36 minute read
Interview
by OPI
PUSHING the boundaries
Declining demand for traditional OP, ultra-competitive pricing and COVID realities are all contributing to Australia’s challenged business supplies landscape. But options for a bright future remain plentiful, as one optimistic independent dealer tells OPI’s Heike Dieckmann
Quick Corporate Australia (QCA) is the third largest B2B reseller in the Australian marketplace, after Winc in the top spot (by some margin) and Complete Office Supplies (COS) in second place. Perth, Western Australia-based QCA is also the largest dealer in the Office Choice dealer group, perhaps a lesser-known fact given its unbranded status in the organisation.
CEO Darren Hayes has been at the helm of the reseller for eight years and a member of the Office Choice board for over two. With a background predominantly in the telecommunications industry, he’s been bringing a bird’s eye view to the table that has served the company well in these ever-changing times.
OPI: Shall we begin with a quick round-up of QCA’s history?
Darren Hayes: Certainly. The company started on the West Coast of Australia about 30 years ago as Quick Cup, mainly supporting the canteen supply into small to medium-sized firms. Our owners have many business interests here in Australia and overseas, and they had a real ambition for Quick Cup to grow and become a national operator.
Eight years ago, they completed their fifth acquisition in the country in the office products sector, thereby finally gaining a national footprint with what were formerly several smaller players in the various territories. It was at that time I was brought in to consolidate the business and create the synergies of a nationwide operator. We did that and have had good, steady growth since.
There’s another side to the business which is not branded under the QCA name. We have a 49% stake in a company called Kulbardi, the largest indigenous-owned holistic workplace supplier in Australia. This joint venture started about six and a half years ago and has been hugely successful since, with double-digit growth on a quarterly basis. The appetite for indigenous engagement in Australia has grown very strongly over that period.
OPI: Is that where the Bibbulmun range Office Choice dealers sell comes from?
DH: Yes, Bibbulmun is part of QCA’s and Kulbardi’s indigenous-branded product offering. We bring the majority of this high-volume range in directly from overseas. Where it differs from other products is that every time it is bought by a customer, a percentage of the purchase price goes back to what’s called The Bibbulmun Fund.
That fund’s charter is to support indigenous people in Australia.
The work we do is quite varied. We arrange business camps, for example, where we teach indigenous people how to take an idea from conception to real-time execution. We also support indigenous scholarships around the country with some major universities.
We’ve seen a high resonance to this programme, particularly in the large corporate sector where businesses can be seen as good corporate citizens while their staff get to use the product and appreciate that part of the proceeds go back to a great cause.
OPI: Let’s go back to QCA. You say you have a solid national footprint in the country now.
DH: We do. Up until two years ago, we had distribution centres in all five key states across Australia. But part of our business strategy was to get as tight and lean as possible as a result of margin pressures.
Distribution was one area we looked at. We wanted to create a more efficient supply chain to the marketplace, with the big caveat that we still had to deliver the next day for orders received by four o’clock the previous afternoon.
We found we could make this promise from three strategic locations in the country. As of late last year, we are down to three DCs, obviously bolstering those three to take on the workload and capacity of the two other states where we closed.
OPI: So where are the current DCs located?
DH: There’s one here in Perth, Western Australia, another in Sydney, New South Wales, and the last one in Melbourne, Victoria.
OPI: Do you work with GNS Wholesale Stationers as well? I believe Office Choice has quite a close relationship with this operator.
DH: To a degree. The difference between our business and some of the other members of the Office Choice group is that our buying volumes are quite large, so we don’t necessarily need to rely heavily on partners like GNS which can break the product down into smaller consignments.
OPI: What’s your core market and how do you differentiate yourself in that space?
DH: It’s definitely the mid-market where we see our biggest value proposition and where we sit most comfortably. In terms of differentiation, that can be a challenge. We all sell pretty much the same products: paper, pens, toner, ink – the offering is very similar. We also sell in the various adjacent categories, such as breakroom and jan/san, and we’re big on promotional goods and corporate uniforms and workwear.
Many of the products in our portfolio are sold on price. The Australian marketplace has been challenged in this regard, so much so that profitability has been hit very hard. Our big competitors know all about it, hence the consolidation that’s taken place in an effort to gain some critical mass and bring back profitability. Although I personally would question that the needle has really moved as regards profitability.
