Branching out

Home / Cover Stories / Branching out
Branching out

Many members of the IDC have diversified their offerings, expanding into furniture, janitorial and breakroom supplies, and printing and promotional materials. Increasingly, however, dealers have begun delving into more unusual areas to increase their customer base and profits.

“Like most dealers who service commercial offices, in March 2020, our revenues fell 50 percent,” says David Guernsey, CEO of Guernsey Inc. in Dulles, Virginia. “We are now up over 70 percent from our record year in 2019, but Washington D.C. is on the top 10 list of cities where people aren’t back in the office. Most of the federal government isn’t back, except for the high-security areas where the work can’t be done from home, and businesses here watch to see what the feds do. For example, the state doesn’t want to demand its workers come back for fear they will lose the workers to the federal government. It’s similar with companies here.”

Replacing this lost revenue has required some innovative thinking.

“Our newest addition is a service we call Guernsey Logistics,” continues Guernsey. “We partnered with Global Freight Forwarding, a company specializing in security freight. It helped us get several drivers and managers certified by Homeland Security, so we have clearance to move cargo to and from airports and other secure locations.”

Guernsey chose the secure freight business for a reason: “We have more than 40 trucks, including 16-foot box vans and 20-foot trucks with liftgates. We are located right outside Dulles Airport and close to the Baltimore/Washington International and Reagan Airports. Also, however, we’ve never considered ourselves an office products company. We see ourselves as a distribution business that distributes office products, furniture, breakroom or whatever customers need. We have warehouse people and drivers, and we have always moved stuff. For customers moving from one location to another, we move all their cubicles and even re-install them if needed. In short, we have the infrastructure in place and have spent a considerable amount of money building it. We didn’t want to open a restaurant or open a bakery. We wanted to leverage our existing assets. In our strategic planning, we always seek opportunities to use what we have.”


Sustainable options

Located in Minneapolis, Minnesota,1st Source Business Supplies has 10 employees and does approximately $6 million in annual sales. According to president and CEO Greg McLeod, the company has leveraged its beliefs to diversify its offerings within the food service arena. “We still sell it if a customer really wants it, but we are doing our best to avoid Styrofoam for environmental reasons, so we sell very little of it,” he explains. “Instead, we sell a lot of fiber-based products made out of bamboo and sugarcane, for example; and 95 percent of what we sell is PFAS free. Often, food service products are made from materials that are better for the environment but then are sprayed with potentially cancer-causing formulas to prevent the grease from leaking through the container. We have found ones that hold up on their own. We sell thousands of products; most are biodegradable or full-blown compostable.” According to McLeod, some of the company’s newest offerings to the lineup include rippled coffee cups that don’t need to be double cupped or require a sleeve, and biodegradable pizza boxes with windows.

Gloves are another top seller for 1st Source, but not necessarily those that were big during the pandemic. “We sold a lot of PPE during COVID-19, but we sell about 350 different types of gloves,” says McLeod. “These include ones for manufacturing. One of our accounts is the biggest vegetable processing plant in America, and we sell them eight different color-coded gloves because they have to use the right glove for the food type due to allergies. They can’t operate without them, so it is good for repeat business.”

Maintenance, repair and operations (MRO) is another less traditional sales category for 1st Source: “There are a lot of different definitions of MRO, but for us, it is industrial supplies—things like hand tools, belts, fasteners, hydraulics; everything a manufacturer needs. We are doing a lot in that.”


Driven to diversify

As for Guernsey, the COVID-19 pandemic drove 1st Source’s latest product diversifications. “We started getting into these areas during the pandemic, which opened our eyes that we needed to diversify more,” explains McLeod. “During the pandemic, we sold stuff I never would have thought we would. But if we hadn’t been nimble enough to pivot, we would not be in business today. The pandemic supply chain issues drove us to seek other vendors and products we could sell and network with new people. It also helps that some vendors in these categories are asleep at the wheel; or maybe they don’t have as good technology or distribution systems, making it easier for us to enter.”


