20 minute read
Big Interview
by OPI
SPR’s VISION: A work in
PROGRESS
Almost two years into the momentous acquisition of S.P. Richards, the pace of transformation at the wholesaler is finally quickening, replacing a period of pandemic-induced firefighting
Little did Yancey Jones and Mike Maggio know when they acquired S.P. Richards (SPR) from Genuine Parts Company (GPC) in June 2020 that what was happening at the time would turn out to be so much more than a temporary global health crisis. To say they had their work cut out dealing with the many and varied pandemic challenges over the best part of two years would be an understatement.
As such, their vision – to become a distribution company to all customers offering all products they might feasibly want – had to be put on the backburner. Surviving and facilitating their customers’ survival became paramount.
Jones and Maggio need no introduction as regards their credentials to meet the obstacles they faced. But as Executive Chairman and President/CEO respectively of SPR, they’ve certainly required their combined 90+ years of industry experience to steer the wholesaler into calmer waters. In the process, their vision didn’t get blurred, however, as OPI CEO Steve Hilleard found out when he caught up with these two unflappable industry veterans.
Coupled with a sharp appreciation of what was important at any given point during an intensely difficult period, that vision became even more focused. And finally now, there’s light at the end of the tunnel as the new world of work is beginning to take shape, with all the repercussions it will bring to SPR, its customers and the industry at large.
OPI: When you entered into this transaction with GPC to buy SPR, you can’t have imagined in your wildest dreams the dramas to come?
Yancey Jones: Absolutely not. In June 2020, just before the transaction closed, we had seven banks that were all very excited about the future. So were we. We thought COVID was over. Sales were good in July and August. But then September came, COVID was back. All the schools – in fact, almost everything – shut down again.
Overall, 2020 was not a banner year for us, with some areas down 40%. Luckily, we also had some categories that were up 30% – our jan/san business was booming and helped us through the second half of 2020, and the same was the case for PPE. We certainly didn’t expect to sell millions and millions of dollars worth of face masks overnight when we first invested in SPR.
We were in the same boat as everybody else – supply chain issues and difficulty getting products. There was plenty of inventory, just not the right inventory.
OPI: Mike, those pandemic issues aside, what else would you highlight that perhaps you hadn’t anticipated following the acquisition?
Mike Maggio: As you know, we had significant plans to change the way we go to market and also how our customers and the manufacturers look at us as a partner. COVID got in the way of those plans. The attitude was: let’s get through this, survive and then start again.
We always knew it was going to be difficult to wean ourselves from GPC, not for Yancey and I, but for the organisation, and that turned into an even bigger challenge because the pandemic has lasted for so long.
But we believe we’re on track again. In the last quarter of 2021, we finally started to put it all together in a format that made sense for us. And January and February this year were both good, solid months. In fact, we went into 2022 with a very different view of the world than in 2021 and we’re now heading in the right direction.
OPI: You sort of rebranded last year with a tagline of ‘Not just wholesale – the whole package’? Are people interested in hearing that message now?
MM: First of all, we think it’s a great message. But it hasn’t fully resonated yet, certainly not to the degree we had envisaged. Everybody’s been in survival mode. When we talk to individual customers or our key vendors, there’s no disputing what we say, but by the same token there’s still an attitude of “Yes, it’s all well and good, but we’re just trying to get through the day”.
Left: Mike Maggio Right: Yancey Jones
OPI: Here’s your chance to put forward the message and your vision again.
MM: (laughs) Thanks Steve. It starts with the simple statement that we want to be the preferred wholesale distributor for resellers and manufacturers in the business products space. What does this actually mean, you may ask? It means we provide market-driven product. We stock what our customers and the vendors want wholesale support on, but we further give resellers access to every product a vendor sells. And we do this competitively so our customers can compete in the marketplace.
This vision also means a bunch of things we’re not. We’re not a manufacturer, a business consultancy or a marketing agency. We’re most definitely not a bank. We’re a partner and a very good and reliable one at that. And we’re going to get even better.
Any reseller is a customer, we’ve said this multiple times before. We’re not going to treat them all the same – of course not. If you do more business with us, you’ll get a better programme, simple as that. But we’ll do business with anyone.
OPI: Is there really such a major difference between the old and the new SPR?
YJ: Yes, there is. We’re not looking at what’s in our catalogue anymore – which is typically how things
have worked with both the major wholesalers in the US. We’re not saying to customers, “This is what we have, that’s what you can buy”. Instead now, we’re saying: “What are you selling?”