As regards Quick Corporate, price is not the key driver behind customers wanting to work with us. It’s more about finding those logistic irritants that customers have and fixing them. I give you one customer as an example. It’s a large retailer in this country that had issues with being able to get the supply chain to deliver the shelving capabilities for all its retail stores on a timely basis.
This operator approached us and asked if we could carry those shelves in our DCs. We looked at the specifics, the supplier we needed to work with and came to an arrangement. We now stock all those retail fixtures and fittings. The retailer has 260 locations around the country – and can draw on our inventory and fulfilment on a daily and weekly basis.
OPI: Retail shelving is pushing the boundaries of office products or even the broader term of business supplies.
DH: Absolutely. It’s an example of a bit of lateral business and of moving where that business is. Logistics is logistics, whether it’s pens and pencils or shop fittings.
Our core range is in diminishing demand as a result of technology, so we need to look at what else we can do. We’ve got these big warehouses around the country. Let’s fill them with what customers want.
We’re in the lucky position of not being too constrained by our size. When I speak to my leadership team, one of the analogies I always use is that Quick Corporate is like a battleship rather than an aircraft carrier. When I look at a competitor such as Winc, for instance, I see one big beast, fully laden and travelling in one direction. For an operator like that to change its business offerings and strategic approach is difficult and takes time, as I have experienced myself working with big multinational businesses.
We, on the other hand, can be a bit more nimble as a battleship; we can tack and change how we do things quite quickly. And that’s what we do: look at the businesses we engage with and see what else it is outside their workplace supplies that they have issues with.
OPI: How would you sum up the past 14 months or so? It would be odd not to mention COVID-19 in the context of both QCA, but also the Australian landscape as a whole.
DH: As a company – much like everybody else – we obviously saw a growth curve in terms of all kinds of PPE, sanitising and jan/san products. A bit of panic buying occurred initially, but we haven’t seen the initial spikes continue. In other categories, we’ve seen some declines.
To be honest, we could not be luckier as a country when it comes to the impact of COVID and we’ve definitely benefitted from our remote locality. Here in Western Australia, it’s almost like life goes on without COVID. We’re under no illusion that this might change, and we continue to look and plan ahead to make sure that we’re in a good position whatever happens.
One big standout – and again, we’re no different from anyone else in that regard – is the shift to work-from-home (WFH), especially from traditional city buildings. And we’ve seen a real resilience of the workforce actually returning to the workplace.
It’s been a challenge to supply those businesses where staff are currently working from home. From a residential delivery perspective, all three of us in the B2B space are certainly capable of delivering to the home easily, but I just haven’t seen the take-up. Perhaps COS and Winc would disagree – Winc has launched this membership programme for home workers earlier this year – but that’s my perception.
Operators like Officeworks, meanwhile, have really capitalised and benefitted from that shift, as employees have been happy to pop down in their car and pick up whatever they need from their local Officeworks superstore.
OPI: But being more at home in the mid-market as opposed to the large corporate sector, have you not been a bit sheltered from that particular hit?
DH: It’s a valid question. As I said, it’s the large companies where we’ve been seeing the biggest shifts to WFH. We’ve had some leakage, no doubt, but I would argue that the likes of Winc which are very heavily engaged in this top end of the market would be feeling it more. COS to a slightly lesser extent, though still very noticeable.
OPI: What about Amazon, a fairly established player now in Australia. Do you see leakage there too, COVID or otherwise?
DH: My answer at the moment is “I don’t”. I’m sure Amazon will have benefitted from some incremental growth from our sector. But do I see it as a huge competitor in our industry, in the way that Officeworks is threatening to be in the B2B space? No.
Australia is a very large place and Amazon’s fulfilment centres are not located across all of the country, so they can’t provide a next-day delivery capability nationally.
Amazon is not my biggest concern now. But I firmly believe we – and by that I mean the independent dealer channel – could be doing much more to become a formidable force against the more pressing competition that is Officeworks.
OPI: How so?
DH: Many years ago, in the mid-1990s, Bunnings – part of the Wesfarmers group which also owns Officeworks as you know – started opening these big warehouse-style stores around the country in the hardware sector. They started to cannibalise a lot of the independent hardware shops around the country, so much so that not many of them are left now.
When I joined the OP industry, I had this sense of déjà vu – wherever Officeworks opens up one of its large stores in whatever location around Australia, it was at the expense of the smaller traditional dealers. Those small dealers have real trouble trying to be price competitive against such a big business. What they lack is large logistics capabilities – warehouses where they can hold their stock and deliver from.
