There is a good deal of uncertainty in the air as independent resellers move into 2020. The Essendant-Sycamore deal hovers over the industry amid dealer concerns. Numerous promises have been made yet dealers remain unsure of what benefits might accrue. Almost simultaneously, buying groups are merging and if the results seem more universally positive, the overall experience is reminiscent of the wholesaler combination with things moving along at what seems like a snail’s pace.
The timing of the buying group merger was far from ideal, according to Phil Barnette, vice president sales and marketing, EVOS, Chandler, Arizona, as the Essendant deal was so prominent and created a void in the market while it was taking place. “It is troubling to hear ‘We are working on it’ from ISG and Essendant at the same time,’’ says Barnette. “We have a business to run, so in some cases we have been forced to use third-party companies to accomplish what Essendant and ISG could be offering.”
EVOS is forecasting close to 15% growth for the coming year, based on a sales analysis developed using category sales by Essendant. Barnette sat down with his administrator and compared in-house percentages with the wholesaler’s. Chemicals offers a great example: Essendant shows 8.2% while EVOS is at 2.4%. “We did that for every category; we figured in inflation and it came to 14.6%,” says Barnette. “If we want to grow quickly in 2020 we need to at least get up to industry averages and then surpass them.”
Kerr Workplace Solutions, Elizabethtown, Kentucky, went through a rebranding and an acquisition last August. “For us stabilization is important and continued sales growth is critical,” says Ed McCoy, vice president sales and marketing. Additionally he sees the need to develop new talent and find new ways to stay relevant. “We have to continue to penetrate our existing customers with additional categories, products and services. That’s critical. They know us, they trust us. So that is one thing we’re focused on and will continue to focus on.”
Growth in 2020 is expected at Egyptian Workspace Partners, Belleville, Illinois, as well. “We are looking at new product categories, looking at acquisitions and looking to expand our reach,” says Brett Baltz, director of business development. The dealership is examining promo products as it works on two acquisitions. [See this month’s “Winners’ Circle” for the first of those acquisitions.] “We’re not seeing a lot of commercial development for big furniture projects in 2020, which is a little alarming,” he adds. From a furniture project perspective Egyptian is being forced to pursue opportunities up to two hours away, in Southern Illinois.
“We are anticipating a gross sales increase of approximately 10% to 15%,” says Paul Zimmerman, president, Office Products Nationwide, Portland, Oregon. The dealership is looking for sales growth in office furniture and janitorial products.
“We do a pretty good job right now but believe this is our growth engine moving forward,” says Zimmerman. “We have some pretty aggressive programs in place to compete against Staples and Office Depot. We have had some reasonable success for the last year and a half so we see that growing even further.” The one soft spot might be project sales. Zimmerman thinks furniture project sales will be good but not as good as 2019.
Partnering with Staples
Everyone seems to have an opinion regarding the Essendant-Sycamore deal. They range from highly favorable to extremely unpopular; most everyone is in agreement, however, that projected price reductions have yet to fully materialize.
“I think it’s genius,” says Derek Hartsfield, managing partner, Gazillion Office Products, Frisco, Texas. He says he is unconcerned about security. “Staples already knows who the independent dealers’ customers are; we can all buy the same lists.” He is more focused on customer acquisition. “I think it is great if our fill rates go up because we can pull from a Staples distribution center and if we have access to products that we don’t have access to today.”
Other dealers are less optimistic. “It’s good and bad,” says Baltz. He contends that Staples and independents have different strengths. “There are some product categories that we absolutely need that Staples has, so we are really looking forward to the Staples warehouses being added to the Essendant facilities.”
“We think that there’s an opportunity for Essendant to use Staples warehouses for ADOT [Automated Distributor Order Transfer],” says Zimmerman. If the closest warehouse runs out of HP toner or Smead folders they could pull them from a Staples facility. ”That would be helpful, but we are absolutely not going to sell a Staples branded product.” He says that a lower cost of goods has been promised but has yet to materialize. “We have not seen lower costs but would be encouraged if we did.”
At JB Office, Chatsworth, California, Julian De Salay, president and CEO, takes a different position. He finds the combination unsettling and thinks if a customer buys a Staples branded product, then what purpose does JB really fulfill; they could buy it directly from Staples. “I don’t want a lot of distributors knowing who my clients are,” he says. “I would rather pay a little more for shipping or delivery and have it controlled by me.”
“It would be awesome if Staples could create an Amazon-like environment that independents could use to sell products,” adds De Salay. He says that buyers across the country probably are not familiar with JB Office but they certainly know Staples. “If Staples put together a marketplace similar to Amazon, that would be a great way to help dealers out. That would be a way for the two channels to work together and be profitable together.”
