016, expert adviser on health and work to NHS England and Public Health England Dame Carol Black noted that UK workers are 14% less productive than before the financial crisis of

2008. As a result, she said, we have to implement lots of things to get people more productive. Britain’s Healthiest Workplace campaign, for example, aims to get businesses involved in understanding the link between health and well-being and company productivity. Black said one of the initiative’s main objectives is to engage with employers to ensure they understand a healthy work environment is not just a nice add-on, but that conditions such as obesity and high blood pressure, as well as inadequate physical activity, have a direct link to the number of working days lost. Educating businesses about the real effects of a sedentary working life and encouraging employees to get up and move more is an uphill battle, but the general consensus is that without management buy-in and being led from the top, health and wellness in the office will continue to remain just a ‘nice-to-have’. Dr Nicola Eccles, co-founder of CP Active and Director of Research and Lecturer in Health, Wellbeing and Physical Activity, concurred, citing research undertaken that was based on targeted subliminal messaging in community spaces such as offices. “We learned that senior management need to walk the talk. The culture of desk working needs

75% Office workers spend

of their working day sitting

Office workers using sit-stand desks are

17% more

productive than those using traditional static desks

ONE in TEN employees report having musculoskeletal conditions

ONE in employees with physical health conditions also report

FIVE

having a mental health condition

to be rewritten by leaders and managers within an organisation. The question now needs to change to ‘why are you at your desk?’ from ‘why aren’t you at your desk?’.” The overriding opinion is that sitting mustn’t simply be substituted for standing, as Dr Benjamin Gardner, Senior Lecturer, Dept of Psychology at King’s College London, pointed out: “There’s a key misunderstanding: the sitting risk is different from not doing physical activity. We need to raise awareness and provide the clear message that we should be engaged in active standing, not sitting/standing still.” As a movement, active working is gaining momentum globally, but it will take a holistic approach and concerted effort from all stakeholders – policy makers, office furniture manufacturers, architects, occupational health practitioners, interior designers, employers, employees and resellers – to affect real changes. EDUCATION IS KEY An important link in the chain will be dealers selling ergonomic furniture to interested parties. But, as many experts are quick to assert, educating users on office furniture such as sit-stand desks, for example, is imperative. In Scandinavian countries, these types of desks have been available for office workers for decades, but still employees are sitting for too long. At the summit, inventor of the Steppie balance board, Gitte Toft, argued that it’s important to understand the cognitive psychology behind this behaviour – humans are simply designed to be lazy and programmed to conserve energy. According to Professor Alan Hedge from Cornell University, after studying the effects of different types of ergonomic office furniture, there are varying degrees of musculoskeletal and productivity behaviours associated with each one. Hedge said that standing up often and moving is what matters, not how long you remain standing: “We have to educate companies and employees and teach them how to use these products properly. You can’t just simply buy them.”

million lost working days in the UK in 2013 due to musculoskeletal conditions

£100 million

ANNUALLY The combined cost of sickness absence and lost productivity through worklessness and health-related productivity losses

Working days lost to sickness absence every year in the UK

131 million 52%

of millennials said living or working in a healthy environment is influential to their personal health

$153 billion Productivity losses annually in the US from full-time workers missing work days due to chronic health conditions

May 2017

TAKING CHARGE Australia has recognised sedentary time as an emerging health issue and has taken steps to address the problem through a number of initiatives such as The Stand Up Australia Program of Research, and Safe Work Australia. Part of the Stand Up research team, Professor David Dunstan said that a study revealed four main factors which influence workplace sitting: intrapersonal factors

