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BIG INTERVIEW

Connecting the

business products world

Neil Maslen, Office Depot Europe June 2018

INSIDE THIS ISSUE l l

Staples raises Essendant stakes l Depot’s transformation progress l COS buys Lyreco Australia and shows interest in Winc NZ What can VR/AR do for OP? l Core OP still going strong – in parts l Vendors selling direct: what are the issues? l ABC preview

CONTENTS 18 Big Interview Six months into the top job, Neil Maslen highlights his strategic priorities at Office Depot Europe 26 Hot Topic Virtual and augmented reality applications may be emerging tools in our sector, but the potential is vast 30 Opinion Thomas Schinkel has a contrarian perspective on an Essendant/SPR deal 32 Feature Is there a benefit in vendors selling direct to end users?

34 Spotlight After 100 years in the market, Pilot Corporation is set for the next century

Big Interview: Neil Maslen, Office Depot Europe

After a period of instability, Office Depot’s European business sailed into calmer waters at the end of 2016 when its acquisition by Aurelius was finalised. Six months ago on 1 January 2018, Neil Maslen – previously Spokesman for the Leadership Team & SVP of Contract – took the helm as CEO. An accomplished ‘problem-solver’, Maslen is determined to lead the company into a future that is prosperous and viable in the long term and where the customer is once again king HOT TOPIC: (VIRTUAL) REALITY CHECK

43 Category Update Operators in the viscom space are benefitting from the changing workplace 46 Advertorial Supplies Network’s Greg Welchans explains the next revolution in the distribution supply chain 48 How To... ...deal with a crisis as it spreads on social and digital media 51 Preview: Advantage Business Conference What’s in store at SP Richards’ ABC in Texas?

REGULARS 5 Comment 6 News 52 5 minutes with...

Savannah Guernsey 54 Final Word Anil Abrol

June 2018

VR and AR are playing a growing role in education. We have seen many examples of students embracing this virtual world as a result of brilliant teaching and learning environments. Through our ‘Ripple Effect’ campaign and HP Learning Studio equipped with VR/AR capabilities, we have worked with eight schools around the country to bring these technologies to life for their pupils. There are some really inspiring stories emerging.

There’s no doubt in my mind that the health of the UK’s GDP in 20 years’ time rests on our ability to educate and prepare the post-millennial generation for the opportunities currently being created by this next wave of technology. Advances in VR/AR and associated 3D design and production will have a long-term influence on our industry and employment.

37 Category Update The core OP category faces many challenges, but there is still plenty of promise

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COMMENT The OPI team EDITORIAL Editor Heike Dieckmann +44 (0)20 7841 2950 heike.dieckmann@opi.net Deputy Editor Michelle Sturman +44 (0)20 7841 2942 michelle.sturman@opi.net Reporter Joshua Allsopp +44 (0)20 7841 2952 joshua.allsopp@opi.net OPI Special Correspondent Andy Braithwaite +33 4 32 62 71 07 andy.braithwaite@opi.net Freelance Contributor David Holes david.holes@opi.net

SALES & MARKETING VP – Continental Europe, Middle East and Africa Ewan Dickson +44 (0)20 7841 2954 ewan.dickson@opi.net VP – North America and UK Chris Turness +44 (0)20 7841 2953 chris.turness@opi.net Director of Growth Services Jeremy Hughes +44 (0)7807 810617 jeremy.hughes@opi.net Digital Marketing Manager Aurora Enghis +44 (0)20 7841 2959 aurora.enghis@opi.net

EVENTS Events Manager Lisa Haywood +44 (0)20 7841 2941 events@opi.net

PRODUCTION & FINANCE Studio Joel Mitchell +44 (0)20 7841 2943 joel.mitchell@opi.net Operations & Production Eda Sismanoglu +44 (0)20 7841 2950 eda@opi.net Finance Kelly Hilleard +44 (0)20 7841 2956 kelly.hilleard@opi.net

PUBLISHERS CEO Steve Hilleard +44 (0)20 7841 2940 steve.hilleard@opi.net Director Janet Bell +44 (0)20 7841 2941 janet.bell@opi.net Executive Assistant Debbie Garrand +44 (7718) 660249 debbie.garrand@opi.net

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The cat among the pigeons

ow! No sooner had the ink dried on Thomas Schinkel’s opinion piece on the potential merger of SP Richards (SPR) and Essendant (page 30), that the cat was set right among the pigeons with Staples – via its owner Sycamore Partners – announcing it was interested in buying Essendant.

Who saw that one coming? And what are the motives behind the move – delay and disruption for an Essendant/SPR get-together or a genuine desire to get into wholesaling as well as push further into the mid-market (see page 6)? If this deal goes through, the repercussions for the entire US business supplies industry – but mostly its manufacturers and independents (and their groups) – would be phenomenal.

You can’t help but feel that this is the beginning of another prolonged saga which will command many column inches in these pages. And whatever the outcome of the Essendant/SPR/Sycamore negotiations, instability and disruption will inevitably be part of the process.

Whatever the outcome of the Essendant/SPR/Sycamore negotiations, instability and disruption will inevitably be part of the process One man who knows only too well about both is Neil Maslen, CEO of Office Depot Europe. The problems that Depot had in Europe began long before the ultimately doomed Staples/Depot merger, but that protracted period of uncertainty didn’t help its performance in the region. See our Big Interview (page 18) to find out what Maslen is doing to put things right.

Uncertainty is quite an apt description for several news stories and features in this issue. What will the Australian market look like when all the dust has settled and the current frenzy of acquisition and consolidation comes to a halt (see page 9 – also look out for our Big Interview with Complete Office Supplies’ Dominique Lyone in the next issue of OPI)? How – and when – is ADVEO ever going to recover and emerge on a positive growth path again (see page 8)? Are vendors increasingly going to take a direct sales route to market given all the disruption in the channels (page 32)?

So many questions. Some of the answers to the more strategic issues that affect our entire industry will be provided at this month’s OPI European Forum in London. I look forward to seeing many of you there.

HEIKE DIECKMANN, EDITOR Have a good June.

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NEWS

Analysis:

How serious is Sycamore?

Is the bid for Essendant Sycamore’s end game for Staples or a disruptive bluff?

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Even before the dust had settled over the prospect of wholesalers Essendant and SP Richards (SPR) merging (see OPI May 2018, page 6), Staples – via its owner Sycamore Partners – shook things up even more in the US office products space by making a hostile bid for Essendant.

In a 16 May regulatory filing with the US Securities and Exchange Commission (SEC), it was revealed that Sycamore had taken a 9.9% stake in Essendant (later raised to 11.16%) and had made an all-cash offer of $11.50 per share to acquire the wholesaler.

Sycamore’s move came after it first sent a letter to the Essendant board on 17 April, expressing its interest in engaging with the wholesaler regarding a proposal to buy the company. This approach was rebuffed by Essendant, leading to a second letter on 29 April that reiterated the private equity firm’s commitment to acquiring the wholesaler and said that it should be able to increase its offer “significantly in excess” of $11.50 per share.

As part of its fiduciary duty to shareholders, Essendant’s board had little choice but to follow up with Sycamore; on 10 May, it sent a draft of an ‘Acceptable Confidentiality Agreement’, the terms of which, at the time of writing this analysis, were still being reviewed by Sycamore and its representatives.

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HOSTILE BID Essendant’s board clearly views the bid by Sycamore as a hostile one and recommends that the wholesaler’s shareholders accept the proposed transaction with SPR owner Genuine Parts Company (GPC).

Indeed, GPC improved its own terms for the Essendant/SPR merger, making a new offer to Essendant that could value shares at $12, slightly higher than the current offer from Sycamore. The big difference is that Sycamore is offering cash in hand

to Essendant shareholders. And while the new GPC offer does involve a contingent cash payment, it is largely based on synergies that are estimated to be worth $8.75 a share – potentially higher, but carrying a greater element of risk.

Reacting to the news, Mike Maggio, President of US dealer group TriMega, told OPI: “This came as a surprise, and if Sycamore/Staples is in fact serious about acquiring Essendant, it creates a very different landscape for manufacturers and independent dealers than we were anticipating with the SPR/ Essendant merger.”

Short-term, this would cause significant disruption in the supply chain for independent dealers and manufacturers AOPD Executive Director Mark Leazer said that normally the words “shocked” or “stunned” would have come to mind, but not so in this case. “Many industry folks have speculated on how the big boxes could get into the wholesale side,” he noted.

“Office Depot’s method of dealer acquisition has been suggested by some to be ‘wholesaling’ to their acquired dealers, and it appears that this is Staples’ method. With Essendant’s depressed value, the cost is relatively inexpensive. In these days of major changes proposed for our channel, we just need to stay calm, patient and informed.”

Maggio added: “Short-term, this would cause significant disruption in the supply chain for independent dealers and manufacturers. What options will they have and how quickly will they

[We] should be more concerned now than ever before about our collective sustainability and who really has our back direct-buy relationships. If this acquisition does go through, it would certainly accelerate that planning.

It would also highlight the advantages, for dealers and manufacturers, of working with an organisation dedicated to direct-buy relationships.”

It’s a sentiment that’s echoed by Independent Stationers CEO Mike Gentile. “Recently I suggested we ‘Keep Calm and Carry On’. Maybe instead our mantra should be ‘Buy Direct and Sell Brand’. In my opinion, each of us and the rest of the independent dealer channel should be more concerned now than ever before about our collective sustainability and who really has our back.”

As this issue of OPI went to press, we were waiting to see if Essendant and Sycamore would reach an agreement over their confidentiality agreement and whether or not Sycamore would enter into a due diligence process.

IMPORTANT QUESTIONS Still, there are several questions as to Sycamore’s true motives behind its move. And it is a Sycamore move – OPI understands that senior management at Staples Advantage was not even aware of the Essendant bid until the news broke.

Essendant’s share price has continued to rise since the announcement of Sycamore’s hostile takeover bid. The 23 May price of around $13.70 is significantly higher than the most improved GPC proposal, suggesting that the market is expecting the bidding for the wholesaler to be increased. The big question is, who wants the Essendant deal more, Sycamore or Genuine Parts?

ESSENDANT BOARD ADOPTS POISON PILL On 17 May, the Essendant board of directors adopted a stockholder rights plan (commonly known as a ‘poison pill’) that effectively prevents Sycamore from adding to its 11.16% stake in Essendant without triggering the plan. This plan allows for a dividend in the form of preferred share rights to be distributed to shareholders; if it is triggered, then the rights are exercisable at a price of $33 per common share, making it prohibitively expensive for Sycamore to acquire Essendant.

The poison pill is structured in such a way that it will not be triggered by the consummation of the merger agreement between Essendant and Genuine Parts-owned SP Richards. The rights plan will expire in May 2019.

“The board believes that given current circumstances, it is in the best interests of stockholders that no one person or group acquire undue influence or control through purchases of Essendant stock,” commented Essendant Chairman Chuck Crovitz in a press release.

Back in 2008, Corporate Express used the threat of a poison pill as a defensive measure in its takeover bid by Staples. In that instance, Staples upped its offer and the acquisition went from being hostile to a friendly one.

More recently, in 2014, US fashion retailer Express adopted a poison pill measure to prevent Sycamore from acquiring more than 10% of its shares. Sycamore pursued its interest in Express and went on to conduct due diligence in the retailer, a process that took around six months before Sycamore backed away.

Let’s hope for Essendant’s sake that Sycamore’s due diligence doesn’t take that long: a prolonged period of uncertainty wouldn’t do Essendant or SP Richards any good.

June 2018

1. Why did Sycamore wait until after the GPC/SPR deal was announced before making an offer for Essendant? Essendant’s share price has been depressed for months prior to the GPC/SPR announcement. The timing of the offer seems like a reaction to GPC rather than a proactive strategic move by Sycamore.

2. Why didn’t Sycamore make an earlier move for SPR if it views wholesaling as a strategic pillar for Staples? GPC said it considered all options for SPR when it initiated a strategic review last year; presumably Sycamore would have had an opportunity to bid for SPR then.