There have been a few price decreases, says Cindy Ciaccio, vice president and COO, The Weeks Lerman Group, New York City. She says that the dealership has been told that compelling price reductions are in process and still could happen. “What I would actually like to see happen is for Essendant to integrate with Staples’ search engine which seems to be more robust,” she says. “Essendant is working to understand what they can secure technology-wise from Staples.”
Barnette suggests that the Essendant/Staples arrangement might have its biggest impact on product availability. “If they truly bring us more products that we can take to market quickly, help us integrate those into our marketing programs, we can win,” he says.
Consolidation on steroids
There’s no question that office products distribution is experiencing rapid change, not the least of which is its ongoing consolidation. “The merger of IS, TriMega and Pinnacle is a positive direction for the entire industry,” says Baltz. With the amount of resources that will be made available to members it should be extremely beneficial for dealers. “I’m optimistic that the people who are in charge are going to sail the ship in a positive direction for the IDC,” says Baltz.
“We are fully in support of the merger and have already found it to have opened more programs and options for us to leverage,” says Lincoln Dix, vice president of sales at Storey Kenworthy, Des Moines, Iowa. “We are very interested in marketing tools.” TriMega had a marketing program that was retired a couple of years ago, so the dealership is interested to find out what ISG has to offer. The merger has opened up some new vendors, and Storey Kenworthy is eager to work with them and pursue all the options they make available.
Unsurprisingly delears identified online competition that comes from Amazon and similar sellers as one of the biggest issues they face in today’s market. “It’s a challenge, especially when there isn’t much loyalty from our vendors,” says Zimmerman. The best approach, he says, is to go back to basics, build relationships and explain the relevance of a one-stop shop. “We explain how we are different and how we can improve the service level for our clients,” he says.
To convert these customers, a dealer has to be good at explaining soft costs. This approach presents an alternative to customers as to why they should do businesses with an independent. “It can be a convincing argument if you’re talking to the right person,” says Zimmerman. To reach out to the right person Nationwide uses LinkedIn data to find purchasing managers, facility managers and the like. “I can’t believe that an office manager or purchasing manager really enjoys comparative shopping on four different web sites,” he adds.
To stay competitive with online sellers, Gazillion focuses on making the shopping experience easy for customers. The most recent website refresh reduced the number of clicks needed to place an order. Customers can order off their smartphones or tablets. With a fill rate at 100% customers always get what they order and drivers place boxes exactly where the customer wants them. “Our entire focus makes it easy on the customer so they don’t have to think about it,” says Hartsfield.
Big box weaknesses
One of the biggest opportunities Hartsfield sees for 2020 is to go after the competition. “Customers who buy from Amazon or Staples are a huge market for us,” he says. “Amazon’s product offering is very limited and their prices aren’t better than ours,” Hartsfield contends. He asks customers for their last four invoices and then writes his prices next to the Amazon price. “We do it all day long every day and their prices are not that good.”
If customers are especially concerned about price, Hartsfield offers them Essendant house brands, which many buyers are not aware of. Just offering better prices isn’t enough to convert these customers but Gazillion salespeople stick with it. “It takes consistent effort to convince them; one call, generally is not going to do it,” he says. He says that 90% of new account conversions take place on the fifth call. “If I know that I just have to build up my pipeline.”
As Baltz sees it some of Amazon’s prices are lower but a lot of their prices are not. Amazon doesn’t really offer any value beyond the item being purchased so the purchase is transactional. “if you’re an independent dealer and all you do are transactional relationships, I think you are probably in trouble,” he says. Dealers need to be out educating customers and building relationships, he argues.
Going forward the dependency on online customers will only increase. “They want to buy online at a competitive price and receive prompt deliveries along with something special,” says Barnette. “They want to be treated well and shown that we care about them.” Amazon doesn’t do that and neither do the big box players. “We have to give the perception of being priced competitively and that’s why we make sure anything we send out has key commodity items priced at or below market,” says Barnette.
To help establish mindfulness, EVOS has started monthly campaigns offering incentives to involve customers. The December promotion sent out coloring books, colored pencils and a candy cane. The materials were packaged along with a document that read: “This time of year is stressful. It’s proven that coloring helps relieve stress. So here’s some candy for you to enjoy the holidays and take some stress off and color a picture.”