EVENT Active Working Summit

(income, education, occupation), interpersonal contexts (workplace culture, social support for change), physical environment (office furniture, office layout) and policy and regulatory environment (flexible work patterns, sit-stand workstations). Meanwhile, Safe Work Australia looks to increase public awareness and create widespread exposure of the “growing hazard of occupational sitting”. The scheme has just launched its Be Upstanding toolkit which includes social media, blogs, evidence-based resources, and business cases. The country also has shining examples of structures that have been purposefully designed as activity-based workplaces such as the National Bank of Australia and Medibank, both based in Melbourne. These buildings are hot-desking environments and designed to increase activity and facilitate movement within the premises. Perhaps the best endorsement of just how seriously governments are starting to take health and well-being in the workplace is the launch of Fitwel by the Center for Disease Control (CDC) in the US. The CDC co-developed and is the licensed operator of the high-impact healthy building certification that has been created to support healthier offices and improve occupant health and productivity. In order to gain certification, the Fitwel Scorecard measures health within 12 sections that impact the design and operations of a site and property interior, such as outdoor spaces, stairwells and location. Fitwel offers a three-star rating and more than 60 cost-effective, design and operational strategies for enhancing building environments. For more information on this topic and the Active Working Summit, please visit the Magazine section on opi.net.

RESEARCH

ADAPT

&survive

While predictions for the core OP market are gloomy, the wider picture looks encouraging, says the brand new State of the Industry Report

redictions last year that the ‘core’ office products market would decline by 1-2% have proved to be conservative estimates. However, increasing diversification seems to be reinvigorating the industry, as OPI and OP market researchers Martin Wilde Associates (MWA) found out for the fourth edition of The View from the Top: State of the Industry Report 2016-17. When interviewed in early 2016, only 24% of a sample of 59 senior OP industry executives in Europe, North America and Australia expected the ‘core’ OP market value to increase in 2016, while as many as 56% of respondents expected the market to decrease over the course of the year, with the largest share of these (29%) believing that the decline would be only 1-2%.

The recent 2017State of the OP Industry report found that core OP market performance in 2016 was reported by all 61 senior executives interviewed in these countries to have been worse than even those gloomy predictions. Only 15% felt that the value of the core OP market had increased in 2016, while as many as 68% of respondents believed that it had declined during the year – with the largest share (38%) reporting that the decrease had been as much as 3-5% (see Fig 1). The report investigates senior executives’ perceptions of OP market trends in seven countries – the US, Canada, Benelux, France, Germany, the UK and Australia – and the research found that, to some extent, similar downward trends were evident in all of these markets, for a number of different reasons:

Fig 1: Change in core OP market value (2016)

• • • • • • •

Ongoing digitisation Declining demand for core OP items More millennials in the workforce Poor economic situation Price competition Currency fluctuations The decline of the oil industry (in Canada and Scotland) • The impact of the Brexit vote • The impact of the US presidential election

10%

Don’t know

13%

20%

ALL CHANGE Despite all this, most respondents believed that their own companies had bucked this downbeat market trend in 2016, reporting that their sales had substantially outperformed the core OP market. Indeed, the majority (67%) of respondents claimed that their sales had increased in 2016, with the largest share (27%) posting growth rates of 3-5% and 8%, stating that they had achieved sales increases of over 10% during the year. Overall, the product categories that were by far the most widely-reported as growing through OP channels in 2016 were catering/breakroom supplies

May 2017

Unchanged

Increased by 1-2%

Increased by 3-5%

Increased by 6-10%

38% Decreased by 6-10%

Decreased by 3-5%

Decreased by 1-2%

Source: MWA Note: Figures do not total 100% due to rounding

n US n UK n Germany n France n Australia n Canada n Benelux

Decreased by 1-2%

Source: MWA

13% 38%

Decreased by 6-10%

10%

20%

Fig 3: Respondents by activity

n Product manufacturer/vendor/paper mill/OEM n Distributer/reseller n Other

www.opi.net 46

21%

• Nearly a third of these distributor respondents said that their average gross margins had increased in 2016, while only 29% claimed that they had decreased. This is comparable with the results of the previous survey. • On average, 6.2% of distributors’ sales were in jan/san supplies, and another 5.6% in catering/ breakroom products, with the share of sales in workwear/PPE/signage products, business gifts and managed print services (MPS) each being less than 2% on average in 2016. • Overall, the share of own label among the distributor respondents was 14.3% in 2016 on average.