Stepping out and up

McLeod believes that one benefit of some of the less traditional sales is that they build stronger bonds: “We are deliberately working to get into more strategic products with better gross margins than office products. We are looking for products that allow us to build relationships with more of the true decision-makers. The people buying some of these new categories have a deeper appreciation of relationships; they remember the supply chain issues. These relationships are stickier and allow us to talk and form relationships at the C-level. It’s more impactful than selling a pen or pencil; we like being more important. It helps us sleep better at night!”

But that’s not to say McLeod doesn’t understand the importance of office products. “They are still a huge part of our business and can act as a gateway to get in the door,” he says. “But we want to avoid being pigeonholed and let them know we have other things.”

Charlie Kennedy is CEO and co-owner of Kennedy Office, Raleigh, NC, an independent dealer with 65 employees that did $19 million in sales last year. One of the company’s largest customer segments is banking, which has led the company to sell some unusual products.

“We do $30,000 a year in the lollipops the banks give out,” he says. “We also sell them dog treats and stickers for kids, like Hanna Montana or whatever is currently popular.”

Some of the less traditional products the company sells aren’t necessarily new; they’ve just added a twist. “We’ve done safety items for a while, but we now sell ice melt kits that include the ice melt plus a shovel, gloves and a vest,” continues Kennedy. “And right now, we are preparing our Kennedy for Kids back-to-school kits that include 1,000 or so different boxes. They have many of the usual items, but now many have headphones and earbuds in blue, green, pink and other colors.”

The school kits—which are filled by Kennedy Office and shipped to school for distributions, so the children receive them with their names on them on the first day of school—are built using state-of-the-art software. “We use a program called that makes it easy,” explains purchasing manager Kim Gullick. “It automatically keeps track of every step and includes purchasing and packing reports. It would be impossible to do through our DDS system, as we’d have to enter every item manually and transfer it all to a spreadsheet, and would not have a packing list.”

According to Kennedy, certain products stand out for the volumes in which they are bought. “Thermal paper that restaurants and banks use for receipts is one thing we sell a lot of that isn’t necessarily out of the ordinary; but the quantity is,” he explains. “With sales of $500,000 to $600,000 annually, it’s probably our fourth-biggest seller. It’s the kind of thing you can go to town with. It has good margins—we go in with a higher price and still beat their previous pricing. It’s also a good lead-in. We go in with the thermal rolls and the rest comes with them. One of our sales reps just won 50 gas station locations with them. From there, we install paper towel and soap dispensers, and sell them trash bags.”

And in terms of the most unusual product the company sells? “We have a large jewelry account with 200 to 300 locations,” says Kennedy. “We stock all their jewelry bags and felt-lined hinged boxes that hold rings, bracelets, and necklaces. The company started buying office products from us and it bloomed into the jewelry containers, which adds up to about $150,000 more a year.

“Also, this isn’t an odd product, but the jewelry store was looking for the best glass cleaner and towels. The glass is very important for displaying jewelry to look its best, so they wanted to find the best one and asked us to do the testing. So we did, and now we sell them the cleaner and microfiber.”


Diverse advice

When it comes to advice for other dealers, Kennedy suggests that an open mind is crucial. “Listen and be willing to do more for your best customers,” he suggests. “Be inquisitive. We tell everyone on our team to ask, ‘What are you having trouble getting from a vendor?’ It opens doors just like that. One customer we have, Merry Maids, wanted a specific dolly with a handle on the top to hold its specific cleaners and towels, and was having trouble finding them. We found this out because our rep asked. Now, they buy them all from us in bulk.”

Guernsey’s advice is straightforward: “Dealers should be thinking very much in terms of their infrastructure and the qualifications of their people, and how these can be leveraged in other areas. Ask, ‘What do we do, and who do we do it for?’ It’s all about leveraging what you already have in place.”

McLeod also recommends maintaining broad horizons: “Don’t be afraid to get new categories. Overcome inertia. Be creative and open minded; like us, be willing to pay the ‘dumb tax.’ None of our mistakes were fatal. You don’t have to go in blind, and you don’t have to bet the farm. Do your research, network, follow the threads, then breathe and go for it. In some of our new areas, we are getting known. On the local level, people are starting to ask, ‘Who are these guys?’”

And if a dealer isn’t ready to leap into the unknown? McLeod suggests, “Partner with a company like us that has already paid the dumb tax.”