In a shock announcement, Essendant has said it is pulling out of the independent dealer channel for office products (OP).
Essendant CEO Dave Rickard told INDEPENDENT DEALER that serving the OP channel in the way it has traditionally done is no longer financially viable for the company.
The Sycamore Partners-owned wholesaler has been reducing its dependence on the OP segment over recent years, expanding its jan/san offering and developing a third-party logistics service called Connected Commerce. However, far from continuing to manage a declining independent channel, the company will now exit the segment altogether.
In a customer letter, Essendant CEO Dave Rickard said this “strategic decision” formed part of a “long-term strategy to optimize operations and strengthen our service.” There will be a 60-day transition period before the change takes effect at the beginning of November, during which Essendant will “continue to operate as normal.”
Rickard later confirmed that the move would involve the complete closure of the wholesaler’s wrap and label service and its furniture division. While the exact fate of the company’s Vertical Markets Group is still not entirely clear, it is widely believed that the service will be completely shut down. The future of the Universal brand is also uncertain at this time.
Instead, Essendant will concentrate on categories where it sees growth potential: jan/san, foodservice, enterprise accounts, e-tailers and tech resellers. These customers do not require wrap-and-label, allowing the company to operate a lower-cost fleet and a more consolidated distribution centre (DC) network. Rickard said the wholesaler will maintain 98 percent US coverage within two days, using into-stock and drop-ship fulfillment models.
Essendant has already added more than 2,000 SKUs in jan/san and foodservice over the past year, including around 200 new private-label items. OP will remain in the assortment, but with a “much tighter focus” and geared toward the needs of non-dealer customers—although dealers will still be able to purchase OP.
The announcement sent shockwaves through the IDC as it appears to leave many dealers, particularly those that were first-call Essendant and stockless (therefore relying heavily on the wrap-and-label program) in potential peril. There will also be significant job losses at Essendant as a result of the changes, although Rickard declined to give specific numbers.
Meanwhile, the IDC’s other main office products wholesaler, S.P. Richards (SPR), has vowed to support all independent dealers to the best of its abilities. To this end, it has taken on the leases of four of Essendant’s expanded DCs as well as a number of other annex locations.
“At SPR, independent dealers are a core focus of our future business strategy,” SPR president Jason Horst told INDEPENDENT DEALER. “Our promise is to remain unwavering in our role as a trusted partner, always focused on delivering value and support. We know that many of our customers are family businesses and, as a family-owned company ourselves, we deeply understand that responsibility. Whether with our longstanding partners or new relationships, SPR is prepared to adapt alongside the market and continue leading in service to the OP community.
“As part of that commitment, taking on expanded distribution centers in Los Angeles, Chicago, New Jersey and Orlando, and annexes in Sacramento and Boston, gives SPR access to larger, more advanced facilities. These expanded centers enable us to handle greater volume, broaden our product offerings and scale to meet the evolving needs of our customers. Together, these locations strengthen our national network and position SPR to deliver even better service to both current and future customers.”
Organizationally, Rickard said Essendant’s company name would not change. The Deerfield, Illinois headquarters may be resized to reflect a smaller corporate staff, but the business will remain in the Chicago area. It has been widely speculated that parent company Sycamore Partners is preparing to offload the company in the not-too-distant future.
As for Essendant’s relationship with Staples, Rickard confirmed the ADOT distribution program (where Essendant sources products from its Sycamore Partners sister company) will continue. Indeed, this may well expand as Essendant reduces its OP assortment. He also noted that the 2019 Federal Trade Commission order, which imposed a firewall between Essendant and Staples until 2029, remains in force.