We’ve also changed quite a bit internally, as an organisation. Because we’re independent, we are more flexible and agile enough to listen to our customers and supply them with what they need to grow their business rather than what we want to shift from our warehouse.
OPI: What is the footprint of your distribution facilities now?
MM: We’ve recently closed our Pittsburgh facility and now have 29 distribution centres in about as many US states. We also have two furniture-only DCs – one in the North East, one in the South East.
We don’t stock the same product in every single facility because, in Florida, they don’t need the same things as they do in Colorado. But they all hold the basic product range and then we expand from there.
We are committed to increasing our use of technology in the DCs. It could be as simple as the apparatus our order fillers use to pick orders. Right now, for example, we’re moving to a heads-up display along with pick-to-voice versus the handheld pick-to-voice we’re doing today.
In our Atlanta DC, we have two new operational items. One is called a three-tier pick module that is more suitable for picking cartons. We also put in AutoStore which is a robotic system that picks a tote filled with product, brings it to the picker who then selects what he/she needs, puts it in a box and sends it on its way.
It’s all about understanding and implementing the most cost-effective way of doing what we do. YJ: Mike and I have so far invested about $15 million to make our processes more efficient. All this kind of stuff hadn’t really changed for years under the previous ownership situation, but we’re reinvesting to build stronger capabilities.
OPI: Becoming more efficient often takes a toll on headcount. What have you initiated in that regard since you’ve been in charge?
MM: This obviously is closely linked to COVID too, so I’ll start with that aspect of it. We essentially tried to weather the pandemic without any staff reductions which was a mistake, quite frankly. We also made some other moves that were not as effective as they could have been.
Ultimately, we had a reduction in our workforce in January of this year. We streamlined and reorganised some of the departments at headquarter level, including finance, merchandising and supply chain, and eliminated a number of outside sales positions. Perhaps this could have been done sooner. We reorganised our marketing team and are more focused on digital marketing versus print, including using social media effectively as a tool to both reach our customers and for them to use as well.
We will be discontinuing our general line catalogue for 2023, for instance, so that will be the end of an era. These things better reflect the way the world works today versus 10-15 years ago.
OPI: Diversity is another big topic today, and you’ve been pretty intent on creating more of it at SPR I believe.
MM: You’re right. One of the first things we did was create a diversity and inclusion group at SPR. Again – and I don’t mean this to sound like an excuse – we’ve had a tough time with it because everything outside sheer survival has been difficult to get engagement for.
But we’re committed to it and are making progress. Very recently, for example, I visited an organisation that works with the blind and visually impaired, and we’re planning on getting involved with the people there to bring in some diverse candidates. Our goal is to make SPR as inclusive and as diverse an organisation as possible – not just within the stock room and the different departments, but at the highest levels. YJ: As you’ll have seen from our communications, we’ve also promoted a number of women to more senior positions in several major divisions.
OPI: Let’s talk about product. What does the business look like in terms of areas of growth? You’ve mentioned jan/san and PPE before.
MM: The two biggest growth opportunities for us right now are furniture and cleaning. But in the long term, we’re also looking at technology as having significant potential and we’re examining a number of other categories too. For the next 12-24 months, we expect OP to grow again which is no surprise given the drop over the past two years.
We’re expecting sustained growth out of all categories for at least a short window. Cleaning, we’re confident, is going to stay important long-term. Breakroom, on the other hand, has not come back yet, but when it does, it will be a source of growth and one of focus for us. YJ: Another category could be packaging and shipping supplies – we see big potential here too.
OPI: I’m interested in your comment about technology. For as long as I can recall, we’ve talked about the convergence of the OP and the technology sectors. But it has never happened in a meaningful way, not from an independent reseller nor a wholesaler perspective. Why do you think you could take a shot at it now?
MM: I don’t see how we can be the kind of wholesale distributor we want to be without offering product that’s in every office in the world. It’s a significant gap, as you point out, and one of the problems we need to overcome is to work more closely with our suppliers.
We also have to be willing to look outside the normal distribution channels to bring in the product, and so we’re partnering with some folks you might consider competitors. But they don’t think of it that way and nor do we.
OPI: Such as?