This was the third month in a row that something was sent out and customers have started to notice. The dealership has started to receive calls and emails in appreciation. Barnette says there is a place for an independent that says. “I’m going to be competitively priced, I’m going to sell you things you need and I’m going to go the extra mile. Then we are going to go outside the box, and we’re going to treat you like we care.”
Growing online competition
It is not just the normal list of online competitors that sell against dealers. There are major manufacturers in many categories that sell through dealers but also sell direct. In some instances the business might be grandfathered; in many more situations the manufacturers are just out for additional sales. If dealers don’t find this upsetting, they’re not paying attention. “There’s not a lot we can do about it because it is so difficult to police,” says Ciaccio.
She has talked with vendors about this and her purchasing team has been in touch with the buying groups to get them involved. “It we don’t get that message out through the buying group in a compelling way, we’re lost on our own. Once you see it, you can’t stop seeing it,” she says. “I think it is becoming more commonplace.”
One proven way to offer an alternative to online purchasing is through a buy-local campaign. Weeks Lerman can’t really do much with traditional media as costs in New York are sky high. Amazon deliveries are also up there. A report from Rensselaer Polytechnic Institute reports that deliveries to residential properties in New York City tripled from 2009 to 2017, with at least 1.1 million packages delivered daily. And online shopping is still in its infancy, accounting for just shy of 11% of all retail sales.
“Our manufacturing partners, aren’t giving us tips on how to compete with Amazon, because at the end of the day, most of them are distributing through Amazon,” says Dix. He suggests that manufacturing partners are giving independent dealers an invaluable reality check.
When all is said and done they need distribution. “They tell us they will distribute through Amazon if the IDC can’t give them the distribution they need,” says Dix. He says that hearing this is harsh, but it’s reality. The IDC is a vital part of their business model but in many instances manufacturers still require wider distribution.
The best defense
One of the best defenses against online competition is to get involved with categories or products that don’t lend themselves easily to online sales. Kerr Workplace Solutions has a strong business selling furniture, copiers and janitorial machines. You need a service team for the copier business; you can’t sell the product line without one. “Clearly people in the B2B world need these solutions and they want people to come out and show them the products,” says McCoy.
He also works with manufacturers who help with onsite demos. “We recently did a school training session where we brought in a rep from a cleaning chemical manufacturer and we taught a group of janitors how to properly strip and wax floors.” Being the kind of partner that would offer this service shows the value that an independent dealer brings to such situations. “This offers a great example on how we can definitely penetrate those markets and stay relevant,” says McCoy.
Another ongoing industry trend is consolidation in the dealer community. ”Honestly I think it has become the new normal in our industry,” says McCoy. Last summer Kerr Workplace Solutions made an acquisition that moved the dealership into the Louisville market in a major way. “We had always been there but only on a small scale,” he says. There is an abundance of customers, more salespeople are available and drivers are based there. “Now the challenge is how we leverage that and use it to our advantage to grow our brand.”
Acquisitions continue at Storey Kenworthy and dealers have actually approached the dealership with an interest in selling out. “The ownership has made it clear that we need to continue to be ready for more integrations,” says Dix. “Right now there is a lot of interest from smaller dealers, non-stocking dealers in particular, to look for exit strategies if they don’t already have a succession plan in place.”
“It’s definitely an opportunity for us,” says Baltz. He says that a lot of dealers have not made needed investments to their business over the past decade. Those are the ones getting acquired. “We need independent dealers to be strong,” he adds. “As long as IDC members are being acquired by other IDC members, I think it is positive.”
Path to survival
The impact of acquisitions creates bigger competitors for us, says De Salay. “I think it is indicative of the maturity of the market,” he says. He contends that when larger dealers get acquired by a big box company they often lose a lot of what originally made them successful. At the end of the day, he suggests that realistically only the strong will survive and he regularly takes business away from his big box competitors.
In the Dallas market, Staples purchased a large independent dealer last year. “Our phone hasn’t stopped ringing because there is a certain part of the population that wants customer service,” says Hartsfield. He sees the acquisition as a big opportunity for the coming year and is focused on taking customers away from what is now a dealership in big box hands. “Customers want the independent touch and they can’t get it from Staples.”
A strong competitive stance in today’s market requires that dealers take a look at the categories they sell and make adjustments. “The continual change leads to more technology and janitorial items,” says De Salay. “No matter how paperless you go you’re still going to drink coffee, blow your nose, sit at a desk and use your computer,” he adds.
Storey Kenworthy has had a facility solutions specialist on staff for the past six years and that role has evolved over that time. Originally the specialist did a lot of training and coaching to elevate the knowledge base of the sales team. “Today, our Jan/San specialist helps manage the category and works with suppliers,” says Dix. “To grow the category we have got to have somebody that can talk to high-level decision makers about facility supplies for an entire office.”