3. Is this merely an opportunistic disruptive move by Sycamore? A due diligence period will give it an opportunity to look closely at Essendant’s books as well as delaying the Essendant/SPR merger process – that won’t do Staples any harm. Plus, if

Sycamore walks away, it will make a tidy profit on the 4.2 million Essendant shares it acquired for an average price of $9.50.

4. Is acquiring Essendant the best way for Sycamore to accelerate a Staples push into the mid-market? A Staples-controlled Essendant makes it a major supplier to the IDC, but there would surely be a mass exodus of dealers to SPR and a long period of channel disruption that might outweigh potential benefits.

5. Would Sycamore be able to realise all its cost-of-goods synergies? A precedent was set around 30 years ago when the US government successfully prevented Boise Cascade from operating a dual distribution model, which eventually led to it spinning off its wholesaling operations. Has Sycamore done its homework on this potential issue?

NEWS

become available? I am confident we will have acceptable alternatives, but there will be disruption before they become fully integrated and available.”

The TriMega boss believes a Staples/Essendant tie-up could be beneficial for dealer groups. “We are a direct-buy organisation,” he stated, “and we have already begun conversations with our primary suppliers and distributor partners about how we can improve and enhance our programmes, so more members can take advantage of our

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NEWS

Analysis:

ADVEO still on downward slope

We take a closer look at ADVEO’s Q1 results, including performance by region and details of an organisational restructure

Unfortunately, Q1 numbers weren’t pretty for European wholesaler ADVEO, with total sales 17.8% lower than Q1 2017 at €107.2 million ($126.5 million).

EBITDA of €2.8 million was said to be in line with budget after a €5.6 million reduction in structural costs, but was more than 50% down on the same period last year. Gross margin was 30.1%, which ADVEO described as “a good level”, while the Q1 net loss was €2.9 million.

The company continues to blame stock availability issues for its steep sales declines.

These issues, caused by credit restrictions, have been going on for about a year and ADVEO is now looking for a new investor to bring in around €30 million in the form of long-term debt. On the earnings call, CEO Jaime Carbó said the funding process was in its final stages and that he didn’t expect any problems. As of 31 March 2018, the company’s net financial debt was €149.2 million, around €18 million higher than on the same date in the previous year.

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ADVEO’S MARKETS France ADVEO said that its largest market of France experienced a “slight” fall in sales during the quarter, although the decline of 6.1% to €46.2 million could be viewed as more serious than that.

Ink and toner sales dropped by 11% to €10.7 million, traditional office supplies were down 4.6% to €24.8 million and other products and services declined 4.2% to €10.7 million. The wholesaler blamed the fall in sales on strikes in the transport and delivery sectors, and the timing of this year’s Easter holidays.

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Iberia Sales in Iberia slumped by more than 42% to €10.9 million as the region continues to be affected by the lack of stock availability. Ink and toner sales plummeted by 77.5% to €900,000 and represented just 8% of ADVEO Iberia’s sales during the quarter.

Traditional office supplies declined by around 33% to €7.1 million, while other products and services fell at a similar rate to €2.9 million.

Rest – Germany, Italy, Benelux Germany was the hardest hit of ADVEO’s three remaining markets, while Italy and Benelux reported similar results to those of last year.

Overall, sales in the region dropped by more than 23% to €42.7 million. Ink and toner sales fell by 30% to €7.7 million, traditional office supplies by 23% to €24.3 million and other products and services by 19% to €10.6 million.

As well as stock problems, Germany is facing other difficulties with the recent introduction of a new ERP system, the sale of its distribution centre in Winkelhaid resulting in a new logistics model based around a single facility located in Höver, and the adoption of the group’s shared services model.

STILL MOVING AHEAD Despite the disappointing financial results, ADVEO continues to press ahead with a number of initiatives that form part of its 2017-2020 strategic plan, as well as some new ones. The company has revealed a revised organisational model structured around four business areas and confirmed the names of those who will lead these units: Markets (marketing and sales activities) Philippe Guillotin, Managing Director of ADVEO France since 2017 Technology & Transformation Luis Ramos, Chief Information Officer since 2015 Supply Chain (from procurement to logistics) Ramón Barca, Chief Logistics Officer since 2016 Finance & Shared Services Manuel López Antón, CFO since 2016

The company continues to blame stock availability issues for its steep sales declines Carbó said the new structure would make the group leaner, more efficient and speed up decision-taking.

Another group-wide project is the launch of joint commercial and marketing initiatives that focus on areas such as promotional campaigns, catalogues, events, services and pricing.

The wholesaler has also introduced Marketpoint in Germany, a B2B platform that allows it to integrate with its reseller customers. It is expected to be rolled out in France, Spain and Benelux during the course of 2018. In other positive news, ADVEO has finally resolved a legal dispute that now allows it to sell three former Unipapel distribution faciltiies in Spain.

The company is hoping to sell the warehouses for €40 million.

Analysis:

OfficeMax New Zealand sold

But how can ComCom ensure Platinum Equity runs Winc NZ as a completely separate entity until it is sold?

Platinum Equity has completed its acquisition of OfficeMax New Zealand although the US firm still has not found a buyer for the Winc New Zealand business it has agreed to divest.

In April 2018, it was revealed that New Zealand’s competition authority, the Commerce Commission (ComCom), had reached an agreement with Platinum whereby Platinum undertook to divest Winc NZ to a ComCom-approved buyer once it had completed its acquisition of OfficeMax NZ. In a statement to OPI, ComCom said: “Platinum has completed its acquisition of OfficeMax NZ. There will now be a period of time when Platinum owns both OfficeMax NZ and Winc NZ. During this period, Platinum has undertaken to the New Zealand High Court and the Commission that Winc NZ will be held and managed as a separate going concern. Ring-fencing obligations are also in place to ensure that Winc NZ’s confidential information is protected. The Commission has not yet approved a purchaser for Winc NZ Limited.”

Quite how ComCom will police Platinum’s undertaking to ring-fence Winc NZ remains to be seen. As far as OPI is aware, the Australia-based senior management at Platinum-owned Winc hold wider ANZ roles, overseeing operations both in Australia and New Zealand, and the New Zealand unit relies on Australia for mission-critical things such as its IT system. How it can fully function as an independent, standalone company is a bit of a mystery; as is how senior management located in Australia will not be privy to sensitive information that could potentially harm Winc NZ’s competitive position.

Dominique Lyone, CEO of Australian independent dealer Complete Office Supplies (COS), told OPI recently that he was interested in acquiring Winc NZ, but that Platinum was “not talking” to him. Why would it? It surely doesn’t want to sell to the company that is now its main competitor in Australia following COS’s recent acquisition of Lyreco in the country (see page 11). That would probably be its last resort.

ComCom is there to ensure a level playing field for competition in New Zealand. It recognised the need for OfficeMax NZ and Winc NZ to remain separate, but the way it has gone about allowing Platinum to acquire ‘Max NZ would from the outset appear to seriously undermine the competitive position of Winc NZ.

NEWS

Analysis: Office Depot execs impress at analyst conference

Gerry Smith and his leadership team woo analysts in New York

Office Depot Inc CEO Gerry Smith and his new senior management team delivered a high-calibre series of presentations to the financial community at the company’s analyst day in New York on 17 May. After ringing the closing bell on the NASDAQ on 16 May, Smith and his team spent most of the following morning going through Depot’s strategic plan – and the progress made so far – to transform the company into an omnichannel business services platform.

Most of the opportunity appears to be in the SMB space where customers have sought out expensive services in a fragmented market

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Apart from Smith, those who took to the stage were Jerri DeVard (customer and marketing), Janet Schijns (merchandising and services), Steve Calkins (BSD), Dan Stone (CompuCom), Kevin Moffitt (retail) and Joe Lower (finance). Only Calkins and Moffitt remain from the ‘old’ Depot as Smith has revamped his leadership team and aims to instil a new, more dynamic corporate culture at Office Depot.

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WALKING THE TALK The enthusiasm and energy levels of the presenters were evident, and as analyst and Jefferies Managing Director Dan Binder put it in a note to clients: “[Office Depot] hosted a high-energy meeting in New York City where it outlined its vision as a company in transforming from a sleepy declining office products business, hindered by a lack of strategic focus, old processes, management deficiencies and underinvestment, to an energised, B2B services-focused, omnichannel reseller ready to leverage existing assets and relationships to penetrate the SMB market.”

Binder called Depot’s strategy “intriguing”, but added the caveat that execution of the plan

now needs to follow. Indeed, that was a sentiment echoed by Smith himself on several occasions during the conference. He said that it was all very well presenting the plan in front of a group of analysts, but that the talk had to be backed up by results. That didn’t really happen in the first quarter, but it’s early days and there were still a few signs from Depot’s Q1 results that it is moving in the right direction. For example, online traffic in the quarter was up 9% and there was a 16% increase in the number of business customers.

The investor day’s tagline was ‘Depot. Different!’

This was not only to highlight the new, differentiating strategy, but also to – once again – try and change the perception that investors and (potential) customers have of Office Depot as being predominantly a consumer-focused retailer whereas, in fact, 60% of sales are derived from B2B. Smith admitted that 12 months ago, Depot’s strategy had been based on synergies arising from the acquisition of OfficeMax, and that this was not sustainable. Something had to be done.

The CEO talked a lot about Depot’s assets and their potential. These include: 28.6 million annual active customers; 18 million+ loyalty customers that spend on average twice the amount of non-loyalty customers; 200,000 enterprise accounts; more than 50% of US school districts as customers; 5.9 million SMBs located within three miles of an Office Depot store; ability to provide next-day delivery to 98.5% of the US population.

SMB MARKET IS KEY One could question the $1 billion paid for CompuCom, but Depot does have a clear, strategic roadmap on how it intends to develop a combined products/ services offering for business customers, with a focus on small and medium-sized businesses (SMBs).

“SMB appears to be the bigger opportunity,” said Binder. “The technology and services areas that management wants [Office Depot] to be a player in were defined as an $83 billion market with $55 billion in technology solutions and $28 billion in SMB business services. Given the challenges in the enterprise side of the business (as we have seen in the negative CompuCom sales results), most of the opportunity appears to be in the SMB space where customers have sought out expensive services in a fragmented market.”

With the move to business services, Depot said it is now playing in a $225 billion addressable market, but it is not all about that. Interestingly, more than 50% of this market figure is still from office and technology products (including furniture) which are estimated to be worth approximately $116 billion.

“We are not abandoning products,” stressed Smith.

See opi.net for a more in-depth look at Office Depot’s 2018 analyst day.

Australia’s leading independent dealer Complete Office Supplies (COS) is now the country’s second-largest B2B office supplier behind Platinum Equity-owned Winc/OfficeMax after it recently acquired Lyreco’s Australian operations.

The deal – for which financial details were not disclosed – was finalised on 1 May. Adding the A$70 million (US$53 million) in sales from Lyreco will take COS’s annual revenues to around A$215 million.

Lyreco entered the Australian market in 2004 when it acquired National 1, but was never quite able to turn things round. We have often questioned Lyreco’s continued presence in Australia – at the end of its financial year in June 2003, National 1 had annual sales of more than A$150 million. However, 15

years later it’s less than half of that and publicly-available documents show that the Lyreco Australia unit made a loss of A$9 million last year.

Lyreco CEO Hervé Milcent told OPI that it was not the outcome the reseller had been hoping for. He said that as part of the new strategic plan to strengthen its Asia-Pacific business, Lyreco had engaged with COS from September 2016 in an attempt to acquire the family-owned business.

However, COS founder and CEO Dominique Lyone was having none of it, steadfastly refusing to sell the business he started 40 years ago. That left Lyreco in something of a quandary.

With Platinum Equity-owned Staples (now Winc) and OfficeMax Australia looking

to combine, and COS not for sale, who else was there that Lyreco could have acquired to achieve the necessary scale for a sustainable and profitable business model in Australia?

The simple answer is that there was no one, and when COS’s own attempt to acquire OfficeMax fell through at the end of 2017, Lyone opportunistically turned his attentions to Lyreco.