MM: TD SYNNEX has been a partner of ours for some time. We’ve done business with this organisation over the years and we’re expanding this partnership, much to the delight of both parties. In the long run, I don’t know if it’s the right way to do it but short-term, it puts us in a better position to offer the types of products customers need.
The biggest hang-up our channel has always had with this category is margin. But maybe you have to look at it differently – at the dollars I mean.
OPI: It’s always been the argument – margin percentage versus margin dollar.
MM: Exactly. We recognise we need to be in that space and this is one way of doing it.
We have also built our own in-house MPS platform – it’s something we did not have and we have just rolled this out and it’s been very successful so far. Again, it’s recognition of what we have to do and where we need to go.
OPI: I guess expanding into categories like technology will open up a broader set of customers for you. But as a result of COVID as well as consolidation, you’ve also had some shrinkage in terms of your customer base. What does that base look like now?
MM: The growth is coming out of the e-commerce segment, no surprise there. And it’s not Amazon, but smaller and new e-commerce operators. We are a perfect solution for a stockless e-tail type of business, and we’ve changed our formula in that regard. It’s not about going for revenue for revenue’s sake. It’s about profitable customers that make sense for us. We’re very happy with the way this piece of our business is going.
The IDC, what we consider our traditional OP side, is about 50% of SPR’s business. And that’s actually held really well. The shrinkage has come from the mega side. Depot, for example, while still a very important customer to us, contributes a much smaller percentage to our overall sales than it did two years ago.
OPI: What do you predict for the coming year or two as the full after-effects of the pandemic are laid bare before us?
YJ: First of all, we are optimistic that sales will come back to resellers as staff return to the office. And they will return in some fashion, although it might take a year or two, but it’s going to get back up to over 90% of where we were pre-pandemic. We’re beginning to see it, but it will take time. MM: You talked about consolidation. There’s a lot of dealer activity now and by that, I mean dealer to dealer, rather than the big players getting involved. We facilitate those conversations where we can.
OPI: You said earlier your role is not to provide consultancy. But do you in actual fact get involved in facilitating and brokering deals?
MM: We provide a clearing house as best we can. You know Charlie Cleary has been working with us for a number of years now. He does a terrific job working with resellers to help them evaluate their
OPI: OK, let’s move on to another potentially touchy topic. You launched a last mile delivery solution last year. Is this still going? Or is this new Supply Chain Investment Group (SCIG) initiative going to usurp it?
MM: We’ve always said we support SCIG’s initiative and do whatever we can to help these dealers from a wholesale perspective. We’re not investing in it – that’s something they are doing and hopefully they’re doing it right.
The Reseller Delivery Network you mention was an attempt to put dealers together which either want to provide or need delivery services. Our goal was to create a platform – a website effectively – where they could contact each other, and we’ve done it. We also provide wholesale support. But apart from this, we don’t tell them what to charge each other.
So far, there has been some level of adoption and we have no intention of not continuing it, but we’ve done everything we need from our side. We remind dealers of this option because freight has become a real challenge and it’s a cost-effective way for independents to ship product.
It’s probably going to take more price increases to accelerate uptake of the initiative. But these increases are coming, we all know it.
own company as well as that of the business they are looking to buy. So in that sense, yes, we do provide a level of service.
OPI: When you took over SPR, you inherited some investments which had been made in certain dealers. Can you comment on that?
MM: We’ve been working very closely with this group of dealers we own a percentage of to figure out precisely what the benefits are for them. As you say, we inherited this situation and it was kind of an incomplete strategy to begin with and certainly defensive in nature.
Dealers are very vocal about it and we have put together some better communication strategies. They’ve elected a chairman of their group and there’s now a single point of contact, for instance, so I think we’re heading down the right path.
OPI: What’s the size of this group? How many resellers do you hold an investment in?
YJ: I can’t tell you that I’m afraid.
OPI: Your old organisation, Mike – Independent Suppliers Group (ISG) – has had an RDC model for years now and SPR recently took over the running of that programme. How is this going?
MM: As of 1 July, we will no longer participate in the RDC. It hasn’t worked for us how we had hoped.
Essendant customers have continued to buy through its carton programme, and our resellers still support Advantage Carton Direct (ACD), which is our equivalent programme. ACD will continue to flow through ISG; we will pay rebates, it will still be central billing through the group and we will pay a management fee for the ability to do all that. But we will no longer be part of the RDC piece.
