It’s old news that office product sales are at best stagnant and more often in decline, leaving most independent dealers scrambling to find new categories to keep business thriving. One growing focus in this regard is maintenance, repairs and operations (MRO). Can this category provide the desired bottom-line boost? These independent dealers are banking on it says Lisa Veeck.
At Storey Kenworthy, Des Moines, Iowa, MRO accounts for less than 1 percent of sales. However, the company has lately been making bold strides in the segment on the assumption that this will soon change.
“We have destocked over 90 percent of our office products, relying more on our wholesaler, S.P. Richards, for those,” says vice president Lincoln Dix. “This has freed up a lot of warehouse space that we are filling with janitorial and breakroom, and we are looking to stock with more MRO.”
It’s all part of a strategy to sell products that Dix calls “non-digitizable.” “Our office products world revolves around paper,” he explains. “Yet as things continue to be digitized, copy paper sales are declining—and with them sales of associated items such as tape, pens, highlighters, report covers, etc. But breakroom and janitorial supplies are non-digitizable; and so are MRO products.”
According to Dix, ISG was the inspiration for Storey Kenworthy’s dive into MRO: “ISG had a new wholesaler, Global Industrial, that offers industrial mailing and shipping supplies—things like carts, jacks and pallets. We partnered with it and uploaded its content, including 15,000 SKUs, to our site. Since then, we’ve been reaching out, looking to expand the category by forming relationships with other MRO providers.”
Storey Kenworthy primarily targets companies with small to medium-sized mailrooms, avoiding those with larger warehouses and trucking companies. Other MRO categories under consideration include floor-drying equipment. “With heavy rains come water leaks that require fans and carpet-drying products,” Dix elaborates. “Again, these are non-digitizable and are non-complicated. There’s not a lot of training required—you just plug them in. They are a commodity, but there’s no software solution for cleaning up water.”
MRO generates 40 percent of the sales at Intivity, Rochester, New York. The dealer entered this space in 2010 thanks to a reseller agreement with W.W. Grainger, under which it offers all of Grainger’s 2 million-plus products. The minority-owned company is a regular supplier to the state and federal government, including in MRO.
“Once office products started to decline, we focused even more on MRO,” reports vice president of strategic sourcing Nate Morales. “Today, we buy from Grainger and direct from manufacturers. It’s the best of both worlds.”
1st Source Business Supplies, of Minneapolis, Minnesota, attributes 30 percent of its business to MRO, which—along with food service disposables—is the company’s fastest-growing category. Key clients include casinos, hospitality, movie theaters and food manufacturers. It purchases products from wholesalers through the ISG buying group or, if minimums are met, directly from manufacturers.
That said, CEO Greg McLeod concedes that the definition of “MRO” remains fluid and the line between it and janitorial services can be blurred: “A lot of people assume MRO is nuts, bolts and screws. But it’s a lot more, like hand tools, ladders and HVAC filters; and it can also include large floor scrubbers, chemical dispensing units and other items that are not considered traditional jan/san.”
What is the most leftfield MRO item the company has sold to date? “A fleet of drones!” responds McLeod. “The operations manager at one of our accounts that we sell MRO products to asked if we could get hold of them. We did some research. The result was a $35,000 sale of something I never thought we’d get into.”
Besides seemingly endless product options, another plus for McLeod is that MRO connects dealers with decision-makers: “For MRO, you are dealing with maintenance directors, plant managers, vice presidents of operations and, in hospitals, environmental services managers—people who have the power of the wallet. And without these MRO items, many of these facilities could have to shut down.”
Zuma Office, Houston, Texas, has just recently begun forging a path into the MRO market, with the category accounting for less than 1 percent of total sales year-to-date. The move was encouraged by ISG and Zuma’s software provider, Logicblock, which sought Zuma’s assistance in an MRO-focused beta test.
“Since office products is not a growing market, we are always looking to expand our product categories and have a wider range of products to sell B2B and B2C,” explains president and COO Mason Kramer. “So, we partnered with ISG vendor Global Industrial and expanded our pay-per-click and Google campaigns. We went from zero in MRO sales to $50,000 in five months.”
The products Zuma sells include everything from commercial-grade electric floor scrubbers and mobile scissor lifts to filtered water refill stations and solar-powered stop signs.
Meeting the challenges
All dealers would agree that the MRO segment has its own idiosyncrasies. “MRO is a different language and you have to focus on value-added versus just selling a widget,” cautions Intivity’s Morales. “The competition knows the language to speak and you have to get trained in it. You also have to conduct site surveys and audits to solve the facility’s problems, rather than selling a product. Compliance is another major concern: there are stringent health and safety regulations to consider. You need to be sure you and the customer staff are trained to ensure compliance.”
McLeod similarly acknowledges that MRO can be uncharted territory: “A lot of paths to success are not paved, not scripted, so there can be a lot of heavy lifting on the front end. One of the first issues is defining MRO. Once you determine what it means for your company, opening new accounts with those vendors can be onerous. But I absolutely think getting into MRO is worth it.”
At Zuma, the biggest initial challenge was building confidence among the salesforce. “One of the hardest things for our team was thinking that, if asked, they wouldn’t know anything about the products,” recalls Kramer.
But they have been pleasantly surprised by the reality. “We are not like local traditional dealers,” he continues. “We sell all online and nationwide, and we’ve found that nine out of 10 times, MRO buyers know what they need and want and are trying to get the best price.”
As for Amazon, the dealers agree it is less of a threat in MRO than in office supplies. “Sure, Amazon is there,” Kramer acknowledges, expressing the collective sentiment. “But I haven’t experienced people price matching like they do with office supplies. It’s not a big competitor.”
Top tips for moving forward
Looking ahead, dealers should try to keep pace with the evolving dynamics in the segment. “The MRO market is more saturated now than when we started, since more dealers are getting into it,” observes Morales. “My advice is to find a differentiator, a specific category to excel in. Get trained in the language and add value. Also, don’t be afraid to invest. MRO, like office products used to, requires feet on the street and hearing customer concerns firsthand. You have to be there in person.”
Dix suggests: “Seek advice from sources like ISG. Frank Hoard [ISG facility supply channel director] visited us and helped us understand the market. In the past, for new categories, he said you needed to hire an expert. We did and had moderate success. But things have changed in just the last five years. Now, Frank contends that you don’t need an expert—you just need someone focused on selling the category. With MRO, 93 percent of what we sell are blue-collar products. It’s a different vernacular, so have someone focused on the category.”
McLeod echoes these recommendations: “Learn from people in the industry, like Frank Hoard, who are knowledgeable, connected and fantastic resources. Reach out and collaborate with other dealers—like me, if you are not in my market. Other dealers have helped me out and I am happy to pay it forward. I am also a huge fan of touring customers’ facilities. You can discuss their needs in person, meet their staff and see what they are buying and what they could purchase from you. And don’t be afraid to ask—you don’t know what you don’t know. Finally, move forward. A quote I use a lot, which is most often attributed to French writer Voltaire, is: ‘Don’t let perfect be the enemy of good.’”