Speaking to OPI, Lyone pointed to the threat of the combined Winc/OfficeMax as the main reason for a need to increase COS’s scale. He added that the complementary customer mix between COS and Lyreco was another attractive part of the deal. Around 70% of COS’s revenues come from enterprise and government customers, whereas Lyreco in Australia has tended to be

NEWS

Lyreco sells Australian business to COS

Dominique Lyone: look out for our Big Interview with Lyone in the next issue of OPI stronger in the mid-market segment, an area that Lyone has identified as having significant potential.

COS has set itself an ambitious four-month deadline to compete the Lyreco integration. “Blending the COS and Lyreco businesses and teams will deliver synergies that will ensure we are a mighty and respected competitor in our space,” said Lyone.

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NEWS

ACCO benefitting from better balance

ACCO Brands’ solid first quarter performance underlines its more balanced international presence resulting from the Pelikan Artline and Esselte acquisitions in the past couple of years.

While company-wide sales were down a comparable 4% to $405.8 million, ACCO still managed to increase adjusted operating profit by almost 30% to $18 million.This was largely due to the positive impacts arising out of last year’s acquisition of Esselte in the EMEA region: the UK market saw double-digit growth and appears to be enjoying a fresh impetus under the legacy Esselte management, while the Kensington brand is benefitting from the Esselte distribution network in mainland Europe and was up 20% year on year in the quarter.

The performance in ACCO’s International division was described as “mixed”

by CEO Boris Elisman: Australia is still being weighed down by some Pelikan Artline integration issues and Mexico posted a surprise drop in sales, possibly due to inventory build-up in the channel during the fourth quarter. Brazil, however, continues to do well for ACCO, and sales and profits were both up during the quarter following a strong back-to-school season there.

ACCO’s North America division continues to be dogged by inventory reductions at its big box and wholesaler customers. There was also a loss of market share in the mass retail channel, although Elisman said this related to low-margin commodity items following “opportunistic” category wins in 2017.

These declines are so far not being offset by increases with e-commerce customers. Elisman added that the North American e-tail channel now represents 13% of ACCO’s sales and its growth rate here is showing no sign of slowing down.

It would not be a surprise if ACCO was to make a move in the North American market this year. The Esselte integration in Europe is going well and a lot of the heavy lifting has already been done. In the US, with the Staples/ Office Depot changes, the uncertainty surrounding Essendant/SPR/Staples and continued secular declines, the market is ripe for further consolidation.

EPIC to end after 2018

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After five years and some iconic locations, EPIC 2018 will be the last as its organisers have decided to bring an end to one of the OP industry’s biggest dealer group trade shows.

The TriMega board has unanimously voted not to hold another joint US conference with event partners Independent Stationers (IS) next year. TriMega cited as reasons for the decision the continuing decline in attendance since the inception of EPIC in 2013, as well as the two big US wholesalers announcing plans for events in 2019, which led to concerns from manufacturers over the cost of supporting multiple conferences in the same year.

Both IS and TriMega have expressed support for a single industry event in 2020 and are currently working with trade organisations Business Solutions Association (BSA) and NOPA. TriMega is also evaluating meeting ideas for its own members for 2019, while IS specifically said it believes it’s important to continue to host an annual meeting with its dealers, focused on several initiatives including educational seminars, networking and supplier meetings in a new, condensed format.

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Officeworks chief to retire

Mark Ward Australian business supplies reseller Officeworks has announced the departure of its Managing Director Mark Ward who is set to retire after 11 years at the helm of the country’s largest office products retailer.

Ward was instrumental in overseeing a seamless transition following Wesfarmers’ takeover of the former Coles Group back in 2007. He will remain in the role until the end of this year while the process to appoint his successor is finalised, upon which he will remain with Wesfarmers working on a number of projects.

These will include membership of the newly formed Wesfarmers Advanced Analytics Advisory Board, membership of the Bunnings Australia and New Zealand board and leading a group-wide safety improvement initiative.

The search for Ward’s successor has commenced.

Wesfarmers said it will be considering both external and internal candidates.

Buffetti takes 40% stake in Italian manufacturer Italian OP franchise retailer Buffetti has acquired a 40% shareholding in Pigna, one of the country’s oldest stationery and school supplies brands.

The move sees Buffetti become the largest shareholder in Pigna, the remaining shares being owned by investment fund IDeA CCR I (31%) and industrialist Giorgio Jannone (29%). Financial details of the transaction were not disclosed.

Buffetti’s entry into the capital of Pigna comes around 12 months after IDeA CCR I – part of the De Agostini asset management group – took a majority stake in the manufacturer which was teetering on the brink of financial collapse. The Buffetti investment represents an important milestone in the strategic development of the company undertaken by the De Agostini-owned fund.

The move represents a key step in Buffetti’s strategy to focus on five core areas: office, school, gifts, software and services. With that same strategy in mind, the retailer also took a controlling stake in Italy-based gifts retailer Campo Marzio approximately two years ago.

Under the deal, no management changes at Pigna are planned at this stage.

Beth Wright is leaving visual communications vendor Bi-silque after more than a decade with the company. Wright has been with Bi-silque since 2007 and in her most recent role as Chief Commercial Officer since 2014 split her time between the vendor’s US and Portugal locations.

She is set to join the senior management team of US-based manufacturer Fellowes Brands in the newly-created position of VP of Strategic Growth in July.

At Fellowes, Wright will be responsible for overseeing strategic expansion in the business professional channel. She will also collaborate with the existing teams to identify and implement enhanced opportunities for customers to partner with Fellowes, according to the firm.

Commenting on the new hire, CEO John Fellowes highlighted Wright’s track record of success and a legacy of driving growth with business channel partners in both the US and Europe through her experience gained at Daisytek, Cardinal Brands and, most recently, Bi-silque.

In 2017, Wright was presented with the prestigious Professional of the Year accolade at OPI’s European Office Products Awards.

IN BRIEF Hamelin re-enters Australian market France-based Groupe Hamelin has re-entered the Australian OP market by taking a controlling interest in the Bantex Group. Bantex Australia has been rebranded as Hamelin Brands.

NEWS

Beth Wright to join Fellowes

Xerox throws out Fujifilm merger Xerox has terminated the agreed takeover deal with Japanese imaging giant Fujifilm due to the failure by Fujifilm to deliver audited financial results relating to the ongoing accounting scandal at its joint venture Fuji Xerox in New Zealand.

ISSA forges Italian events partnership Cleaning industry association ISSA has partnered with Italian trade association Afidamp FAB to expand the Pulire family of events.

Platinum buys mail business Winc and OfficeMax owner Platinum Equity has acquired US-based Document Messaging Technologies for $361 million.

ALSO launches new offering European technology distributor ALSO has opened a Financial Services division. Resellers can receive new, expanded financing solutions as part of a single offer. Currently available in Germany, there are plans for a gradual launch across the rest of Europe.

Newell sheds packaging business Newell Brands has agreed to sell its global disposable cutlery and packaging business, The Waddington Group. The division has been acquired by US-based paper and plastic packaging maker Novolex Holdings for around $2.3 billion.

CWG acquires Gilpez US-based Carolina Wholesale Group (CWG) has bought out EOS and OP supplier Gilpez Office Products. Family-run Gilpez is merging its day-to-day business operations with those of Arlington Industries – a subsidiary of CWG. Exertis expands consumer unit European IT wholesaler Exertis has launched its new Core Electricals segment. It will sit within Exertis’ Consumer Business Unit and will be led by Harriet Croft who has joined from UK high street retailer Argos.

Beth Wright

Australia loses two industry doyens

Tejas widens footprint US dealer Tejas Office Products has acquired Red Tag Business Products and Office Edge, both based in Texas, for an undisclosed sum. Tejas provides local representation not only in Houston – where it is headquartered – but also in Austin and central Texas.

Imperial Dade enters Texas US distributor Imperial Dade acquired fellow sanitation, packaging and OP supplier Gulf Coast Paper, which operates out of seven locations in Texas.

New leadership for KCP Kimberly-Clark Professional has appointed Aaron Powell as President. He was formerly President of Kimberly-Clark Europe, Middle East and Africa.

June 2018

OPI is saddened to report the passing of Australian industry legends Geoff Penney and Hilary Lee. Geoff Penney, aged 91, is best known for founding OP and stationery distributor Geoff Penney Ltd in 1964. The company went on to merge with Pelikan Quartet in 2006 to form Pelikan Artline, which is now part of ACCO Brands Australia.

Hilary Lee was a much-loved and respected former board member of Office Choice, having joined the dealer group in 2001 following the acquisition of Minto-based OP reseller Advance Supplier. In June 2005, he also purchased WC Penfold’s four Sydney locations including the flagship Pitt Street store, later rebranding them to City Stationery Office Choice.

HP pays up in ink gaffe The Australian arm of HP Inc has agreed with the country’s consumer watchdog to pay compensation to customers who bought certain printers without being informed that hidden software prevented the use of non-HP ink cartridges.

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BIG INTERVIEW

The

TURN AROUND

OF OFFICE DEPOT

An accomplished ‘problem-solver’, Neil Maslen is determined to lead Office Depot Europe into a future that is prosperous and viable in the long term, and where the customer is once again king

Europe

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fter a period of instability and disruption, Office Depot’s European business – worth more than €1.5 billion ($1.7 billion) – sailed into calmer waters at the end of 2016 when the acquisition by private equity firm Aurelius was finalised. A year on, just six months ago on 1 January 2018, Neil Maslen, previously Spokesman for the Leadership Team & SVP of Contract, took the helm as CEO. The company remains a dominant force in the European OP space through the formidable Viking brand, the Office Depot Europe contract business and a relatively small retail operation. But there’s plenty to be done and Maslen’s turnaround strategy is clear: return the business to profitability, stabilise the top line and then grow again. At the centre of it all is the fundamental promise of putting the customer first.

OPI’s Heike Dieckmann met Maslen at Office Depot’s UK headquarters in Leicester to discuss what went wrong in the past and what is going right now.

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OPI: You’ve been with Office Depot for a few years, but only had the CEO title for a few months. What’s your background?

Neil Maslen: I was born and bred in the UK, but moved with my parents to South Africa when I was 11.

I finished my education in South Africa and started my working life there.

I’m actually a mining engineer by qualification, and had the opportunity to live through some difficult yet interesting times in South Africa. It was a great environment to understand what it takes to lead, to mobilise, to work safely and to be extremely focused on what you need to do. So when I say that I took away some tips and tricks and certainly some thoughts around leadership from the rock face, I mean that quite literally.

I soon realised that it was problem-solving which interested me more than anything else, and it was a logical extension to move into engineering consulting.

This then morphed into business consulting as I really liked the client interaction and the business development side. It’s an area I remain very passionate about.

I moved around a bit in that area – geographically as well as in terms of client base and eventually got involved with Office Depot in a consulting capacity, advising them on how to think about the future, the challenges that they faced, on co-creating solutions, etc. They must have liked the outcome because Steve Schmidt asked me to join the team, so I became Head of Business Transformation at the beginning of 2014, having done the prior consultancy work in 2013.

OPI: That was well before Aurelius stepped in, even before the planned – and then failed – Staples/Depot merger was announced…

NM: Well, the merger talks resulted in all sorts of subsequent action, but Office Depot had clearly already realised by then that change was needed.

There was a lot of duplication of cost, a complete lack of synergies across the European landscape and plenty of inefficiency and ineffectiveness. Together with the previous executive team, we defined the causes and mapped a clear transformational journey.

I initially facilitated this process and was then brought in to support and lead the execution of that change.

That role lasted till the end of August 2016 when I was asked to take over the contract channel – historically the largest part of the challenge that Office Depot faced. When the Aurelius acquisition was concluded, I also stepped into the role of

BIG INTERVIEW Neil Maslen

Spokesman of the Leadership Team, so I had a dual role. I still do now, in fact – I am CEO, but also still head the contract channel.

OPI: What’s the set-up of Office Depot in Europe?

NM: In a basic nutshell, our business is primarily split into two halves. Contract, which is our Office Depot brand that also represents our retail stores in both Sweden and France; and our direct online business through Viking. There has been no change in terms of geographic footprint since Aurelius bought us. We today have operations in 13 countries across Europe – Viking is in ten of these countries while the contract Office Depot operation is in all 13.