If the independents organised in the dealer groups, for example, were to unite, join forces and work together in terms of logistics, I believe it would be of real benefit for the industry and open up the market.
They could not only deliver within their own local area or even state, but everywhere in the country. If we gave that empowerment to the independent dealer channel, it would be a completely different opportunity.
QCA CEO Darren Hayes
OPI: Are you talking about a coming together of the two dealer groups or just referring to Office Choice? The necessity of two groups is another discussion point entirely, of course. They are quite different in make-up and identity.
DH: I believe Office Choice could certainly do it within its own right. But why not join forces with Office Brands? You wouldn’t have to change names and could run as two different branded channels with whatever you feel is your own personal offering. I have seen this strategy play out in the telecommunications market.
Why couldn’t the two groups look at a way of putting their aggregated volume together and create a logistics capability? All of a sudden, our joint capacity would be doubled. We’d be bigger than COS and it would put smaller independents in a formidable position to really scale up.
Yes, we are competitors too, but could we possibly take the blinkers off and have a holistic look on a big scale? This could be something to protect all members in both groups long-term in my personal opinion. .
OPI: It’s refreshing to hear you speak so openly about it. It’s not something that would work in many other markets, I’d hazard a guess, but in Australia, given the lack of a really established wholesale scene combined with the might of Officeworks, it would certainly open the market up. A great way to end – thank you.
The POST-COVID
breakroom
The breakroom as we know it is gone, at least temporarily. In its place is a space that is definitely cleaner, arguably less social but full of new gadgets and products – by Heike Dieckmann
When offices across the world started shutting down from Q1 last year due to coronavirus lockdowns, so did the entire breakroom sector. As Jay Tittman, President at US dealer Rocky Mountain Business Products, quite simply puts it: “Breakroom is a category that disappeared for a year.”
For any reseller that is heavily reliant on this business segment, including Virginia, US-based Guernsey, for example, where it makes up 30% of total revenues, it’s a very big deal.
Some resellers shifted their focus to other channels to compensate. The hospitality vertical is one of these, specifically the restaurant delivery business. Frank Hoard, Director of the Facility Supply Channel at Independent Suppliers Group (ISG), explains: “Restaurant delivery saw its peak in the US market in 2020. It meant a real shift in thinking, but customer behaviour over the past 15 months or so has changed – it had to. Legislation passed at state and local levels now even allows for alcohol delivery by independent suppliers.”
COFFEE CHALLENGES
The coffee market in particular is one that completely collapsed in the office space. Mark Leazer, Executive Director of independent reseller network AOPD, says: “I recently spoke with one of our dealers who is heavily involved in coffee service in a large city. He said he was at 28% of 2019 sales levels. I’m hearing from some major suppliers that their office workers are looking to come back from their home offices in September. Others are slowly returning now, but demand in this category may not show robust results until Q4 or even Q1 2022.
“In a worst-case scenario, one major coffee company was saying they hope to get back to 60% of 2019 levels by the beginning of 2022, but that it could take eight years to achieve 100% of pre-pandemic levels. Eight years! This would be dreadful and I don’t really subscribe to it.”
Nestlé Professional is among the many suppliers that have taken a hit. Tony McGinn, Head of Sales – Alternative Channels, elaborates: “Nestlé’s breakroom business has historically been a growth driver for us. The pandemic quickly halted this progress. And we know the traditional breakroom will not be a growth market, even post-pandemic. As such, supporting our dealers to reach the work-from-home employee, providing sanitary and touchless solutions for the office, and leveraging our brands in emerging micro markets is an opportunity to offset the population decrease in this space with innovative programmes.” As employers everywhere are trying to work out future in-house staffing, renewed importance is placed on this part of a company’s facilities.
One thing is certain, the breakroom post-COVID will look somewhat different. Rather than the relaxing, social, open plan collaborative spaces that we were talking about just 18 months ago, they will likely be areas of relative solitude and utmost efficiency, certainly in the early stages. Health will be top of mind for facilities managers and company bosses alike, but it will be a different type of wellness, all in the name of minimising the spread of germs, viruses and the like.
Typically a hotspot for sharing spaces – from chairs and tables to coffee pots and condiments – the breakroom for the foreseeable future will be spotlessly clean, temperature-checked, fully masked, socially-distanced, single-use and as touch-free as feasibly possible.
RESTOCK, RETHINK, REVISIT
US wholesaler Essendant believes the renaissance of the breakroom will unfold in three stages: restock, rethink, revisit.