29%

67%

TREND ANALYSIS This extensive research study is based mainly on insights and data collected from senior OP industry executives in a broad selection of major OP companies in the aforementioned countries (see Fig 2 and Fig 3):

It should be noted that it was the ‘traditional’ OP channels which were once again most likely to be regarded as having lost market share in 2016 The report also includes the 2016 financial performance of 15 major OP distributors in the US, Europe and Australia, as well as an analysis of the key industry events during the year. Additionally, it features the predictions of these key executives for the OP industry in 2017, including, for each country: • • • • • •

• • •

29%

particularly the contract stationers, small independent dealers, wholesalers and superstores. Other key trends identified by respondents for 2016 included the following:

26%

Don’t know

and jan/san supplies, as OP channels have increasingly diversified into the facilities supplies sector. A significant share also mentioned growth in office furniture as economic conditions – and end-user confidence – have slowly returned. Ergonomic products were also widely reported to have grown in 2016. However, ‘traditional’ stationery products, cut paper and printer/IT consumables were again quoted by the majority of respondents to have declined in 2016. Given that this is the perception of respondents in channels where the prime purpose was originally to supply traditional OP items, this is an ongoing trend that cannot be ignored. Broadly speaking, the two distribution channels that were by far the most widely reported to have won market share in 2016 were – once again – Amazon and the internet-only OP resellers. The larger independent dealers were also significantly quoted to have grown their share last year, confirming the findings of MWA and OPI’s recent Phoenix Report research study on the positive health of the dealer channel in the US and UK (see Research, OPI November 2016, page 100). It should be noted that it was the ‘traditional’ OP channels which were once again most likely to be regarded as having lost market share in 2016,

20%

13%

Decreased by 3-5%

Unchanged

Increased by 1-2%

State of the Industry Report RESEARCH

Fig 2: Respondents by region

67% Source: MWA Note: Figures do not total 100% due to rounding

•

Core OP market size and growth Estimated sales growth and margins Growing/declining product sectors New product categories being developed in 2017 Growing/declining channels The current market share of Amazon and the end-user sectors in which it is currently having the most success The effect on the OP industry of the Office Depot/ Staples divestment of European operations The effect of Brexit on the OP industry in Europe The effect of the Trump presidency on the OP industry in North America Future trends for other key issues, including own label share, the share of online sales and the share of sales in jan/san, breakroom, workwear/PPE/ signage products, business gifts and MPS.

A RELIABLE YARDSTICK In these turbulent times, senior industry executives need a reliable yardstick against which to assess their own performances, perceptions and strategies. The State Of The OP Industry 2016-17 is intended to provide this essential objective viewpoint. This must-have authoritative annual sourcebook for the OP industry is available now for only £850 ($1,080). To order your copy, go to www.opi.net/SOTI2017.

RESEARCH

Piranha

BUSINESS

Martin Wilde Associates and OPI are once again joining forces to investigate the appeal of Amazon Business within the business supplies sector

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ack in the summer of 2014, Martin Wilde Associates (MWA) and OPI published Swimming With Piranha, a market research report that investigated the use of Amazon for office products purchasing by B2B buyers in the US and the UK. The study published some significant findings about the true extent of Amazon’s penetration into the B2B OP market and why these end users chose to purchase from the company. Things have moved on since then. In the spring of 2015, Amazon launched Amazon Business, a B2B portal that offers “hundreds of millions” of products, business-only pricing on select items, quantity discounts, corporate credit, free two-day shipping on eligible items and orders above $49, and multi-user business account administration allowing integration with third-party procurement solutions.

page 10). The fact that Amazon is rolling out this model in other countries only increases the need for OP suppliers across the world to gain an up-to-date understanding of the strengths, weaknesses and opportunities being posed by Amazon Business. Addressing that need, MWA and OPI are now launching Piranha Business, a new research study featuring the results of 400 in-depth interviews with B2B buyers in the US. These buyers – from micro to large corporate companies – have purchased any type of business supplies from Amazon Business in the past 12 months. The 400 Amazon Business customers are being asked the following key questions about why – and how – they purchase business supplies:

SIGNIFICANT THREAT By November 2016, Amazon Business was already reported to have reached sales of $1.9 billion and to be achieving growth of 20% month-on-month. If Amazon was a challenge to established B2B OP suppliers, Amazon Business is already proving to be an even more significant threat in all types of B2B customer markets. It launched in Germany last December and in the UK in April (see Analysis,

l What business supplies product categories do

l What is the demographic profile of Amazon

Business customers?

they buy overall, and what product categories do they buy from Amazon Business? l What share of their overall business supplies do they now buy from Amazon Business? Is this increasing? l Where did respondents previously buy the business supplies product categories that they now buy from Amazon Business?

to respondents?

l How frequently do respondents place an order

Piranha Business

with Amazon Business and what is their average order value? l How do respondents place an order with Amazon Business and how effective is their ability to integrate with their own e-procurement system? l What kind of delivery service do respondents require from Amazon Business? How important is ‘free delivery’ to them and how often do they qualify for it? l Are respondents happy to buy from third party suppliers via Amazon Business and to receive their order in several separate consignments? l How important to respondents is the use of a local supplier? Do they see buying from Amazon Business as having any social impact? l What is respondents’ perception of the value of the ‘exclusive discounts’ and promotions that Amazon Business offers?

RESEARCH

l How important are commercial visits by suppliers

If Amazon was a challenge to established B2B OP suppliers, Amazon Business is already proving to be an even more signaficant threat in all types of B2B customer markets l What is respondents’ perception of the ‘multi-user

l Which other types of office products supplier do

respondents still use?

l When did respondents first start to buy business

supplies from Amazon Business? Had they previously used Amazon or AmazonSupply? l Why have respondents chosen to buy from Amazon Business, and what are the perceived advantages and disadvantages of doing so? l How important is price to respondents? What kind of pricing do they want and what is their perception of the ongoing competitiveness of Amazon Business’s pricing? l What do respondents think about the quality of the customer and after-sales service at Amazon Business? A NEW RESEARCH STUDY BY MARTIN WILDE ASSOCIATES AND OPI

accounts’ system and ‘business analytics’ offered by Amazon Business? l What are the perceptions and the usage of the Amazon Basics brand against manufacturer brands and other own brands? Are there any product categories in which they would not like to buy this brand? l How do respondents search for product and how easy is it for them to find required items on the Amazon Business site? l What is respondents’ anticipated future use of Amazon Business? Would they ever go back to using a conventional OP supplier and what would persuade them to do so? The answers to these questions and the final report – which will also include a summary of the key research findings and conclusions – will be published in June/ July 2017. The full report is available for $3,750. However, if you order your copy before 14 May 2017, a heavily-discounted rate of only $3,250 applies.

To order your copy, visit www.opi.net/Piranha-Business

May 2017

piranha business

GENERATION GAME

Shopping

through the

GENERATIONS

A new report has revealed that shoppers’ life experiences have a profound effect on their behaviour as consumers. The onus is on brands to master the subtle differences in buying habits across the generations

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ur world is more connected than ever before. With the click of a mouse or the tap of a finger everything we could ever desire is ready and waiting to be churned out as fast as it is consumed. In these times of instant gratification, social media and same-day delivery, it might seem safe to assume that every shape and size of consumer is catered for, but that is clearly not the case. As new research reveals, there is no one-size-fits-all solution when it comes to providing the best possible shopping experience. Instead, resellers need to acknowledge the subtle and nuanced differences that affect consumer behaviour across the generations. US-based marketing services group Alliance Data has delved into the intricate subcultures of each generation, quizzing 2,400 consumers of all ages about their buying habits. The report, entitled The Generational Perspective, looks at the distinct differences in lifestyle that influence the shopping behaviour of millennials, Generation X, baby boomers and the silent generation, and investigates how technology and social media can be utilised to connect more closely with these shoppers.