With Viking, we’re largest in the UK, followed closely by Germany. In terms of contract, our two biggest regions for Office Depot are the UK and Ireland, and Germany, Austria, Switzerland and Benelux. Our contract business accounts for 50% of our total revenues, with Viking taking up 36% and our retail stores 14%.

pleased to say that 2017 marked a year where, to a large extent, that was achieved and we moved away from a loss-making position in 2016. We also made a significant difference to our cash situation.

The second core pillar of my job is to stabilise the top line and that’s a broad umbrella term which encompasses a few separate aspects. No surprise there – everybody has the same pressures in this area, as the consumption of some core products – paper, ink and toner most notably – is in decline.

It means we have to do things a bit differently and again there are several strands to our strategy. Our goal is ‘to leverage the power of AND’. What that really relates to is that we must continue in the segments we have historically come from – core OP – but we also have to move into products which are in growth. It’s a no-brainer: if a significant percentage of our SKUs is in decline, then it’s no surprise that the top line is

June 2018

OPI: What are your strategic goals and responsibilities in your current CEO role?

NM: There are three things I would highlight as being my key responsibilities. First and foremost, execute the turnaround, ie return the business to profitability and ensure that we generate and free up cash. I’m

There was a lot of duplication of cost, a complete lack of synergies [...] and plenty of inefficiency and ineffectiveness

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BIG INTERVIEW Neil Maslen

under pressure. So the ‘and’ is becoming absolutely fundamental. That said, we’re very much reiterating to our more established and long-standing partners that our focus is on both – we are still a supplier of traditional office supplies and have no intention of moving away from it. But there has been some natural rationalisation in the vendor community already, of course.

It’s not just the products in decline. And as in pretty much every conversation, here comes the Amazon word. Amazon – and Amazon Business – is here to stay. The company, in every market it enters, in every way it operates, has taken a significant amount of market share and no doubt will continue to do so.

With Viking and the contract Office Depot side, we effectively had two organisations that were run in parallel

OPI: You’re talking about this ‘new’ Office Depot.

Just by way of a recap, describe the ‘old’ one for me.

NM: Well, for a start, we had started to become loss-making in 2016. Why? Hindsight is always a beautiful thing, of course, but broadly speaking, it was down to margins and costs. We weren’t operating with a cost structure that was aligned – I mentioned earlier all the duplication of cost and lack of maximising the synergies that we already had. We also had a lot of bureaucracy and complexity. All of this was further exacerbated by a top line which, like for almost all of our competitors, has been in decline.

Office Depot had a lot of silos in the past – again, not dissimilar to others I’m sure. Some of them were country silos, others channel silos. With Viking and the contract Office Depot side, we effectively had two organisations that were run in parallel.

OPI: What’s different now?

NM: Focus, management and attention to the business. Aurelius has been a real partner to us and brings considerable knowledge and expertise into the organisation. The team there knows how to drive change in companies and they bring that skill into the business within a strong partnership model.

June 2018

OPI: What can you do about it?

NM: Well, you’re never going to beat Amazon on product alone. So we have to move towards expertise, knowledge and service – these are areas where we can win and in terms of my responsibilities this also falls under the second point of stabilising the top line.

It’s not only about adding product – though that’s important and we’re doing it – but about being experts in office supply solutions and services. We need to talk to customers not just about the light bulb, but about lighting; not about the chair, but ergonomics; not just about paper, but about sustainability.

Another big goal under the stabilising the top line umbrella is acquisition. The market is set for more consolidation and I believe it will look very different in just a few years from now.

OPI: I assume your private equity parent is very much behind that acquisition drive?

NM: Yes. We have a clearly stated objective to grow and we will do that organically as well as through acquisition.

Finally, the third major pillar of my role is to build a culture that people want to be a part of. We need to be more agile, responsive and flexible. If there was a criticism of Office Depot in the past, it was that we were a lumbering oil tanker, not nimble and quick in any way. To change that, we need the right people in the right culture who are enabled and equipped to respond to the considerable changes in the market.

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OPI: So being more entrepreneurial?

NM: Exactly. Anyone can say, “we want to be agile, responsive and flexible”, but it only happens when you become more accountable for the cash that you generate. Having that direct accountability sharpens the mind enormously and that drives the change.

With regards to the channel silos, one of the things we’ve changed is how we go to market. We are now one company with two routes to market. We can offer different services at different levels and at different price points according to the route the customer wants to choose, but we need to integrate all the aspects of our organisation a lot more and operate as one company to benefit from the synergies that we have.

Lastly, in terms of what went wrong and what’s now different – a real willingness to invest in the right things.

One of these ‘right’ things in my mind is e-commerce.

You may have seen at the end of last year that Aurelius is investing, over a two-year period, an additional €20 million in our e-commerce environment. This investment drives a substantial difference in efficiency, in effectiveness and in the customer experience.

OPI: How much is that happening now?

NM: We’ve been surprised at the crossover between our customer base. There’s a lot of commonality

OPI: How does this work in practice?

NM: We’ve taken a unique approach in adopting what we call an agile SCRUM-based methodology and implemented that cross-functional approach into our merchandising.

Behind your front end – your two shops effectively – we have one commercial entity that works on an end-to-end basis from a business intelligence perspective all the way through to marketing, merchandising and inventory. We have eight of these different SCRUM teams which have been allocated across the organisation to create handover points and maximise the flow of information.

OPI: To make the organisation more efficient and streamlined, you had to make some unpleasant decisions I’m sure. Your Irish business springs to mind and the redundancies you made there…

NM: Yes. We took the decision to move some of the fulfilment back from Ireland to the UK. We retain a profitable business in Ireland and we still have a facility there and people on site, but of course, as we do with every aspect of the business, we seek operational improvements. Ireland was affected by these initiatives, as was Switzerland where we closed a warehouse. We are also closing an additional warehouse in Zwolle in the Netherlands.

OPI: Has this caused difficulties in terms of delivery times?

NM: No. We’ve had to change some of the cut-off times in terms of when orders had to be placed by, that’s all. In Ireland, we took a decision for certain large clients to retain products locally, so we’ve been able to manage that very effectively.

June 2018

OPI: You say one company with two routes to market – is there going to be a big rebrand or a change of the Viking name?

NM: No. There are very few examples of organisations that have not suffered significant negative impact when they’ve tried to consolidate their brands in my opinion. Both brands – Office Depot and Viking – are extremely well-established.

One of our objectives with regard to our set-up across Europe is to become a single business that has two brands which can offer customers different options. We want to take them to market so that customers can choose how they interact with us.

They can have different types of service and different solutions according to the brand that they interact with. We refer to it as ‘One Commercial World’.

We want to work with companies of any size across all industries, but we also recognise that every person in those businesses is a potential customer as well. So there’s a clear B2B orientation for our total business, but we recognise that employees go home at the end of the day and require products in their personal lives.

If we work as one company across the Viking and Office Depot brands, we are not only retaining existing customers, but also generating new ones.

across the brands. We have customers that are operating in a business environment, but are also seeing the benefits of the Viking offering.

Attracting our client base to both brands and widening it is definitely our intention.

BIG INTERVIEW Neil Maslen

I referred to the top line before. We had to take some tough decisions around what type of revenue we wanted to pursue. It can certainly be a case of quantity over quality, which we are addressing now. Any revenue growth has to be ‘quality’ and sustainable.

Then there’s the cash again. There has been an overwhelming focus on cash and on looking much more carefully at every working capital lever that can be pulled. That brings not just an improvement in cash flow, it also brings an improvement to the commercial approach of the management and the leadership of the business, while creating the financial resources needed to achieve growth.

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Neil Maslen BIG INTERVIEW

OPI: How many people were made redundant in total as a result of the turnaround process?

NM: Our transformational programme that focused on ‘legacy overcapacity’ and a change in our contract sales coverage model delivered an overall 20% headcount reduction in 2017.

OPI: That’s a very severe cutback and must have affected staff morale considerably. How many people are employed at Office Depot Europe?

NM: We now have 5,500 people working across the business. We were an organisation in turnaround and we needed to return to profitable growth to ensure our future sustainability. As such, we have restructured the business, looked to remove duplication, improve operational efficiency and – where need be – reduce our footprint and the workforce. The process is coming to an end, but we’re not quite there yet.

OPI: How disruptive has it been for your own staff and, from a customer point of view, service levels?

NM: It’s been tough, there’s no doubt, but interestingly it was with a great deal of relief and pleasure that 1 January 2017 came around. From then on – and the first time in several years – we started having some stability and some clear direction in terms of where we were going.

Any turnaround process is difficult, but I would say that the prior two years were worse and brought a significant amount of disruption to the organisation, which also had a strong impact on customers, specifically from a contract business perspective.

As we moved into 2017, we were able to stand up and say: “We now have clarity, we know where we’re going to be going and the period of uncertainty is behind us.”

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OPI: What’s been the net result of all that cost reduction, consolidation, etc?

NM: I can’t give you specific numbers. What I can say is that we have achieved a high double-digit reduction in cost structures due to the changes we’ve made. That, in addition to our working capital initiatives, has freed up cash and returned the total business to profitability.

One of our key messages now, after a long period of uncertainty, is that we’re putting the customer back at the centre of everything we do. Our new Aurelius ownership has not just brought clarity, it has also enabled us to turn our attention to the external world again, rather than predominantly looking inwards.

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OPI: Let’s go back to your growth plan with regards to acquisitions versus partnering with other entities in your various markets.

NM: We have considerable experience with partnerships and we’re not ruling them out, but right now our appetite is far more orientated towards acquisition. That could firstly mean geographic expansion, even within existing locations, or secondly vertical expansion – we see opportunities in potentially looking into manufacturing, for example.

Thirdly, a more comprehensive foray into services.

At the moment we’re prioritising the first and the third options, ie geographic expansion or extending our service and solutions offering through acquisition.

OPI: What kind of top line growth do you have in mind in the short to medium term?

NM: Personally, I would like us to not just achieve a stabilisation of the top line within the next three years, but to be on the path of substantial growth. That will require both organic and inorganic change.

As a team we want to improve the business, and seek organic and inorganic opportunities, and I am convinced that we have the full support and backing of our shareholder

For more exclusive content from the interview, including Office Depot Europe’s focus on e-commerce and the customer experience, plus more information on the set-up of the company in its various European locations, visit the June issue in the Magazine section on opi.net.

OPI: To wrap it up, what’s the long-term outlook for Office Depot Europe? Obviously a private equity firm typically has a limited timeline that it pursues, but as EVO’s Steve Haworth told us earlier this year, that doesn’t necessarily always follow.

NM: It doesn’t and I’m going to make the same comment. We do not have a defined timeline with our investor, and if you look at other Aurelius companies you’ll see a large number have been there for quite some time – the longest one ten years I believe.

Aurelius is not a fund with any exit pressure.

It’s about the longer term which proper corporate transformations clearly require, and as such we are glad to have Aurelius as our shareholder. What it brings to the table is a real partnership, a genuine presence in the business, and real expertise and knowledge. It’s not just interested in the acquisition, but also in being part of adding value to the organisation it has bought.

I, for one, am not operating under the mindset of a specific timeline. As a team we want to improve the business, and seek organic and inorganic opportunities, and I am convinced that we have the full support and backing of our shareholder.

HOT TOPIC

Virtual reality may sound like science fiction, but real-life applications are rapidly turning it into science fact – by David Holes

V

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irtual reality (VR) as a technology is now making significant inroads into everyday life and hardly a day goes by without the mainstream media running a story of how it’s being adopted by different industries and pushed by global brands.

Backed by huge players such as Google, Microsoft and Apple, its promotion is being led by the high-end gaming sector, with other branches of the entertainment sector also experimenting with it.

Immersive VR experiences are being incorporated into theme park rides, for example, while film studios are investigating how it can best be used in blockbuster movies. Director Peter Jackson is openly talking about an augmented reality (AR) version of his Lord of the Rings trilogy, for instance.

All very interesting, you may say. But how is this relevant to me or my business? Well, several of the latest VR/AR developments have the potential to affect the OP industry, its target audiences and certain parts of its supply chain.