The initial need will be around restocking. This will likely happen over the course of 2021 as a sizable proportion of the workforce is expected to return to their traditional workplace. As Armin Mehic, Director of Category Management at Essendant, says: “We expect to see more mini fridges and smaller break areas with single-serve coffee units throughout the workspace in order to minimise the number of people using communal spaces. Coffee and its accessories will be portion-sized for individual use. There will be foot slots to open larger fridges, and wrapped, disposable cups, lids, bowls, plates and cutlery.”
According to ISG’s Hoard, more people will eat at their desks, while outdoor spaces, where made available by employers, will also be very popular. “In addition,” he adds, “there could be a real shift to people leaving the workplace for lunch.”
The second phase, Rethink, will begin with planning in 2021, but execution will mostly commence in 2022 as employers have had time to invest in new workplace layouts or refits. The premise is that employees have got used to the benefits of working at home and companies will need to offer added incentives to pull them back into the office environment.
The focus of the breakroom will also change, shifting to being an area for collaboration and teambuilding. Employers will need to create spaces that allow social distancing between groups while at the same time encourage interaction and collaboration.
Sara Johnson, Merchandising Product Manager at Essendant, says: “Bean-to-cup coffee machines that can be operated by an app will become more prevalent along with touchless vending machines and strategically placed micro markets.”
On that note, Nestlé Professional’s National Account Manager Thea Thanas adds: “We offer our customers office coffee options like NESCAFÉ bean-to-cup machines or the individual NESCAFÉ Dolce Gusto brewer. In an effort to address COVID-19 concerns, Nestlé has developed machines using touchless technology – where you can hover over a button for dispensing a beverage or scan a QR code using your smartphone to order a custom drink.
“These options are available on new machines, or we can retrofit some existing equipment. Touchless solutions are a trend that will continue post-pandemic, so we feel well positioned.”
In terms of innovation, air purification is another hot topic right now and although no air purifier can currently claim to capture and eliminate COVID-19, products like Fellowes Brands’ AeraMax Professional are definitely being considered as part of a broad and proactive hygiene strategy.
As breakrooms are restocked and rethought, other priorities will be revisited. One of them is sustainability, a topic that seemingly moved to the bottom of the agenda at the height of the pandemic (see ‘The green breakroom’, page 36).
FEELING SAFE AND SECURE
In the short to medium term, however, one of the core focus areas will be on creating a breakroom that is as safe and clean as possible: making employees feel looked after is paramount. As such, social distancing products of all kinds will continue to be in high demand.
Cleaning, meanwhile, has never been more in the spotlight, as vendors such as Greenspeed can attest to. The company’s Commercial Director Johan Tops says: “The world has become cleaning obsessed. Jan/san and hygiene products are used in every office and that includes the breakroom. Growth rates – and the supply chain – have been very unstable to an extent we’ve never seen before in the past 20 years, but it’s been an extraordinary year for Greenspeed with more ups than downs.”
Category Manager Wayne Darrall at UK wholesaler VOW adds: “We are seeing an increase in items that are Microban-treated as well as demand for Microban itself, so customers can treat their own surfaces. This trend will continue as long as the public feels a need for these items and then subside again.”
Nestlé’s NESCAFÉ touchless bean-to-cup machine
It is the combination of products currently needed in the breakroom which is making the overall picture bearable, if not positive, for many operators. It’s also a question of customer demographics, as Dennis Albers, Head of Purchasing and Category Management at Dutch wholesaler/dealer group Quantore, points out.
“For us, the breakroom is a very broad category and we’ve seen good growth over the past 12-18 months. We mainly deliver to SMBs and have seen steady sales of hot and cold drinks, surges in demand for takeaway products and disposables, and good results for slightly adjacent items such as signage, viscom and, of course, cleaning. We have even launched our own coffee brand during the pandemic – called Biaretto – and we have experienced major success in developing this despite having strong local brands as well.”
For more feedback on the breakroom sector, including opportunities to service a hybrid workforce, look out for Xtra content in the May/June 2021 issue on opi.net
From a US perspective, AOPD’s Leazer offers this overall conclusion: “Breakroom demand is starting to come around, albeit very slowly. It will probably be one of the slowest categories to fully return, but as evidenced by what we are seeing from new relationships with suppliers in our space, they are being very sensitive to the current trends and are creatively working on ways to stimulate demand as soon as possible.