SUBTLE DIFFERENCES The report reveals that life experiences and cultural identities define future shopping habits. For example, Gen Xers and millennials grew up during the information revolution and crave instant gratification. These are the people with Amazon Prime accounts who expect next-day delivery and a wi-fi connection as fundamental human rights.

The silent generation, meanwhile, shops with the brands they know and trust – after all, they lived through the Second World War and the Great Depression and want value for their hard-earned money. Resellers must exploit these differences in consumer buying behaviours if they are to remain relevant and successful. CUSTOMER SERVICE Millennials expect a lot more than all the other generations from their preferred brands. Because they are emotional buyers, they need to feel a special connection to the product and the company behind it before they commit to a purchase. Conversely, for the older age groups, value matters the most. Baby boomers and the silent generation have money to spend, but the quality of the product has to be worth it before they part with that cash. Payment security, easy brand interaction and transparent promotions were all ranked as important when choosing where to shop, but customer service topped the list across the generations. That’s an interesting fact considering that e-tailer Amazon, for instance, seems to largely ignore its users, with a mostly automated customer service offering and no one ever on the other end of a phone. It’s particularly surprising given that the online titan captures 50 cents of every dollar spent online in the US. Smaller stores, on the other hand, tend to offer features that are aimed at connecting more closely with consumers. The key is to anticipate shoppers’ requirements and deal with any issues as timely and efficiently as completing the transaction itself.

THE GENERATIONS

Millennials 18-35 94% own a smartphone

Generation X 36-51 46% have kids under 18 at home

Baby Boomers 52-70 77% have no kids at home

Silent Generation 71+ 68% say they’re great at managing their finances

THE NEXT GENERATION And what about the next generation of shoppers, the so-called Generation Z? Their buying power is set to rival that of millennials, so it’s important to identify their buying habits now. Generation Z are true digital natives; these kids have never heard a modem dial-up tone or seen a fax machine in action. Practically born with smartphones stuck to their palms and more photos on their Instagram accounts than the silent generation have of their entire lives, they are raised in an era of complete connectivity. As well as instant gratification, this generation will also have to contend with climate change and other environmental issues, so sustainability will be a top priority. They will expect their chosen brands to make the world a better place. To stay ahead of the curve, resellers will need to know exactly how to get the most out of this group too. To download the whole report, visit http:// knowmoresellmore.com/insights-news/ generational-perspective.

GENERATION GAME The Generational Perspective

STAGES OF LIFE Consumer expectations are first guided by generational identity and then by life’s different stages like career, family and retirement. Alliance Data’s report illustrates that brands need to think generationally about the shopping experience and take a targeted approach when it comes to engaging customers. 46% of Gen Xers have children under 18 living at home, for example, which means efficiency and convenience is key to enable them to juggle their busy schedules. They crave instant gratification too, but for different reasons than millennials. With Generation X, it’s because they value their time – or lack thereof – the most. Baby boomers, on the other hand, are at that stage in life when the children have flown the nest and they are no longer trying to balance a career with parenthood. They also have extra money in their pockets. This generation’s coming of age ushered in the era of consumerism, but they weren’t spoilt by 24/7 connectivity, so technology isn’t a top priority. They too care about quality and value. The silent generation is arguably the most well-off of all the age brackets thanks to diligent and early retirement plans and cleverly managed finances. But

old habits die hard. The rationing mentality persists and with their ‘waste not, want not’ philosophy, if they don’t need it, they won’t buy it. Although online is clearly the place to be, don’t shut up shop just yet, bricks-and-mortar is still important. Stores offer a tangible refuge from the chaos of the virtual world as consumers still crave the comfort that comes from investigating a physical product on the shelf. Shoppers want to touch and feel before they commit to a purchase. In fact, it turns out the physical store is just as important to millennials as it is to the silent generation. More than 75% of respondents said they want to see a product in store before they buy it, while a third emphasised that the total in-store experience is important. Brands must focus less on what channels customers are shopping in and more on the overall experience – ‘bricks-and-mobile’ is the new customer requirement. For a shopper, moving between online and offline should be seamless.