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THE RETAIL LINK The B2C world is perhaps the most obvious channel, in particular e-commerce. Virtual reality looks set to be the next chapter in the book of internet shopping, with VR apps able to provide a virtual tour of an entire store, thereby improving on the current online shopping experience. Instead of clicking through pages on a website, shoppers will be able to get a real-time shopping experience. One such app, developed by a company called Trillenium, has already attracted the attention of one of Europe’s biggest online retailers, ASOS. Interestingly, this developer has also produced a VR experience aimed at airlines. This uses images

from external cameras on an aircraft which are then combined with transponder tracking services to create a VR vision of a flight in 360° video. Passengers experience the flight as though they were sitting in a plane made of glass. Back at ground level, some large car companies such as Ford, Volvo and Hyundai are giving potential customers VR headsets so they can ‘test drive’ their models without leaving the showroom.

Also from a retail perspective, US giant Walmart is now using VR to train its employees so they can experience ‘real-world’ scenarios before being ‘let loose’ in stores. Trainees will, for example, be exposed to a holiday rush or a spillage in an aisle, and learn how to effectively respond to these events. In the future, the superstore’s customers will be able to receive more information with an AR-enabled phone by simply pointing it at any food product in store to get additional advice on nutritional values, provenance or even recipe suggestions.

In a business environment, DHL, one of the largest shipping companies in the world, is employing the technology in its supply chain. Employees use AR glasses to ensure packages go to the right place, with initial studies showing its implementation results in a 15% increase in productivity as well as a significant decrease in the number of mistakes.

What does it all mean?

Virtual Reality (VR) – To experience VR, users wear something on their head – usually a set of goggles or a helmet – that creates a fully-immersive, but entirely artificial world separate from the ‘actual’ reality around them.

Augmented Reality (AR) – AR also requires the use of a sensorpacked wearable device, such as Google Glass, but takes the ‘real world’ view and adds digital information and/or data on top of it.

Mixed Reality (MR) – Sometimes also referred to as hybrid reality, MR is the merging of real and virtual worlds to produce a visual experience where physical and digital objects co-exist and interact in real time.

US giant Walmart is now using VR to train its employees so they can experience 'real-world' scenarios before being 'let loose' in stores

AR/VR IN OP WHOLESALING: KEEPING A WEATHER EYE The potential of virtual and augmented (VR/AR) technology – augmented in particular – in the distribution environment is clear. But how is this evident in practice very specifically in our industry? OPI canvassed opinion from senior executives at many of the most prominent OP wholesalers in Europe and North America to gauge interest in or indeed uptake of the concept.

As an overall statement, there is certainly an awareness of the technologies that exist, but most responses also indicated a “wait and see” and “it’s still too early” attitude, with just small steps underway for now: • VOW Managing Director Adrian Butler says that virtual technology is an area the UK wholesaler is exploring following the adoption of other types of technology within its distribution centre that were already driving up its service levels.

• Essendant is not looking at VR/AR at the moment, but has implemented ‘voice-picking technology’ – a system whereby warehousing staff equipped with hands-free headsets and microphones interact with voice–recognition software to create a paper-free distribution environment and improve on speed and accuracy.

• According to Thomas Veit, Managing Director at German wholesaler/distributor soft-carrier, AR could prove useful in the logistics industry. He cites HoloLens technology using smart glasses as potentially beneficial for warehouse staff when picking, packing and wrapping products. That said, Veit believes that its current system – which uses conventional monitors to show text and images – provides his employees with sufficient information for now, and the additional investment required to step up to AR could not be justified. Yet! Keeping a weather eye on developments, on the elimination of teething problems and of course on cost appears to be the way to go for the time being.

answer correctly before moving to the next level. The reaction from both teachers and students at Bett was very positive and demonstrated how VR can provide the education sector with a totally different tool for improving learning efficiency.

Another firm has launched a chemistry set, initially aimed at the US home-schooling market, but which could additionally be adopted by schools.

The science is taught through a series of practical experiments that are subsequently explained within a VR-immersive experience that shows exactly what is happening in each reaction at a molecular level.

The student is ‘shrunk’ down to atomic size where they see elements and compounds combine, with chemical bonds breaking and reforming as the reaction proceeds. Similar sets covering physics and biology are also planned.

Neil Sawyer, UKI Education and Channel Director at HP, is an enthusiastic supporter of this type of technology and believes it’s important that HP – and the industry at large – gets involved in it: “VR and AR are playing a growing role in education. We have seen many examples of students embracing this virtual world as a result of brilliant teaching and learning environments. Through our ‘Ripple Effect’ campaign and HP Learning Studio equipped with VR/AR capabilities, we have worked with eight schools around the country to bring these technologies to life for their pupils. There are some really inspiring stories emerging.

“There’s no doubt in my mind that the health of the UK’s GDP in 20 years’ time rests on our ability to educate and prepare the post-millennial generation for the opportunities currently being created by this next wave of technology. Advances in VR/AR and associated 3D design and production will have a long-term influence on our industry and employment in the UK. The challenge is to make sure that we train and inspire teachers, who in turn will inspire their students. This is a long-term project – and one HP and our industry partners are committed to supporting.”

HOT TOPIC Virtual & Augmented Reality

EDUCATION FOCUS One sector where the potential benefits and practical uses of VR have often been quoted before is education. It is here where the technology is emerging as a significant tool that can help both teachers teach and students learn their curriculum subjects. At this year’s Bett education technology show in London, UK, the prominence of VR was striking, particularly among the STEM (science, technology, engineering and maths) subject areas.

Examples of how VR could be used in education were plentiful. One was a demonstration on how teaching a chapter from a geography book on ‘river basin management’ could be transformed by VR into a five-minute virtual tour of the Hoover Dam. Taking some cues from the gaming industry, a friendly robot guided students around explaining aspects of the structure and setting quizzes that they needed to

June 2018 27

Virtual & Augmented Reality HOT TOPIC

FURTHER APPLICATIONS There are many other areas where this technology is making significant inroads, notably in the field of medicine as well as rehabilitation where a number of interesting trials are being run: trainee surgeons are already experimenting with VR technology to practice operations, with equipment that lets them interact with virtual ‘flesh and bone’ in simulated theatre environments, while stroke and brain injury victims

Advances in VR/AR and associated 3D design and production will have a long-term influence on our industry and employment in the UK across Europe can now use immersive VR therapy to help regain motor and cognitive function, with virtual exercises that are made to feel like games thereby motivating patients to practice everyday activities.

Finally, with terrorism, natural and man-made disasters a constant threat across the world, VR is being used to train first responders and emergency services in realistic immersive or mixed-reality (MR) environments where they can practice their skills in a variety of scenarios.

In 2015, the European Commission awarded project funding of €5.5 million ($5.8 million) for the

development of such a platform. It has been piloted at a Barcelona train station where police, security personnel and counter terrorism units were able to train in a real infrastructure environment using MR techniques.

A virtual reality revolution is truly underway, there’s no question about that. The high-tech industries are already embracing it and large distributors are making use of it in their supply chains, with the retail sector likely to follow suit. From a business supplies perspective, whether the opportunity lies in getting involved in the sales potential that VR/AR offers or in using it as method to increase productivity with a real return on the considerable investment, it’s a topic that many players in our industry will be monitoring eye – albeit from afar at this moment.

FROM CURRENT STATE OF PLAY TO FUTURE GAZING: VR/AR IN THE SUPPLY CHAIN Westcoast Retail works with the UK’s largest in-store and online retailers and is recognised for its innovative approach to distribution. OPI talks to Managing Director Carl Oxley about how virtual and augmented reality (VR/ AR) could affect the office supplies supply chain and retail experience.

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OPI: Where do you see these new technologies having the greatest impact?

Carl Oxley: AR and VR will both play a growing role across the whole supply chain and within retail over the coming years, from warehouse to the shop floor. They will allow users to benefit from entirely new options and let them develop and test scenarios that have never been available before.

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OPI: Where specifically in the supply chain will we first see it being adopted?

CO: One key area that will benefit greatly from this technology will be the warehouse. For example, staff

with have the ability to use special AR glasses to facilitate the picking of products by matching them with images of what they should be collecting, saving both time and effort.

Another part of the supply chain where AR will become commonplace is in ‘volumetric scanning’ – a technique that is currently widely used as a means of checking whether products will fit onto pallets or for loading trucks in the most efficient way. Using AR to visually recreate virtual scenarios, rather than estimating capacities using data and numbers, is a far more attractive option for firms that can then help safeguard against potential problems more successfully.

OPI: Where will we see the technology being implemented in retail?

CO: Within retail the main drivers for adoption will primarily be down to two things – convenience and choice. Take point-of-sale (POS) displays in-store, for instance. By moving

from conventional displays to AR, consumer choice will be increased as shoppers will no longer be limited to seeing only the items physically present on shelves. It will also be far more convenient for retailers as they won’t have to change an entire display as soon as a product line alters or deals change.

The technology is likely to first gain a foothold using in-store projections, but then migrate to full AR viewing using specialised equipment, with the option of personalised versions tailored to a consumer’s particular needs.

OPI: What barriers do you see to the adoption of these cutting-edge technologies?

CO: AR and VR will undoubtedly have a pivotal place in retail and the supply chain, but it will require significant investment to take it to the next level. And the technology isn’t perfect yet.

Take ‘Findbox’, for example.

This is an in-store scanning box that helps customers find replacement ink cartridges

Carl Oxley or light bulbs. You drop the old item into a box where it’s scanned and it then tells you whether the same item is stocked, if an alternative is available and on which shelf in the shop you’ll find it. More advanced versions can even guide you to that shelf.

However, there have been problems – caused by stock being moved around or blocked from view – that have stunted its success. It’s a prime example of a good technological idea that has gone wrong. The tech is there to make these things a success, but it must be implemented properly. Then it will show true return of investment and earn its rightful place in the industry.

OPINION

MAKING

Essendant

(& SP Richards)

GREAT AGAIN?

Thomas Schinkel offers a contrarian perspective to the recently announced proposed merger between Essendant and SP Richards

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n 12 April 2018 Genuine Parts Company (GPC) and Essendant announced the divestment of GPC’s office products business, SP Richards (SPR), and the merger of the divested business with Essendant.

The pitch deck for the deal and the press releases that announced it include all the familiar, upbeat language that supports transactions of this kind. On the surface of it, this seems to be a clever deal with obvious benefits. It allows GPC to sharpen the focus on its core businesses. The new entity is larger, offers opportunities to harvest synergies, drive growth and has more working capital to boot. All stakeholders benefit. What’s not to like?

Upon closer inspection, however, there appears to be plenty of room to develop a contrarian perspective on this deal. For example, examining some key parameters of Essendant’s historical performance, consider the following:

www.opi.net

Revenues For at least since the financial crisis of 2008, Essendant has been trying to calibrate, tweak and reinvent its business model. This has taken the form of M&A activity in office and non-office channels and in attempts at providing computer services to its dealer base. This should have had a significant impact on the top line, but after five years of experimentation and at the high watermark experiencing a 6% growth in revenues, in 2017 Essendant was right back to where it was in 2012.

How will the merger move the needle upward and reverse this downward slope, especially since revenues at SPR flatlined as well over the past few years? A reality check may suggest a further erosion of revenues even as the two companies combine. The reduction of wholesaler choice from two to one is anathema to the most fundamental of a merchant’s instincts and many resellers, especially the larger ones, will be voting with their feet and pivot to alternatives. Vendors will tend to do the same and the more agile already have found a pathway to the mid-market of resellers by going direct.

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Gross margin For the past six years, gross margin at Essendant has been on a downward slope, slipping and sliding from 15+% in 2012 to 14% in 2017. Typically, this is a manifestation of a combination of factors, including but not limited to:

a changing product mix in favour of lower margins (not a good direction to take); l reduced pricing power in negotiations with key customers (80-20 rule); l a lack of real-time information about where product margins are on a day-to-day, week-to-week and month-to-month basis. If memory serves me correctly, at Essendant attempts to address this point were squashed several years ago in favour of higher EPS in the short term. l

How will all this improve after the merger, and why?