OPI: OK, a secret then. What’s not a secret, however, is that you own a stake in Source Office & Technology and, of course, this business was recently sold to The Supply Room (TSR). Can you elaborate?
MM: We’ve maintained our percentage of ownership in Source when TSR bought it. And I believe it’s gone very well for both parties.
OPI: It must be a delicate situation Yancey, given your TSR family connection?
YJ: I did not have anything to do with it. The TSR management made that decision on their own.
OPI: Where does that leave the RDC initiative?
MM: That’s a question for Mike Gentile. I don’t know, but as far as we’re concerned, we’re out.
OPI: What about other programmes like EPIC Business Essentials?
MM: It’s the best solution right now for dealers to utilise other resellers to help them with satellite business and we’re certainly supporting it from a wholesale perspective.
OPI: You talked about your ambition to offer many more SKUs, not just 50,000 to 60,000. With that comes the need for data and content, which is something the industry has been battling with for a very long time.
MM: We’re 100% committed to it. I was beating that drum way back when I was at TriMega. And the day Yancey and I got here, we made a commitment to our manufacturer partners, assuring them we wanted to represent all their products, regardless of whether they are in the building or not.
I would love to not be in the content business but, quite frankly, there isn’t anybody else out there – it’s either Essendant or ourselves and we are both on the same page about the products we want to sell.
Our goal is to add every SKU into our content feed. We introduced a new product information management system last year, with the specific aim of streamlining this process. We’ve added about 30,000 or 40,000 extra SKUs already and are at over 100,000, but we’ve got a way to go.
OPI: You say you’d rather not be in the content game. Is there an opportunity for an independent organisation to pick up that ball? In the UK, for example, we have an organisation called FusionPlus Data which is pretty much the industry-wide repository for content now.
MM: If we had to start from scratch today with content and search engines, we wouldn’t be able to afford it – it’s absolutely enormous. What we have created has been developed over a number of years and we’re very proud of it.
We had an independent and industry-agnostic third party take a look at what we’re doing and it rated us very highly across all the key metrics when it comes to both search and content. YJ: Our search engine was rated number two behind Amazon – it’s pretty stalwart.
OPI: Before we wrap up, I want to ask you about Staples and Depot. I’m mindful of the fact one of them is a significant customer of yours. but what’s your view on how that whole situation will likely play out?
YJ: I have no clue. I’ve been in the business 47 years and I long ago stopped making predictions. It’s going to be interesting for us however it shakes out, and I’m confident it will be a positive outcome. We sell to both of them. Depot is the largest, but Staples is one of our top 50 customers too.
OPI: In many parts of Europe, we have so-called hybrid wholesale organisations. EVO Group in the UK now owns Staples.co.uk and Staples Advantage. And it owns Banner, which is a sizeable reseller to government and large corporate entities. But it also has a considerable wholesale operation. Can you envisage a situation where the North American market allows you to be that type of operator?
MM: You never want to say never, but right now and based on the current players in the market, I don’t see a path for this. As we talked about, we own a percentage of some dealers, everybody is aware of that. We’re still not sure strategically how this is going to play out. To develop it to the extent EVO has, for instance, I can’t see it at the moment. But who knows what tomorrow might bring.
OPI: On a final note, gentlemen, what do you see yourself doing in five years’ time or so? We don’t always ask that question, but I don’t think I’m being too rude when I assume you guys are probably heading towards the end of your careers.
YJ: What a nice way of pointing out how old we are! When Mike and I bought SPR, we wanted to build the strongest, most efficient wholesale distribution company in the US. It’s still our goal.
We want to have the product that help our customers to grow, we want to add more customers to our portfolio – and we’re doing that every month, be those customers small or large. We’re going to add hundreds of new accounts this year. And they, combined, will help us to grow as well.
OPI: I wasn’t really asking about the company Yancey, but more about you two.
MM: I don’t think we want to answer that. We have a lot of things yet to accomplish which we set out to do when we bought the business. Now is not the time for a succession plan. We’re currently behind where we wanted to be thanks to COVID, but we’re still committed to the same things. You’re going to be stuck with us for a little while longer I’m afraid.
OPI: Given all that’s happening in the world at the moment, this is certainly the best news I’ve had for some time. Thank you both for your time and insights.
For more from the interview with Yancey Jones and Mike Maggio, such as relationships with vendors and their view on the post-COVID world of work, see our Xtra content in the April/May issue on opi.net