TOP PURCHASE INFLUENCERS (RANKED IN ORDER OF IMPORTANCE) Millennials l My budget l Fair pricing l Product quality l Value for money l Lowest prices l Reliability l Sales and promotions

Generation X l Value for money l Fair pricing l Product quality l My budget l Reliability l Sales and promotions l Product selection

Baby Boomers l Value for money l Product quality l Fair pricing l My budget l Reliability l Sales and promotions l Lowest prices

Silent Generation l Product quality l Value for money l Reliability l Fair pricing l My budget l Lowest prices l Product selection

NEW KIDS ON THE BLOCK

May 2017

Generation Z 6-20 Their buying power will rival that of millennials – get to know them now!

5 MINUTES WITH...

Josh Allsopp CAREER Q&A

Where would you most like to visit and why? Since I was a boy I have always had a fascination with Ancient Egypt, so I would love to visit Cairo and the Pyramids of Giza. I’m thinking of doing a tour this year, but will wait for the political situation to stabilise a bit first. What would you cook for a dinner party? I love cooking for my friends. I am renowned for my Sunday lunches. My speciality is roast chicken with all the trimmings – crisp roast potatoes, honey-glazed parsnips, cauliflower cheese, the works. I actually find cooking quite therapeutic and can lose myself in the process, especially if I’ve got the kitchen to myself. And my friends certainly don’t complain. Your pet hate(s)? Bad manners. I cannot abide people who are rude and inconsiderate. I try not to waste too much energy getting worked up about it, but without common courtesy there is no point in engaging with other human beings. I also despise people who whistle in public. I don’t mean wolf-whistling, that’s a separate issue; I mean folks who put on a full solo performance while walking through the supermarket. Why?

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What’s your favourite cuisine? I love South Asian cuisine, particularly curries. I’m fortunate to have a lot of international friends – many of them Indian – who showed me that food doesn’t have to be bland and gross, contrary to what British fare will have you believe. Whenever I go travelling I always

Describe your current job. I am the new Reporter at OPI. I write daily stories for opi.net, covering breaking news, industry updates, financial results and more. I also write features for the magazine when they let me. Email me with any news at joshua. allsopp@opi.net. sample local restaurants and street food. Last year I went to the Philippines and probably consumed my body weight in crispy pork. What was the last gift you gave someone? A NOW TV subscription I gifted to my editor at OPI. Got to keep her sweet. What is the hardest thing that you have ever done? In 2015 and again in 2016 I volunteered as an aid worker at the refugee camp in Calais, France. It was one of the most physically and emotionally draining things I have ever done. Every day was a challenge, but compared to the conditions the camp’s inhabitants had to endure, I counted myself lucky. Some of my most cherished memories come from that terrible place. Within such squalor, I found some of the most wonderful people I have ever met; I just wish I could have done more to help them. It changed my whole outlook on life.

It’s early days yet, but what stands out for you about the OP industry? So much is happening and there is always a lot to write about; it keeps you on your feet. I have found it to be a really friendly and well-connected industry; everyone is willing to impart their wisdom if you need it. It’s definitely a big improvement from the cold, ruthless world of finance that I was in before. Your best piece of advice to someone joining this industry? Get involved! Within my first two weeks at OPI, I was thrown into the deep end and sent to a conference with other young industry professionals. It allowed me to forge connections early on and let people put a face to this new name. Best moment of your career? I’ve not long graduated from university, so this ‘career’ of mine is rather short. But I have to say the time I was identified by UK LGBT charity Stonewall as a youth influencer and invited to join its Young Leaders Programme. If you weren’t doing your present job, what would you like to be doing instead ? In an ideal world, I’d be sailing between lush tropical islands, eating coconuts and freshly caught fish. But let’s face it, I’d probably just be sat at home watching Netflix. I joke, but as my colleagues will tell you, I am obsessed with TV. So if I wasn’t talking about the OP industry, then I’d probably be writing about Game of Thrones, House of Cards or Westworld.