And how long will it take the new team to come to grips with a prolonged decline in revenues?

Operating expenses When revenues are decreasing and gross profit is as well, it would make perfect sense to calibrate one’s operating budget accordingly. But throughout the period, there is no evidence that this has been happening with any real measure of success.

Why would the merger magically provide a well-oiled, real-time response mechanism for this crucial aspect of running a business if the company cannot even do it on its own?

EBITDA (before asset impairments) An important measure of a company’s health, this has been on a downward slope as well, especially from 2015 onwards. In 2017, it was 1.6% of revenues, a far cry from the >5% where it should be. Cost cutting, yes. But not in sync with top line and gross margin declines. How will this change after the merger? And why?

Leverage This is the ratio between debt and equity. The higher the ratio, the weaker the company. This ratio has gone up, not down. In other words, the financial infrastructure of the company appears to have become weaker, not stronger.

Repurchase of shares Despite a weakening balance sheet, the firm found $260 million of cash over a five-year period to spend on the repurchase of shares. Definitely good for EPS. But the health of the firm?

Thomas Schinkel, M&A Advisor, Thomas Schinkel & Associates

Capital expenditures (CAPEX) From 2012 to 2017, Essendant made close to $200 million in capital expenditures while booking depreciation and amortisation to the amount of more than $250 million. I am sure there is a good reason for this but nevertheless some people call this “eating your seed corn”.

The real losers in this script are the independent dealers, specifically the smaller ones that have been hemmed in by the straitjacket of wholesaler programmes for years Market capitalisation In 2014, the company was still valued at $1.8 billion, but by the end of 2017 investors did not think it was worth more than $321 million. A whopper if ever there was one.

LACK OF SUBSTANCE In 2015, the firm rolled out its much touted re-branding campaign, spending millions of dollars announcing to the world that it had changed its name from ‘United Stationers’ to ‘Essendant’. This definitely was a clever play on two words – ascending and essential. The problem is that neither seems to be in evidence, at least not from a review of the company’s recent history. At this point, a qualitative observation is in order as well, rounding out a review of the numerical record.

Both Essendant and SPR can be said to nurture ‘conflicted’ loyalties, catering to customer groups that are in a mortal struggle with each other for their very survival. It does not seem unreasonable to speculate that it is these conflicted loyalties that have eroded the very trust among channel partners that was in evidence before the turn of the century. For all intents and purposes, if this trust doesn’t come back soon, the new entity’s entire future hangs in the balance.

A crucial question is this: will the merger with SPR create a change for the better? Will it include a magical wand guiding the management team on an upward trajectory, a virtuous cycle back to prosperity? In my opinion, it’s not likely. My observations point to the need for a complete overhaul of the business model, beginning with the most fundamental aspects of its value proposition.

These include:

OPINION Thomas Schinkel

Asset impairments Over a period of six years, Essendant took hits directly against its equity base to the total amount of $425 million. These hits came in the form of asset impairments, the most recent one – recorded at the end of 2017 – coming in at $285 million, a real whopper. It reads like an admission by the management team that most if not all of its acquisitions during this period has failed. How will this change for the better after the merger?

Close some of the logistics centres SPR’s or Essendant’s? Which ones? Why, when and at what cost?” l Reduce head-count Who, why, where? When and at what cost? l Capital investments What, how much, where, when, why?

Who benefits? l

None of these are achievable under the Klieg lights of a public company with quarterly phone calls to a financial community that doesn’t want to hear what needs to be said. But without such an overhaul and continuing with its sales-centric approach, the new organisation structure will be prone to a slow decision-making process: Are there better options for Essendant? Yes. One such option would have been to take the company private and aggressively reward a new entrepreneurial team on value creation, not just clever financial engineering. Assuming that regulatory approval for this deal is not an obstacle, chances are this better option will need to wait for yet another iteration of the new firm’s structure.

In the meantime, there will be winners and losers. GPC will be among the nominal winners.

At least it gets some hard cash out of the deal. But the employees of the two organisations are at risk, especially those who don’t have a ‘golden parachute’ strapped around their waist.

The real losers in this script are the independent dealers, specifically the smaller ones that have been hemmed in by the straitjacket of wholesaler programmes for years. Mid-market dealers still have room to pivot and pursue other options; the smaller ones not so much. In short, not a good way of making America’s mainstream great again!

June 2018

Thomas Schinkel is an internationally-recognised business adviser who works with senior executives of large and medium-sized businesses on strategic issues that include corporate value improvement, exit planning and growth through acquisition. He has helped establish and co-founded several companies and has served on the board of companies in the software, business products and medical device industry.

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FEATURE

The direct APPROACH

The issue of vendors selling direct to customers has accelerated with the continued uptake of e-commerce, but is there any real benefit?

Michelle Sturman takes a look at this thorny subject

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PI recently took a non-scientific snapshot of almost 40 of some of the office products industry’s best-known manufacturers and found that around half sell direct to end users through their own websites.

Out of the vendors in the core traditional OP category, almost one third have their own online selling platform, although for some of the international brands, this option was only available in select countries. Traditional stationery manufacturers – including Faber-Castell, Pentel and Stabilo – appear to be more likely to adopt a direct strategy although, again, for some it was available only in certain territories.

www.opi.net

We discourage direct purchases through our pricing strategy, but it helps provide a deeper product offering – essential for non-mainstream products

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All the major IT and EOS vendors operating in the business supplies industry that OPI looked at – including Logitech, Samsung and HP Inc – offered the option for customers to purchase direct from their websites. Looking at the UK market, only one – Brother in this case – redirected buyers to purchase through partners. In fact, out of all the companies that OPI examined, few offered a ‘buy from a recommended reseller’ link to end users.

Of the remaining companies in categories such as furniture and facilities management, one third offered a direct purchasing function. Interestingly, albeit unrelated from a direct-buy perspective,

a quarter were not even on Amazon in some geographic locations. This mirrors the lack of general website capabilities in the jan/san industry, while for the furniture sector it reflects an ongoing reluctance by end users to buy big ticket items through the online channel.

BRAND CONTROL One of the main reasons for manufacturers not selling direct online from their own web store is because they don’t feel it’s a necessity due to their presence on Amazon and other e-commerce sites, such as Euroffice, Shoplet, etc. As Hamelin CEO Eric Joan explains: “We don’t feel the need right now to directly sell to consumers, but we certainly feel a strong demand from them to buy online. Of course, Amazon is leading the way and offers us a great opportunity to promote our products to customers with a presentation that we control. It’s time-consuming but worth it, and it has forced us to improve our product information.”

As a way to reinforce and better control their brand messaging, some vendors are opting for a sponsored/branded page presence. This goes someway towards addressing the perennial frustrations around product descriptions, while offering manufacturers some element of brand supervision. “These pages are mostly to ensure that the products are accurately described and to take control of the branding. When one of our products lacks a branded page, marketplace dealers cut and paste the wrong images and descriptions can be completely inaccurate,” says Acme United CEO Walter Johnsen.

Using third-party e-commerce platforms brings with it its own set of issues for vendors. Many lament the fact that specifically dealing with Amazon today is not as easy as it once was, while some

CHANNEL CONFLICT It’s no secret that wholesalers, large resellers and dealers don’t carry a full line of available products, whereas a manufacturer’s entire SKU range can be hosted on its own web store or a third-party e-commerce platform.

As one major international OP vendor told OPI on the condition of anonymity, there isn’t a European wholesaler or reseller/customer that has all of its products available, adding that the standard scenario is to ask only for the “best-performing SKUs due to warehouse and catalogue limitations”.

In order to counteract this problem, it’s no wonder that many vendors have gone down the route of selling direct to customers via their own website, which is leading to a certain amount of disintermediation within the supply chain. That said, while there have been grumbles in the industry regarding this move, according to a recent opi.net poll (see right), it seems that an air of resignation towards this practice has set in.

As mentioned earlier, it’s certainly standard practice across many adjacent industries, particularly IT and EOS. While the uptake of e-commerce varies from country to country, virtually all the printer manufacturers including HP Inc, Canon, Samsung and Xerox offer the ability for customers to buy directly from their websites.

But online is not the only way manufacturers are bypassing the wholesaler and reseller channels to sell direct. High-end brands such as Apple, Moleskine and Lamy offer access via their own retail stores, while vendors such as Avery have been acquiring direct-to-consumer businesses – in 2017, it acquired Goed Gemerkt and Badgepoint, both European software-powered online digital printing companies.

In 2016, Avery said around 10% of its sales already came from its direct-to-consumer businesses.

IT’S A POSITIVE DEVELOPMENT (36%) IT’S NOT SOMETHING I WORRY ABOUT (3%) IT CREATES UNNECESSARY CHANNEL CONFLICT (34%) IT IS INEVITABLE (27%) Technology has levelled the playing field, meaning it is eminently possible now to cut out the middlemen – resellers and wholesalers. But while on paper this can seem like an attractive proposition, moving more prominently into the direct distribution of products is not the way most manufacturers want to go. Says Hamelin’s Joan: “We don’t have the proper logistics organisation to sell direct and a lot of our wholesalers offer good online distribution for our products.” Other vendors echo this sentiment, adding that the current distribution model works and for manufacturers to pursue a direct route to market simply isn’t cost-effective on any significant scale.

President of ACCO Brands EMEA Cezary Monko told OPI in a recent interview (see Big Interview, OPI March 2018, page 16) that as long as the current channels provide the desired access to the customer, there is no reason for the company to head down the avenue of selling product from its own web store. It should be a question of each channel focusing on its core competencies, he argued, not trying to be all things to all people.

Having said that, there are more options becoming available with the advent of third-party fulfilment (3PF) companies such as Distribution Management’s DM Fulfillment. The company is actively speaking to manufacturers about omnichannel fulfilment, including a drop-ship and carrier model for e-commerce fulfilment (see ‘Fulfilling a need’, page 46 for more information). With the current uncertainty over the two big OP wholesalers in the US, for example (see Analysis, page 6), 3PF could well be a game changer for vendors.

However, the majority of manufacturers state that they don’t feel they are competing with resellers, mainly for the reasons cited above, but also because e-commerce clearly lacks one essential ingredient – the customer relationship.

But one thing is for sure: as the OP market continues to undergo rapid change and consolidation, at least partially selling direct to customers through web stores and/or other avenues is likely to become an attractive option for vendors.

June 2018

AVOIDING PRICE WARS Most vendors OPI spoke to admitted that ‘direct from their own web shop’ online purchases currently only make up a minuscule portion of overall sales.

Importantly also, most manufacturers have averted a price war and competing with the reseller channel by offering end-user pricing that tends to be full retail whereas the majority of resellers sell below the recommended retail price, thus removing a compelling reason for customers to purchase direct. The real benefit for vendors is that they can sell products that aren’t available in the reseller channel, or offer bundles, for example, that cannot be found when going ‘comparison price shopping’.

Says Acme’s Johnsen: “We discourage direct purchases through our pricing strategy, but it helps provide a deeper product offering – essential for non-mainstream products. For example, our Kevlar shears which Boeing buys for its Dreamliner aeroplane, are also used by sailmakers. Wholesalers and dealers won’t carry these, but we need to ensure that they are easily searchable and available for anyone who wants them.”

WHAT IS YOUR OPINION ON MORE MANUFACTURERS SELLING DIRECT TO CUSTOMERS?

FEATURE Vendors Selling Direct

vendors miss the accountability that comes with the availability of and relationship with specific account managers in other industry channels.

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SPOTLIGHT

BUILT ON SOLID

foundations

Just as Rome wasn’t built in a day, Japanese vendor Pilot Corporation has painstakingly built up its reputation of excellence in the writing instruments sector over the past 100 years. And the journey is far from over, as Paul Phelan, Ken Schoellhammer and Patrick Forveille from Pilot in Europe tell OPI’s Heike Dieckmann

A

t the end of April, about 110 partners from Pilot Corporation across the globe – predominantly Europe – got together in Rome, Italy, for a few days of strategic meetings, networking and – on the occasion of its anniversary – some serious celebrations.