To further its breakroom business Storey Kenworthy has expanded its brewer program and added a new vendor—Aquabeve. The dealership now also offers environmentally friendly coffee pods as the Midwest begins to embrace a more eco-friendly approach. “Some of our larger customers want to convert off the traditional Keurig and get into Pod Packs because of the environmental impact as well as some better price points,” says Dix.
EVOS has expanded its offering and is talking to additional distributors who have items not readily available from traditional suppliers. “I found a company in New York that offers a biodegradable coffee pod that our wholesaler doesn’t carry,” Barnette said. He continues to search out providers that will assist him in diversifying his product mix and help him exceed his category goals and objectives for 2020.
“We have really put a big focus on our equipment,” says McCoy. This is the third year that Kerr has offered the IPC Eagle line of janitorial equipment, including scrubbers, buffers and ride-on machines for floor care. “We are focused on that because it is a service-oriented business and we have a service team,” he says. Service after the sale is the really important part of selling this equipment. “So this and copiers are categories that make sense to be in.”
The role of technology
“Technology is critical to our growth and our success,” says De Salay. The more growth his business experiences the more critical that technology becomes. “If you are going to focus on driving down costs and providing the best products for your customers, you’re going to have to utilize technology,” he maintains. There will always be competition from real-world business as well as online threats, technology can help level the playing field.
Virtually every dealer consulted for this article has either recently updated its website or is working on an update right now. “We made good investments in technology and have a responsive website that is mobile capable,” says McCoy. The whole online experience has to make it possible for customers to find what they need quickly, check out and move on. ”It is no different from us buying items in our personal lives.” Drivers are all equipped with JumpTrack which they access on their smartphones, and the software has made the delivery process quicker and more efficient.
The success of the website is all about content. “When you visit a big box website the content seems endless, but if you visit our site you’re only going to see what our wholesaler offers,” says McCoy. He believes the combination of the buying groups might prove helpful in this regard.
Egyptian is at work on a complete transformation of its backend system and is doing so without using a traditional industry technology supplier. Baltz contends traditional tech suppliers are not fully equipped to handle online threats. “We have gotten away from the technology partners who traditionally show up at industry events,” he says.
A complete digital transformation of the website is in progress. “The website is going to be our number one salesperson,” continues Baltz. It is more than halfway finished and should go live later in the first quarter. Efforts are underway to produce videos and add them to the website to deliver messages more dynamically.
Baltz is especially vocal on offerings he would like to see from his wholesaler. He says that he found the last wholesaler show disappointing from a content perspective. “I thought that some of the breakout sessions actually misinformed the dealer community.” He says that organizers need to take a step back and bring in more outside partners who know what they are doing. “When you go to a wholesaler show there should be 10 vendors offering email marketing and there are none,” he says. The same is true of vendors talking about online digital strategy; they don’t seem to be around.
There is also a downside to technology. “Technology is an ongoing threat in the form of malware, phishing scams, spam and competition that is able to better position their programs and services,” says Dix. He says the dealership is hammered every day; on a weekly basis there can easily be a dozen or more cyber-attacks. “We have done a lot of work to educate our customers and employees to train them on what to look for.”
Get to the next level
Dealers are split on the value of social media posts; some see them as effective communications while others are less sure. At Egyptian, Baltz is less supportive. “We actually had a post go viral last year,” he says. “it got a lot of views but we got basically nothing in return.” That result has the dealership questioning how social media actually plays into the business. “I think what we will see is email and even text messaging becoming more relevant.”
EVOS has been working with a marketing company on all things digital. That marketing organization optimized Google searches so that EVOS always came up high in results. “We had them look at our Facebook page; we weren’t posting much and now we post at least twice a week,” says Barnette. In a little over two months followers increased from around 100 to more than 700. “As soon as we get the Facebook platform the way we want and we start to get reports and analytics, then we will start on LinkedIn,” he adds.
After a recent chamber of commerce meeting, attendees asked Barnette what EVOS did. He said: “The best way I can tell you what we do is you take any office, turn it upside down. Everything that falls out, we sell.” The market has a perception of what an independent dealer can do and that usually doesn’t include being competitive with Staples or Amazon. “All we have to do is say ‘Yes we are; let us show you,’ one customer at a time,” says Barnette. “Then we do all that extra stuff that our competitors don’t do.”
Michael Chazin is a freelance writer specializing in business topics, who has written about the office supply business for more than 15 years. He can be reached at email@example.com.