FINAL WORD

Special Issue

FACILITIES SUPPLIES

Moving beyond TEA AND COFFEE

S reality show Shark Tank investor Barbara Corcoran once said: “Finding opportunity is a matter of believing it’s there.” We have heard for years that the office breakroom houses plenty of potential for additional sales and growth, but many independent dealers have stopped focusing on this category after winning the coffee and tea business. This lack of additional discovery is a missed opportunity and all dealers need to understand that there is more and that it is in their best interest to uncover these prospects.

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START WITH COFFEE The average employee drinks 1.5 cups of coffee per day, so starting with the coffee business is the easy choice when deciding how to enter the breakroom category. Beware, however, that dealers will likely have to be competitive with pricing, as coffee is the second largest commodity in the world behind oil. So while the coffee and tea business is the perfect entry into the breakroom category, dealers will make little margin on these sales, and it is imperative that they capitalise on other opportunities. If employers offer coffee and tea, for example, they will also need essentials like cups, lids, creamer, sugar, stir sticks and more. Supplying these sub-categories improves margin and further establishes the dealer as a partner with the company. As a general guide, start the conversation with the customer’s office products buyer, as this person probably does the purchasing for the breakroom as well. And even if customers do not offer any beverages or other breakroom products yet, dealers have a chance to become consultants and educate them on the advantages of carrying these products. Improved productivity is a good example as employees are less likely to leave the office on a coffee run.

CAPITALISE ON TRENDS There are two emerging trends that dealers can capitalise on in an effort to expand within this category: personalisation and snacking. Over the past decade, food and beverage establishments have done this very successfully, creating a core menu of options, but being flexible and able to offer a personal experience. This customisation has become the norm and recently migrated into the office. Specifically, employees expect to not only have the basics like coffee, creamer and sugar, but to also have options within those basics. For example, in addition to original flavour coffee creamer, employers will also need to carry other flavours such as French vanilla and hazelnut to cater to their increasingly demanding

employees. All dealers should see this as an opportunity to expand and grow sales. The second trend surrounds snacking. Over 40% of consumers eat three or more snacks a day and statistics have shown that snacking has increased across every part of the day. Companies such as Google and Facebook have changed employee expectations by providing plenty of food options at work, which opens the conversation for dealers. Do their customers offer snacks? If so, what kind of snacks? Do they offer breakfast bars or microwavable soups as meal substitutes? Do they have meetings where someone usually picks up candy or pretzels? All these are opportunities to expand breakroom sales.

Special Issue

VENDOR SPECIAL

Kelly Perez, Senior Merchandise Marketing Manager, SP Richards

So while the coffee and tea business is the perfect entry into the breakroom category, dealers will make little margin on these sales After dealers have established themselves as the partner of choice for all breakroom items, they need to look for occasions to upgrade products and increase profitability. Wellness and sustainability are two developing trends they can use to do that. Research has shown that people are looking for healthy snacking alternatives at work, so trade in the candy for whole nut mixes. Add additional sweetener options like stevia or turbinado sugar that are more natural. For customers that want to become more eco-friendly, suggest they trade out their foam cups and plates to recycled alternatives or sugar cane compostable options (for an in-depth look at the issues around disposable coffee cups in particular, see page 32). These items tend to have a higher ring and therefore increase margin for the dealer. Dealers need to stay close to their customers and really understand their needs, so when the time comes and they need a new toaster or want to renovate their entire breakroom, they are the first ones that spring to mind. So ask the right questions and become a consultant on all the latest trends and products. And remember, if you believe there are additional opportunities, you will find them.

NEXT ISSUE Big Interview Christa Furter CEO, iba Category Update l Traditional OP l Visual communications Preview l SP Richards Advantage Business Conference l North American Office Products Awards