Hot Topic

Some business models in our industry need to change, it’s a fact. One of the reasons is that OP vendors are increasingly taking their products elsewhere – where the customer is. OPI’s Heike Dieckmann finds out more…

Our industry has been operating in a pressure cooker environment for the past couple of years. The issues are multifold and well documented: shortage of (the right) products, disrupted supply chains and soaring prices are just some of the challenges incurred, many of them ongoing.

For the traditional OP channel – vendors, wholesalers and the reseller community made up of independent dealers, contract stationers and some very large operators – these macroeconomic obstacles have been exacerbated by the fact that large swathes of their end customer base disappeared, almost overnight, from their usual place of work – the office.

Gone are the days when resellers like WB Mason or Lyreco would drop off a shipment of business supplies worth thousands of dollars (or the equivalent in another currency) at a large office block housing many different customers. Occupancy rates in these destinations vary now, but suffice to say numbers are still significantly down and they will likely never come back to pre-COVID levels.

This is forcing all channel operators to reassess their business models. Starting at the beginning of the food chain, so to speak, OPI takes a look at the vendor community and how it has expanded its routes to market in search of those elusive customers, wherever they might be.

For many manufacturers, the past couple of years have merely accelerated a journey which started long ago, but perhaps was in need of a jumpstart. Needless to say, Amazon is the first company that springs to mind in terms of broadening the selling horizon, and all the vendors OPI spoke to for the purpose of this article admitted how important that operator has become. For many, it’s now the single biggest customer. No surprise there.

What is scary, however, is that the growth vendors are seeing with Amazon and other marketplaces is not incremental (see also ‘Monetising Marketplaces’, page 50). Instead, in a declining market, it’s share taken from someone else and, most likely, this someone has its roots in the traditional OP space.

All vendors were quick to add that this channel remains critical to them, with sizeable percentages of business still going through those operators. Figures typically play in the 40-60% ballpark. However, there’s often a big ‘but’ because, only two years ago, those percentages were much higher. A pandemic reality.

As Fellowes Brands’ VP Americas Beth Wright asserts: “The traditional OP channel is critical for us, it’s still 50% of our sales, but it cannot be the only sector we’re investing in as we come out of COVID and look for growth.”

ACCO Brands President/COO Tom Tedford concurs: “I want to be clear that our core business

is very important. It is vital our traditional customers remain competitive in the evolving marketplace. But ACCO Brands is an evolving business and the new areas we’re focusing on are very exciting.”

The role of the traditional reseller channel remains essential, agrees Stewart Superior’s Managing Director Geoffrey Betts, adding: “It’s extremely important because we need a different customer other than Amazon. We need to make sure all our customers survive – not just one of them. But if you ask me, has that reseller channel reduced in importance as regards the percentage of our sales, then yes, significantly.

“We see a decline in the number of orders from our traditional customers. The size is different too, with minimum order values becoming very difficult. The days of an office supplies catalogue landing on your desk and customers choosing from it are gone, although I do believe they still have a place, if only in terms of brand recognition.

“In the past, if you had your lighting in a direct mail catalogue – as we did – you were guaranteed instant access to, say, 750,000 customers in the UK. And every customer wanting a light would buy it from you. Now they buy their lights online and have immediate access to 150 suppliers offering them.

“Viking, for instance, is doing a good job with its online business, but the number of said lights it now sells is a lot lower than it used to be. We have customers requesting private label on 250 items sold per year. Who would make that number for us in China? We, as a manufacturer, can only survive if we have critical mass and volume. The traditional channel has to radically change or accept a different supply chain.”

Fellowes, says Wright, monitors its channel focus very carefully in order to avoid disruption and cross-cannibalisation. “Our core mission is to help professionals be their best. And we go to market in the most suitable way that allows us to accomplish this. With air treatment, we are predominantly reaching a completely different buyer. It’s still all B2B, be that in offices or educational settings, but it’s another conversation and a different person to selling a Bankers Box, office furniture or technology accessories.”

Air treatment, incidentally, has been the vendor’s best performing category in every route to market over the past couple of years. But the traditional channel only commands a third of this pie.

The success of the segment didn’t fall into Fellowes’ lap. It was a result of John Fellowes’ decision to enter the air treatment and, more broadly, the wellness category in 2013. Little could anyone have predicted that coronavirus would become the lightbulb moment for indoor air quality.

Foresight as well as diversification are certainly playing a crucial part in navigating these difficult times. With product diversification come new customer prospects and routes to market. In retail, for instance, the DIY, home décor or arts and crafts industries all offer vast possibilities in the form of Screwfix, Home Depot, Michaels or Hobbycraft among many others.

Mass market operators, supermarkets and discounters are other avenues where vendors have increasingly ventured with their products, especially in the early days of the pandemic when only essential shops were allowed to open. In Europe – and regions vary considerably here in terms of their dominance – players like Aldi or Lidl have really upped their non-food offering. Writing instruments, school supplies and arts and crafts sit particularly pretty in the ‘middle aisle’ environment.

Executing product diversification with traditional partners can be trickier and this is where vendors often have an axe to grind.