“This category won’t be getting the attention that PPE received last year, but I think there will be plenty going on. Breakroom has been one of the key growth categories for office products dealers over the past decade – that cannot be allowed to just dry up without a good effort. Suppliers engaging with dealers through promotions, social media, sales force training, etc, should also have an impact.”
THE GREEN BREAKROOM
To say the coronavirus pandemic has created an environmental setback would be an understatement – just think disposable PPE. The breakroom, per se, is not fundamentally guilty of contributing to this setback, as so many offices have been closed over the past year. But what has remained of a battered hospitality sector is certainly telling: takeaway containers; single-use condiment sachets, disposable cutlery and crockery. They all point to one conclusion: more waste and, very likely, environmentally unsustainable waste.
As employees slowly return to their traditional workplaces, the scene is set for a similar situation in the corporate breakroom. However, speaking to a number of industry peers, there’s broad consensus that, no, sustainability hasn’t been top of mind over the past 15 months or so but, with demand for environmentally-sound products having already ramped up pre-COVID, this will likely see a real resurgence.
OPI spoke to Ralph Bianculli Jr, Managing Director of sustainable products manufacturer Emerald Brand, about the importance of this happening.
OPI: The breakroom – in the short term – will undoubtedly be dominated by a lot of single-use products. Do you believe awareness of how sustainably these products are made will return along with the workforce coming back?
Ralph Bianculli: There’s no question the environmental impact of single-use products is a primary concern for corporations and their consumers, particularly with the elimination of all reusables such as mugs, plates and cutlery in the workplace.
This bodes well for a brand like Emerald because we can offer solutions with a quantifiable environmental impact and replace the use of petroleum and tree-based products with plant-to-plastic and tree-free alternatives. Communicating this to end consumers will be extremely important.
OPI: So what are you seeing in terms of demand, and I mean for your company in particular?
RB: Good question. The biggest challenge all manufacturers will have – and it’s already happening – is forecasting. Industries including cruise lines, hospitality, business and manufacturing, leisure sectors such as arenas and theatres, etc, are coming back faster than expected here in the US.
We are well positioned for this – better than many of our competitors I would say, even non-environmental brands – for two reasons. Firstly, 70% of our portfolio is now made in the US which means faster turnaround times, no port issues, and so on. The second one relates to the unique alternative materials we use, specifically our tree-free pulp capacity. We do not have to rely on major players to provide raw material of plastics and virgin/recycled fibre.
There are major capacity and supply issues related to these traditional materials that most brands are at the mercy of. Right now, inflation and, potentially, hyperinflation is everyone’s problem, all the way down to the individual consumer. Most companies’ biggest concern is obtaining products through a very difficult freight and supply channel (see also Hot Topic, page 22).
OPI: Is there legislation as regards more sustainable products in this particular category?
RB: Yes, quite a lot of legislation has passed, but it has been overshadowed in the news by COVID.
OPI: How big is the connection that people now make – as we slowly emerge from the COVID crisis – between health/ wellness and sustainability?
RB: It’s a very significant connection. Consumers want more traceability and accessibility on all things they are consuming and using. That’s why our Made in USA story is resonating so strongly here in the US. What you refer to is in fact our trademark: Sustainability = Health + Wellness.
Already suffering from secular declines, the paper industry is facing many more issues, thanks to the coronavirus pandemic – by Michelle Sturman
To say the uncoated freesheet (UFS) paper industry had a dreadful 2020 would be an understatement. Already struggling with a long-term downward trend in office paper use, last year saw the pandemic turbocharging the contraction.
Results from European paper industry consultants EMGE’s Cutsize Monthly Monitor report reveals that in February in Western Europe, demand, deliveries and capacity continued to fall compared to the same month last year. Eastern Europe fared much better with above-trend demand growth.
Overall, demand for uncoated woodfree cut-size paper on the continent fell by just under 12%, with shipments decreasing over 7% and capacity falling more than 10%, resulting in an improvement in operating rates.
The good news is industry feedback was largely optimistic for March 2021 as Monitor respondents rated demand for the month as the least weak since the full effect of COVID-19 began to be felt across Europe.
Globally, EMGE reports that demand was still negative at around -12% during Q4 2020. Meanwhile, the Confederation of European Paper Industries indicates printing and writing papers production fell by 18.4% last year.
According to Paper Trader (March 2021), published by cross-commodity price reporting agency Fastmarkets RISI, UFS demand in 2021 should be +1.5% in the US. In addition, Q3 will mark a positive turning point due to the anticipated reopening of offices and educational facilities. As such, demand is forecast to recover just over 60% of the decline from Q2 2020.