OPI spoke to three members of the team in France, where Pilot Europe is headquartered, to find out more about its anniversary marketing campaign, its strategic plans going forward, and the challenges the changing market in Europe presents.

www.opi.net

OPI: Please tell me about your recent event in Rome.

What’s the idea behind this annual get-together?

Paul Phelan: The event originally started back in 1979 with just a few countries being involved in a number of meetings. Now this annual event is very much a launchpad for Pilot in Europe to present new strategies and products. We have a three-year plan and the core component of the conference part of the event is to review our achievements and challenges in the plan period, and make sure we’re on track with the remainder of that plan.

This year in Rome, we had two delegates from each of our 35 partner countries in Europe, plus many other attendees from our affiliates in Russia, Turkey, northern Africa and Israel, Australia, New Zealand and South Africa. And, of course, we always have a considerable contingent from Japan attending.

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OPI: Was this year’s event mostly about your 100th anniversary and the initiatives that are in progress?

PP: Not really. We’re currently in year three of our existing plan, so there was a lot of focus on the next

Below: Mika (middle) with Paul Phelan (left) and Pilot Europe CEO Yasuyuki Kazaoka (right) in Rome

one. It was last year’s meeting where we had a big emphasis on the upcoming anniversary in terms of marketing initiatives planned, etc. In that sense, Rome almost served as a review platform for these initiatives.

In addition to the serious side of things, we’re also always trying to strike a good balance between the business and the social element of the event. This year, Mika, the personality we chose as our celebrity endorsement for our anniversary campaign, was there, making for a very showbiz atmosphere and providing plenty of entertainment.

Ken Schoellhammer: The Rome meeting also offered a great opportunity for us all jointly to look at the next 100 years, well beyond our three-year plan. We have created some very high standards for ourselves and for the writing instruments industry as a whole, and we have to make sure – and this was a main talking point – that we can maintain those high levels for the next century. We want to still be around and lead the market in another 100 years.

OPI: Talking about a review of your campaign this year, what has the feedback been? Mika designed a limited edition of your pens I believe?

PP: Yes, we took some of our very traditional products such as the G2 and the V5, together with the more modern FriXion Ball and Clicker, and had them redesigned by Mika.

How successful has it been? We measure this on three levels. Sales to our subsidiaries and distribution partners in the various countries is the first phase and that’s gone very well, particularly in countries

Left to right: • Paul Phelan, SVP of Sales and Marketing • Ken Schoellhammer, European Brand Manager • Patrick Forveille, Corporate Services Manager

We have created some very high standards for ourselves and for the writing instruments industry as a whole OPI: In the core OP category overall, there seems to be some doom and gloom. What’s your view?

PP: I know there’s decline in certain categories, but we don’t see that. 2017, for example, was the best year ever for Pilot globally. In Europe specifically, sales are increasing in terms of volume as well as value.

Judging by data we get back from the likes of Carrefour and Auchan, we’re performing better than some of our competitors though.

If any sub-segment of writing instruments is down, it’s own label products – consumers are no longer buying the big value packs but are looking for quality, and are happy to pay a premium for it.

OPI: On that quality note, I’m going to hand over to Patrick to talk about the entire supply chain.

What’s important for you in that area?

Patrick Forveille: With our Japanese background in mind, we have a real culture of excellence and progress in the organisation. The functionality of our plant and warehouse, for example, reflects this

philosophy perfectly. Over the past ten years, Pilot Europe has invested hugely in a wide range of tools to be able to meet our customers’ needs.

There are three pillars that drive our investments: supply chain efficiency, productivity and data analysis.

Pilot has a very stern view on and commitment to product quality: there is zero room for mistakes.

What is also really important to us is the well-being and continuous training of our teams.

SPOTLIGHT Pilot Corporation of Europe

where Mika is very well known. So we’re ahead of expectations with that.

The second phase is our partner sales to the reseller community – Lyreco, Auchan, Bureau Vallée, Staples, Ryman, Tesco and El Corte Inglès to name just a few.

This only started in the first quarter of this year, but the main part will actually be over the back-to-school (BTS) period. The final phase – and probably the most important measure of success – will be trade sales to the end consumer. We won’t have those figures until this autumn and the proper analysis later still.

KS: In Pilot’s home country of Japan celebrity endorsement is very customary, but we haven’t done this in Europe before and it’s been a big learning curve for us. But we wanted to do something special for the anniversary and I believe we achieved that.

The actual results will take a while to come through, but in terms of brand awareness we’ve certainly raised our profile. Like Paul said, the ultimate judge is the end consumer, but of course the more immediate reaction comes from our reseller partners. We have had a fantastic amount of exposure during the first quarter of 2018 because a lot of resellers believed in our project and in the power of this campaign. This is only going to increase during the all-important BTS period.

OPI: What have been the main discussion points in Rome from a supply chain perspective?

PF: E-commerce was a big topic. How do we provide the best packaging solution to our distributors to deliver to online players; how can we meet their strict specifications without generating too much cost, etc? Packaging, which is a big part of what we do at our facility in France, is very different depending on the channel you serve. And in the online world it’s particularly challenging compared to the mass market or small retailers, because it’s just a commodity – convenience for the e-tailer is the most important criteria in terms of packaging.

Another big discussion point in Rome was forecasting order volumes.

OPI: What do you mean by that?

PF: We have to order the products we need in September, so they are available for our customers the following July. That’s not just the pens, but all the packaging too – more than 25 million blisters, flowpacks, wallets and displays. We do all of this in-house to make sure that we are completely in tune with our ‘excellence’ brand image. The challenge is to separate what is permanent activity from promotional peaks – like our anniversary initiatives this year, for example.

We have invested in a variety of forecasting software (AZAP) to order accurately and we are currently implementing a manufacturing execution system (CIMAG) to monitor production. We have also invested in robots for blistering activities, in new picking systems that have brought dramatic improvements in productivity and in transportation management systems (Microtrans) to optimise deliveries.

June 2018

OPI: Out of all the products you sell in Europe, how many are actually manufactured at your European headquarters in France?

PF: In terms of pens, a significant part of our range comes from Japan. Our factory in France is mainly dedicated to two categories of pens. It means excellent communication with our European partners is absolutely mandatory.

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CATEGORY UPDATE

Core

STABILITY The market for traditional office products can be problematic, but specialist suppliers are still finding ways to make it work for them – by David Holes

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Clairefontaine Group in France. “However, although the traditional office supplies market is declining in volume, it remains relatively flat in terms of value.”

Some sub-sectors are bucking the negative trend completely and that’s generally because they are answering a specific consumer need, explains Rouillard: “A manila filing brand such as Guildhall, for example, has done just this in the legal and professional sectors which require premium-quality products with long-lasting durability for their archival filing needs. By tapping into this need, the sub-segment has shown a healthy 8% growth in sales over the past year.”

Brazilian traditional OP manufacturer Acrimet is equally bullish: “We’re not seeing falling demand for our core office supplies products,” reports Export Manager Jaime Nascimento. “On the contrary, the burgeoning number of home and remote offices is driving our sales upwards, with our e-commerce business growing especially fast. Our 46-year-old company is going from strength to strength, backed by tremendous loyalty from our long-term customers.”

We’re not seeing falling demand for our core office supplies products.

On the contrary, the burgeoning number of home and remote offices is driving our sales upwards

ALL SEALED UP Germany-based adhesive products manufacturer tesa also saw 2017 sales rise 10.6% by value compared to the previous year, with pre-tax profit up 11.6%. This was on the back of particularly strong performances in Africa, Australia and Asia – the latter helped by the electronics industry returning to its former strength. The company also reported positive development in its US segment, driven by sales of specialised adhesive tapes for the automotive sector.

June 2018

t’s an undisputed fact that sales of core office products have been under significant pressure for several years. Yet, although vendors and resellers aren’t exactly reporting record sales, they are quietly confident that there’s still value to be had in this sector, citing a relatively stable market at present. There’s also growth to be found if you know where to look for it.

Indeed, the recently published The State of the OP Industry 2017-18 report by OPI and Martin Wilde Associates indicates that the rate of decline in core OP demand looks to be slowing down. Research conducted across the US and in six key European countries showed many respondents reporting growth in this category and highlighting that they are now generally more positive about the future of core OP demand than they have been for a while.

“In the current inflationary climate, customers are becoming savvier than ever which is putting pressure on manufacturers, wholesalers, dealers and retailers,” says Clement Rouillard, Marketing Manager at UK stationery vendor ExaClair, part of the Exacompta

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CATEGORY UPDATE Traditional OP

“Although the traditional tape sector is relatively flat, new technological developments are giving us the ability to aim our products at different target groups, which is opening up new markets,” says Falk Butterwegge, the company’s Head of Office Supply, Food & Digital Sales, International Sales Consumer & Craftsmen. “Offering simple, reliable and easy-to-use solutions is vital. It’s convenience that drives demand in this sector.”

TREND BENEFITS There are several trends that vendors can benefit from to make traditional products more current or give their existing ranges a new lease of life. The increase in people working from home on a regular basis and looking for attractive, smart products in their home offices is behind a burgeoning preference for vibrant colours across the core OP category, for example.

“We’ve recently launched a complete line of office organisational products – document holders, letter trays, clipboards, etc – in a large selection of citric and bold colours,” says Nascimento.

“Fundamentally, they are very similar to other items made in the traditional black colour, but it means we can generate more value from them.”

We’re also finding that although consumers are buying fewer traditional OP products, they are generally trading up to better-quality items Environmental credibility is another significant selling point. But it’s essential that any eco-friendliness claims are robust, as anything perceived as ‘greenwashing’ is ultimately likely to have a detrimental effect on a product’s – and its company’s – image.

Exacompta’s Big Box which comes in a wide range of colours

Additionally, as office desk sizes decrease, a growing need is emerging for products with a smaller footprint and space-saving solutions that can help keep workstations tidy and organised. This is leading to demand for products such as Exacompta’s Big Box, where you can effectively create a filing cabinet to suit the space you have available.

“Boutique, premium-quality notebooks and pads have also dramatically risen in popularity over the past few years,” adds Rouillard. “Again, the rise of mobile workers is fuelling this demand as they are regularly client-facing and looking to portray a professional and stylish image. This trend is behind the strong growth of our Clairefontaine Europa range of notebooks, which is already up by just over 8% in 2018 so far.”

June 2018

TECH CHALLENGE As in virtually all product categories, technology is undoubtedly having an impact on the traditional OP market. But we are still a long way off the ‘paperless office’, according to Rouillard: “Particularly in professions involving journalism, the legal system, design and the creative arts, there will always be a need for note-taking, physical filing and storage alongside the digital alternatives. Manufacturers are becoming aware of this and are now embracing technology within crossover products, such as digital storage-friendly notebooks.

“We’re also finding that although consumers are buying fewer traditional OP products, they are generally trading up to better-quality items. It seems that, as we use pen and paper less, the notes that we do take are the ones that matter more. Consequently, although we may only file the most important physical documents, we want to take better care of them.”

Looking at the future, Rouillard is convinced that while private label items are important to wholesalers and contract stationers in order to win volume contracts, branded products will remain crucial in driving value back into this sector of the industry: “It is brands that provide dealers with the larger margins and profits that can then be invested in R&D. This is essential for providing the vital innovation in new materials and manufacturing processes that will lead to improved quality and new products in the traditional OP category,” he concludes.

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Traditional OP CATEGORY UPDATE

THE DUTCH PERSPECTIVE Rillstab is a traditional office products company situated in Breda in the Netherlands. Probably best-known for its patented display books, it also manufactures flip charts, self-adhesive labels, stationery, envelopes and business cards. OPI speaks to European Sales Manager Jean-Paul Wortman about the company and the challenges that traditional OP businesses face today.

OPI: How has the core OP market performed for Rillstab recently and what do you see as the company’s strengths and unique selling points?

Jean-Paul Wortman: We navigate in a very traditional segment of office products. Display books, flip charts, writing cases and labels are not the sexiest products in ‘office land’, but we’re still seeing a steady market in this sector.

Our sales are undoubtedly being helped by the fact that we have a unique patented mechanism in our display books. Additionally, as a result of having our A4 label-manufacturing business we were asked if we could also produce labels for label printers and writers. This required a significant investment in new machinery, knowledge and people, but we’re now reaping the rewards and have seen significant sales growth in this category over the past two years.