COLOP is a manufacturer in a mature category. And for traditional stamping products, the OP reseller channel remains hugely important. But the vendor has also recognised the need to expand beyond this traditional product and has done so very successfully as part of its COLOP Digital component. The e-mark, launched in 2019, is a portable printing device that has won several prizes for its innovative concept and design. However, sales via the traditional channel were not as rapid as expected, says Franz Ratzenberger, Head of International Sales & Marketing. “With some products you have to be very quick to market. We experienced reservations and conservative behaviour among our existing partners. Admittedly, this was also due to the general economic situation, but not only. We found that other industries, including electronics, were faster and more open to product innovations.”

This slow speed to market is another common complaint. There are exceptions, of course. In continental Europe, Ratzenberger and several of his peers frequently point to operators that have excelled. Böttcher, for instance, the phenomenally fast-growing German online reseller, or OTTO Office, part of the Printus stable, which has done an outstanding job in shaking off its historic mail order shackles, in the process fully embracing e-commerce as the sales channel of the future.

There is no doubt whatsoever that e-commerce has been the biggest winner of the pandemic – even for B2B which was behind the B2C curve. As Bi-silque’s European Sales Director Danny Berendsen soberingly asserts: “If you still have to adapt your business model in 2022 towards online, I would argue you are too late.”

Bi-silque has long been in the Amazon game, with Berendsen spearheading its European efforts since joining the vendor in 2017. He says: “In 2017, our revenues through Amazon across Europe stood at just under €1 million. In 2021, we closed at €6 million, with Italy and Germany being the leading countries. We have done this

through a clear SEO and SEA strategy and a close partnership with Amazon Vendor Support which basically provides us with a dedicated Amazon person in our own trading team.

“Some of the big resellers across Europe, including Lyreco and what was Staples Solutions and Office Depot Europe, have had a very difficult time. Not being able to knock on the doors of existing or new customers, not having that physical contact or a solid plan B to cater to the wants and needs of all the people suddenly working at home has been devastating.

“These players simply weren’t considered to be the place to go. It led to this enormous shift in demand for products in the e-commerce space as well as B2C retail where so many manufacturers – including Bi-silque – now have a huge stake.”

But even in retail, a multichannel presence has become vital, says Mark Daisley, Managing Director of Exaclair in the UK. “We are constantly asking our retail stationery partners what we can do to help increase their sales. We lost about 200 retail accounts during the pandemic and I guarantee none of them had an online presence – and it’s become absolutely essential.

“We kept talking to them, saying we can help as our data is very good – we run CommerceConnect – and direct consumers to them. A couple were willing to go down that path, but many weren’t. I would argue they won’t make it.”

Ratzenberger already alluded to speed to market and this is where e-commerce shines the most. As one vendor told OPI, by the time you've taken a taxi back to the airport following a meeting with Amazon, the product is online. The long-winded process so common in our channel couldn’t be a starker contrast.

Combined with often being a real testbed for new items makes for a compelling proposition, according to Mark Cooper, President of Avery Products in the US. “We do a lot of test marketing and pilot launches on Amazon – and other marketplaces – because it’s a great platform to see how a product evolves. We can then determine if Amazon will stock the product directly or whether we do the fulfilment.

“It’s a very easy way to make items visible to consumers and see what demand they generate. If they sell well, they can be placed directly in Amazon DCs and presented to other customers, knowing they have viable consumer demand. If they don’t sell particularly well, we haven’t invested in massive amounts of inventory. I believe it’s a model everybody should pay attention to.”

“One of the major differences between Amazon and our traditional channel is that resellers and

wholesalers are still the merchandisers. They decide what’s listed and what’s not. Amazon isn’t like that – it doesn’t make the listing decision. That’s up to the brand owner.”

It’s an argument that’s been raging for years and one our industry’s incumbents are only too aware of. S.P. Richards, since its acquisition by Mike Maggio and Yancey Jones, has been making small steps in the right direction with its “wholesale distributor for all resellers and manufacturers” vision and the promise to “stock what our customers and the vendors want wholesale support on” (see Big Interview, page 14).

Of course, the discussion is not just about the importance of the traditional channel to vendors. It also works the other way round as resellers are widening their portfolio of products too in an attempt to diversify. As such, their dependence on traditional OP – lever arch files, labels and stamps to name but a few – has also changed substantially. Food for thought.

Will reseller revenues bounce back to pre-COVID levels as working patterns become more established again, especially for those operators so affected by decimated office locations and for which home deliveries are financially not viable? Unlikely, but some of the imbalances of the past two years will likely be redressed.

The large corporate sector, served well by the likes of Lyreco and several others, will see a renaissance. And this, according to many vendors, is in fact a segment that is still most accessible through the traditional contract channel.

As regards the independent dealer community, Fellowes’ Wright says: “Dealers need to find target categories where trust is a key factor in what the customer is looking for. Commercial air treatment is one of those categories. But they have to invest in updating their selling model, implementing vertically focused digital marketing strategies which are directed at a particular set of customers.

“Several resellers – not just independents but also Staples and Office Depot – have really latched onto air treatment and those that have done well have been very focused on where they had existing relationships. They have become trusted partners and upskilled themselves to be experts in selling this category. Working alongside our national field sales teams, in my opinion, is the way to go.”