OFFICE AND LEARNING-DEPENDENT
Given the work-from-home mandates espoused by many governments over the past year or so and the relative dearth of employees working in offices, these figures are hardly surprising.
As Antalis Office Divisional Director Tim Percival notes: “In 2020, COVID-19 hit the UK office paper market significantly, with year-on-year volumes impacted by -32%. Globally, this number is reported as -17%. We see a direct correlation between demand and lockdowns, and as restrictions ease, there will be a direct pickup in volumes.”
Over in the US, Domtar Customer Marketing Manager John Parke believes the UFS sector will bounce back relative to the percentage of workers that return full time to the traditional workplace and live school attendance.
But, he adds: “Even when the virus is behind us, it’s not likely we will see pre-pandemic demand levels. Working and learning from home will remain permanent options to some degree. There is less paper consumption when folks are not assembled at work or in schools.”
Derek Mahlburg, Director of North American Graphic Paper & Packaging at Fastmarkets, agrees with Parke. He also believes that demand is unlikely to revert to pre-pandemic levels, even as vaccinations progress and we witness a return to travel, face-to-face learning and work.
“There will be about two years’ progression of the ongoing structural decline by the time this all happens, and the slump had already shown signs of accelerating prior to 2020.
“Additionally, the corporate acceptance of remote work as a major force will reduce the extent to which offices rely on paper. At schools and workplaces alike, the pandemic spurred heavy investment in digital technologies that will have lasting effects. Digital habits are rarely unlearned, ” he says.
Mahlburg’s European counterpart, Alejandro Mata, concurs with this assessment. However, he adds the caveat that recovery on the continent will take longer to commence because of a slower vaccination rollout, less generous incentive programmes than in the US, and the deep impact from reshaping the behaviour of consumers and companies towards more flexible environments.
This latter point alone, says Mata, will keep office paper demand from returning to pre-COVID levels. “Another key threat emerging from the pandemic might be the redefinition of learning methods.
Education has not changed in centuries. Now, with the introduction of virtual environments and the push to explore them more than ever before, we are at risk of seeing institutions retaining a mix of online and face-to-face learning platforms, just as it’s happening in places of work,” he warns.
Parke, on the other hand, is optimistic as regards the onset of the paperless office. “Does the use of digital communication continue to grow? Yes, there is no denying this particular trend and the post-pandemic world will be further ahead in the transition. But I certainly don’t see paper ever becoming obsolete.”
Liz Wilks, European Director for Sustainability and Stakeholder Relations at Asia Pulp & Paper (APP), concurs. “We still process information in a different way when it is printed, and with the constant need to be online, the use of paper represents a refreshing change.
“One of the leading factors contributing to the rise in demand for paper products is ‘screen fatigue’, as individuals look to break away from intaking information via digital displays,” she adds.
NOT PULP FICTION
The true decline in paper usage now that hybrid working and online learning are expected to become more commonplace is, as yet, unknown. But this is only one issue the industry faces.
The pulp sector is currently very tight which, according to pulp and paper market intelligence consultancy Brian McClay & Associates, is due to a combination of factors. These include: purchasers buying as much as possible to beat pending increases, a faster-than-expected economic recovery in China, planned outages, a high need in sectors such as at-home tissue, government stimulus and supply disruptions, and logistics issues.
On this final point, a shortage of containers, trucks and railcars has ramped up logistics costs and created supply chain bottlenecks globally, leading to delivery delays.
For NORPAC VP of Sales and Marketing Tom Crowley, the steep rise in freight costs and shortage of equipment means it’s more difficult and expensive to ship copy paper anywhere. As a result, the US market, for example, has become more regionalised, and he expects it to remain that way for the foreseeable future.
It has put a strain on paper manufacturers exporting into the US because of skyrocketing costs combined with a weakening dollar, and resulted in the implementation of a round of price increases already.
One industry expert believes non-US-based mills will raise prices on subsequent production cycles as North American producers continue to deal with machine closures, conversions, and finding buyers on assets not deemed to be part of medium to long-term business strategies. This will ultimately close the gap between foreign and US domestic prices.
Richard Hoyland, Purchasing Manager for UK-based wholesaler VOW, told OPI that a price increase is already confirmed for Q2. He expects this will just be the beginning, adding: “We have already heard from several mills of a further increase in the summer.”
Antalis’ Percival agrees: “Against the backdrop of an inflationary cycle, caused by escalating costs – pulp being the most significant which has seen increases on the commodity markets of 25% since Q4 2020 – we can only anticipate paper prices to rise as supply and demand become more balanced.” (For more on global logistics issues and price rises, see Hot Topic, page 22).
MANUFACTURING SHIFT
Just as the sector had adjusted to the removal of an estimated 500,000 tons of copy paper from the marketplace following the shock exit of Georgia Pacific at the start of 2019, the pandemic struck. Understandably, paper capacity has been cut drastically over the past year and US paper vendors in particular are shifting out of UFS and towards containerboard. (Visit opi.net for the latest updates on capacity withdrawals, acquisitions, and paper business spin-offs from key manufacturers).
As Mahlburg explains: “A major driver of this trend is the fact that corrugated box markets posted exceptionally strong growth in 2020, encouraging copy paper mills facing poor market conditions to pursue conversions to containerboard. Thus, much of the capacity removed last year was actually for large-scale, low-cost commodity copy paper.”
Will office paper sales return to pre-COVID levels?
n Unlikely n Definitely not n Probably n Definitely
15%
23% 54%
He continues: “So much capacity has left the domestic UFS industry, we expect there to be significant upward pressure on pricing in 2021 – almost regardless of the demand outcome. Prices will also be pressured by intense cost inflation that began to emerge at the end of 2020, mostly in the areas of pulp, chemicals and transportation. It would not be surprising for prices to regain their 2019 peak this year.”
The upshot of continual rises in raw materials and logistics costs, coupled with further mill closures and conversions, is the reduction of overall UFS capacity and the potential for a tight paper marketplace this year.
A SUSTAINABLE MARKET
Across Europe, but especially in the UK, not only have Brexit and the COVID-19 pandemic contributed to increased strain on the sector, according to APP’s Wilks, but so too has a growing focus on sustainability. She says: “The requirement for pulp is rising with the need to find well-managed substitutes for packaging – this includes pressure on the need for paper packaging as a plastic alternative.”
Indeed, the necessity to provide environmental credentials has become an even hotter topic in the paper industry. As Wilks points out: “Purchasing paper products on behalf of a business has been further complicated by the sustainability debate.
“As the climate emergency continues to accelerate, dealers need to align with these expectations and ensure they are purchasing from a sustainable supply chain.”
NORPAC’s Crowley believes that while sustainable copy paper is “definitely in vogue”, the conversation surrounding sustainability has subtly changed: “Firstly, the product itself must have a good environmental pedigree, with low carbon gaining traction as a desirable attribute as opposed to recycled content.
“Secondly, customers are now looking at mills and wondering f they are sustainable operations, and can they count on them to continue to supply paper in the medium and long term? The recent closures have turned the industry upside down and are causing people to ask this question in a way they simply didn’t have to in years gone by.”
In terms of other sustainability trends in the copy paper market, Mondi Marketing and Sales Director Uncoated Fine Paper, Johannes Klumpp, notes that consumers are increasingly paying attention to certifications like FSC and PEFC, and processes that produce totally chlorine-free or optical brightening agent-free papers.
“Moreover, we see an increased interest in office papers made fully or partially from recycled fibre, as well as an elevated demand for CO2 neutral printing products,” he says.
For more insights into the paper industry, including the paperless office, new sales channels, product developments and sustainability, look out for Xtra content in the May/June issue on opi.net
Buy online pick up in-store, and contactless ordering, payment and deliveries have accelerated over the past year. In this How To… guide, OPI takes a look at Rakuten Ready’s Playbook for Creating Contactless Experiences
Depending on where you are in the world, ‘contactless’ probably means something slightly different. In the UK, for instance, most people currently recognise the term as paying for an item by ‘tapping’ their bank card against a payment machine. In the US, it is more likely to be used as a reference to e-commerce.
However you interpret the word, contactless – in all its guises – is becoming imperative for businesses to adopt across the purchasing chain. Leader in order-ahead technology, Rakuten Ready (formerly Curbside), has released the Playbook for Creating Contactless Experiences, a guide to building and developing a contactless strategy.
The company carried out research in April 2020 and found 76% of consumers had already started using buy online pick up in-store (BOPIS) at the onset of the pandemic; significantly, 73% expect to continue it after the crisis eases.
While the Playbook is written primarily for the retail, grocery and restaurant sectors, the advice can be used within any business. Also, there is a lot to be learnt, particularly from the restaurant trade, in terms of deploying rigid health guidelines.
As Rakuten points out, while the technology to support e-commerce – whether for collection or delivery – is nothing new, safety and hygiene requirements are, and many shoppers are keen to decrease the time they spend in-store.
After enduring numerous lockdowns and stay-at-home mandates, pretty much forcing people to buy online, along with the enhanced requirements for shopping in physical retail outlets, it’s hardly surprising that a contactless journey has become a priority for many purchasers.
Rakuten describes contactless as “the method in which businesses provide their goods and services to customers by eliminating human contact, throughout the customer journey, from ordering to fulfilment”. The Playbook outlines three pillars: digital first, customer-centric preparation and contactless handover.
1. DIGITAL FIRST
A key question is whether your digital strategy is contactless from end to end. According to Rakuten, businesses today need to provide a seamless digital experience. In a May 2020 Rakuten Ready Contactless Consumer Survey, 73% of respondents stated that, when buying goods online, knowing when an order is ready is important. This was followed by pickup availability on offer (65%), clear details on how to pick up a purchase (62%), and contactless payments (58%).
E-commerce ordering
Is your inventory linked in real time to all mobile/ website purchasing channels and optimised to drive demand? • Lowers risk by limiting human interaction • A seamless online to offline order experience • Increases employee and customer protection • Builds trust with defined social distancing and safety measures
BENEFITS OF CONTACTLESS
Contactless payments
If you already offer mobile and web commerce, then contactless payments should be part of the service. With increased demand for this purchasing method, it is time to consider accepting apps such as Apple Pay, Samsung Pay, Google Pay, PayPal, Venmo, etc.
Marcomms
Currently, one key element to successful digital marketing is providing details on touchless pickup systems during ordering, especially as demand from consumers for more frequent, honest and engaging communication rises. In addition, you should be leveraging social media, email, texts, direct mail and all other contact points.
2. CUSTOMER-CENTRIC PREPARATION
An essential question to ask is whether contactless processes revolve around current business operations or your customer. To successfully execute a holistic experience, order preparation requires the purchaser to be at the centre of how and when goods are prepared. It also means maintaining employee welfare.
Safety is imperative
When preparation is running efficiently, there is time to stage orders and be prepared for safer fulfilment – whether in-store/kerbside pickup or office/home delivery.
Timings
By adopting the appropriate technology, collection can be timed to perfection, based on when you know buyers will arrive.
3. CONTACTLESS HANDOVER
COVID-19 has accelerated contactless handovers, but unless customer-centric preparation is already in place, this third pillar often falls short.
In the May 2020 consumer survey, Rakuten found that 78% of respondents believed it’s crucial to have their items ready when they arrive, followed by social distancing protocols (69%). Allocated parking or collection areas were important to 41% of those participating in the study.
Kerbside pickup
This method of buying has grown exponentially over the past year, and when scheduled perfectly to match a buyer’s arrival time, businesses can execute the fulfilment with zero contact. how each step can be undertaken in a non-contact manner is key.
Social distancing
Even post-COVID, it is expected that some social distancing and hygiene systems will remain commonplace. Rakuten recommends auditing your handover experience across all locations and touchpoints to ensure suitable physical spacing is maintained and determine where it’s appropriate to follow hygiene and safety rules such as wearing a mask and gloves.
NEW NORMAL CONTACT
The new normal represents a buying landscape that has substantially shifted over the past year into an evolving set of customer rules and behaviours which favour a contact-free encounter from beginning to end.
The increasing use of technology in the ordering and delivery process will accelerate and improve the no-touch journey. Rakuten Ready asked May 2020 survey participants the following question: what technology are you willing to adopt in the future if it lowers your risk?
In response, 65% said predictive arrival technology – this gives businesses insights into when a customer is approaching so goods can be available on arrival. 43% of respondents said drones, followed by autonomous vehicles (40%) and smart robots (37%). The latter technology will deliver to a car or address for contactless buying with automated fulfilment.
Designated in-store or outside pickup areas Like kerbside pickup, it’s vital to let customers know what to expect. Communicating precisely where they need to go to pick up purchases and
RAKUTEN READY
Founded in 2013 by leaders of location innovation at Apple, Jaron Waldman and Denis Laprise, Rakuten Ready (formerly Curbside) provides mobile technology that powers fast, easy mobile commerce at bricks-and-mortar sites. The company enables brands to deliver online-to-offline experiences that give time back to customers. For more information on the Playbook for Creating Contactless Experiences, visit https://pages.rakutenready.com/contactless.html