The fact that we can offer our customers a range of ‘Made in Holland’ products that cover both branded and private label markets is also important. A combination of all these factors means that our sales projections are looking very good.

www.opi.net

OPI: What is fuelling demand for the range of products you make?

JPW: Successful products need to be attractive and desirable to end users. But they also need to provide good value for money and I believe we achieve this balance. Additionally, customers want to be treated well, with clear product information and next-day delivery. I believe that if we can stay focused on the needs of our customers and constantly innovate, then future opportunities will present themselves.

On a different note, one big trend sweeping the Netherlands currently is a desire for ergonomically-sound products and our range of chair mats, foot rests, desk pads and special floor mats for sit-stand desks meets this need. Maintaining a healthy office is currently a hot topic.

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OPI: How has the way you market your products changed over recent years?

JPW: The way millennial customers gather information differs significantly from previous generations.

Reaching out to them via social media is completely mandatory nowadays and our marketing campaigns have to be placed wherever they connect.

To understand what our customers expect from our range we run consumer panels – the back-to-school period is a good example where we gather groups of students together and ask them what they like and dislike about our products. It’s also a great way of gaining insight into the likely trends on the horizon.

Having a good website is obviously vital, but the provision of a mobile portal is equally essential

these days. It’s estimated that 25 billion people will surf the net from mobile devices by 2025, so if you want to stay relevant having a well-designed app is imperative.

OPI: How important is branding in this category?

JPW: It depends on the product.

With everyday items such as paper, toner and labels, branding is no longer particularly important – as long as the quality and price are ok, customers don’t care about the name on the package.

But at the higher-end – a Mont Blanc fountain pen, for example – product perception and tradition play a bigger role and consumers are far more likely to buy a trusted, branded product. As such, they will take the trouble to visit a high street store to get ‘hands-on’ with an item and be pampered by a local dealer. You need to have a mix of branded and private label to entice your customer.

Jean-Paul Wortman

OPI: How do you see the future for the core OP sector? What challenges does it face and how can these be overcome?

JPW: We can no longer deny the decline in traditional OP sales. But, in order to stem this negative flow, I’m a strong believer in the need to collaborate across the industry. In this fast-changing world it’s impossible to go it alone, so why don’t we share our problems, thoughts and ideas among wholesalers, manufacturers, buyers and sellers in a genuine and open discussion? In this way we can guide each other in the right direction.

Rillstab’s display books Of course, diversification is a logical step if you and Rillprint labels want to maintain or raise margins and profits, but you still need to keep your focus on the things that you’re good at. If you can do this in the rapidly-shifting landscape of traditional office products, you can still come out as a winner in the end.

Global 2018 The 7th Global Forum for senior executives from the business supplies industry and associated sectors

11 - 13 November 2018 Sofitel Chicago Magnificent Mile, Chicago For more information, email steve.hilleard@opi.net

www.opi.net/gf2018

ORGANISED BY Connecting the

business products world

CATEGORY UPDATE

VISUALISING collaboration It can be difficult to keep up with the rapidly changing needs of the workplace, but manufacturers of visual communication products are on the ball – by Michelle Sturman

T

he chameleon nature of the office environment is playing right into the hands of today’s visual communications (viscom) players. As the workplace continues to morph into collaborative spaces with a strong focus on interior design and technology-based functions and features, viscom manufacturers are uniquely placed to take advantage.

Pioneered by business giants such as Google, Amazon and Bloomberg, workplaces now combine open plan concepts with smaller collaborative and relaxation spaces built-in. This desire for replacing

As we continue to see the shift from traditional office spaces to a more open concept, our products are becoming central design features

the traditional ‘grey’ office cubicle is being driven by the millennial generation and is filtering through to all types of office space.

Says Bi-silque CEO André Vasconcelos: “Lately, we’ve been witnessing the growth of viscom to enhance innovative workspaces for all types of social human interactions. Communal design solutions reflect the growth of millennials in the workforce, along with the rise of trends such as sustainability, comfort and well-being – with our viscom products as the ultimate collaborative tools.”

Scott Bowers, Director of Product at GMi Companies, agrees: “As we continue to see the shift from traditional office spaces to a more open concept, our products are becoming central design features.

People are looking for ways to divide space to create huddle zones or semi-private meeting spaces.”

June 2018

EFFECTIVE COMMUNICATION This shift is boosting sales for multifunctional, mobile viscom solutions with noise-cancelling properties, resulting in the necessity for products that lend themselves to brainstorming sessions and idea-sharing such as boards. Bowers explains that dry-erase boards, for example, are an integral part of group communication as they are a way for colleagues to communicate their thoughts with the ability to visualise different viewpoints and ideas.

In terms of board sales, there has been an increase in the popularity of more robust and longer-lasting products including glass and information boards, according to Debbie Nice, Category Director for Facilities Supplies at UK wholesaler VOW, while cost-in-use is becoming more of a consideration too.

GMi’s VP of Sales and Marketing Jim Harter concurs, adding: “We’re really encouraged by how 2018 has started for us. Our product mix continues to push us into higher-style, higher-design items. Demand for glass boards, for example, has never been greater.”

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Viscom CATEGORY UPDATE

The desire for products that can be easily applied and save time such as digital wallcoverings are also filtering into the interior design space, with this trend anticipated to continue into 2019. These types of applications are becoming more popular across all kinds of businesses, including offices, retail stores, hotels and restaurants, with antibacterial versions available for hospitals.

As Chris Green, Channel Head for Visual Communications at Antalis UK, explains: “The demand for décor products has significantly grown as interior designers are seeking new and alternative methods to refresh space in a fast-paced environment. More designers are recognising the multitude of benefits that come with digital wallcoverings and personalised wallpapers, and printers and signmakers are utilising this method of instant transformation.”

Meanwhile, VOW is seeing an interesting move towards retro products such as peg boards, particularly in hospitality and retail environments. In addition, traditional products like frames continue to grow, with interesting developments in the area of hanging solutions whereby information can be attached to a wall without causing damage.

Selling a complete solution, not just a product, is key

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MOVING INTO TECHNOLOGY Keeping up with the pace of change and the need to provide technological solutions in the viscom space, manufacturers are blending the traditional with the latest in technology. Bi-Bright, the viscom technology arm of Bi-silque, launched an interactive whiteboard last year featuring free annotation software. It recently launched an app, Hubing Scan, which can scan notes and save them digitally. Handwritten or text notes can also be added to the digital version as well as voice-over commands.

All that said, technological advancements can be both a blessing and a curse. The increase in home and remote working is a driving force behind the uptake of new ways of conveying collaborative information – Skype, Slack and unified communications spring to mind. The advent of virtual and augmented reality provides other enhanced methods of presenting information (see also Hot Topic, page 26, for more information). The flipside is that traditional products such as projectors are on the wane. As VOW’s Nice says: “Projectors are an essential part of most meetings, and while more portable than ever, advances in technology mean they are being replaced less frequently.”

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TARGETING NEW MARKETS However, as the viscom product mix changes, it is opening up new markets, giving resellers the opportunity to target other sectors. According to Nice, there is a substantial rise in sales into the education, hospitality and healthcare verticals where effective visual communication is essential.

Bi-silque has also been concentrating on building its vertical markets and has been effective in

segmenting ranges that address the specific needs of customers in the corporate, industrial and personal sectors, in addition to those mentioned by Nice. Its ARCHYI brand, for instance, which targets architects and the contract furniture market, was launched a couple of years ago and, according to Vasconcelos, “aims to demonstrate that you don’t have to choose between efficiency and aesthetics when it comes to workplace solutions”.

In May, the company announced the launch of a new website dedicated to customers in its industrial market, with the goal of offering specific industrial solutions in one place. Bi-silque says customers can expect the launch of new products, promotions and several industrial assets to follow during 2018. “Digital transformation is in our DNA and we have launched specific marketing collateral and digital assets to drive beyond office supply categories,” adds Vasconcelos.

CATEGORY CONFIDENCE Viscom manufacturers are undoubtedly confident as sales are robust in this burgeoning segment, leading to considerable investments in the category by the majority of vendors. Bi-silque is reporting double-digit sales growth in both the US and Europe. The company recently opened a new state-of-the-art centre in its home country of Portugal, adding 30,000 sq m (3,000 sq ft) and 3,000 additional pallet positions.

VOW is also seeing sales continue to grow in the viscom area and is putting a renewed focus on the category this year. “We are moving it to our category development team. This enables us to work more closely with proactive suppliers and add specialist resources to help increase sales. We have added a new exclusive brand – Announce – to our range, and will continue to look for new product ideas for the modern workplace,” says Nice.

All this is good news for resellers as they can offset declining sales in more traditional categories by adding more viscom products into the mix. As GMi’s Harter says: “Visual communication products serve not only the needs of resellers to generate some much-needed income, they also fulfill an important requirement for their clients to make spaces more functional.”

Finally, Vasconcelos advises against a downward trend of selling purely on price in the viscom arena.

“Pricing discounts should be replaced by educating and supporting customers during their buying journey. Selling a complete solution, not just a product, is key,” he says.

ADVERTORIAL

Fulfilling A NEED

Distribution Management/Supplies Network’s Greg Welchans explains the next revolution in the distribution supply chain

O

www.opi.net

PI speaks to Greg Welchans, President and Chief Marketing Officer of Distribution Management and Supplies Network, about creating more cost-effective, efficient distribution options.

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OPI: Firstly, can you provide a brief overview of Supplies Network?

Greg Welchans: Supplies Network is a US-based print and imaging wholesale distributor. We largely focus on the print space, both from a hardware and consumables standpoint, representing about 70 different brands including all the major OEMs such as HP Inc, Canon, Xerox, Lexmark, etc. In addition to our comprehensive line of products, we also offer a turnkey Managed Print Services (MPS) program which is quite compelling and a key point of differentiation.

We deal primarily in four channels: The Business Technology Association – basically copier dealers – the office products space, government and value-added resellers. Our biggest channel by some margin is the copier dealers.

We had record revenues in 2017 and it may well happen again this year. In total, we currently have around 350 employees.

OPI: Any plans for international expansion?

GW: Currently, Supplies Network only serves the US, but we are looking to expand to other parts of North America rather quickly. It will be Canada first and we are already working on gaining manufacturer approval to move into this market.

Under our parent company, Distribution Management, we operate another business, DM Fulfillment, where we’re already managing international distribution. Within this division we own and operate a facility that is a designated Foreign Trade Zone in the Chicago (IL) area. It’s also a TSA (Transportation Security Administration) Certified Cargo Screening Facility which allows us to send shipments direct to air carriers supporting speed to international markets.

OPI: Please tell us more about DM Fulfillment.

GW: DM Fulfillment is our rapidly growing fulfilment as-a-service model. We’re a hybrid distributor with the technology and know-how to deliver an omnichannel customer experience.

For Supplies Network we buy the product and we wholesale it. The DM Fulfillment business is third-party fulfilment (3PF) as-a-service which is an important differential. While the two businesses operate as independent systems, there are many synergies between them and this enables us to offer a very flexible business model.

DM Fulfillment puts us in a unique position in the marketplace. A consumer packaged goods customer or office products manufacturer can utilise our distribution system for omnichannel fulfilment.

There can be one set of inventory with one provider that can be used for multiple channels of selling and distribution – we can do wholesale, retail replenishment of shipping pallets or cases to stores, along with marketplace integration and drop-ship capabilities for e-commerce fulfilment.

OPI: How did this model come about?

GW: The primary and largest part of our company is Supplies Network, but ten years ago when everybody said print and imaging was going to decline, we looked intently at ourselves and asked what was at the core of our business. Are we an IT wholesaler or a distributor?

We chose the latter and created DM Fulfillment to realise the potential of the evolving e-commerce landscape. As e-commerce continued to grow and the need for drop-shipping to consumers increased, we definitely felt this was the sweet spot for us.

As this business evolved, we realised that there’s also an in-between model whereby manufacturers and merchants could benefit by streamlining the supply chain for all their channels, be it wholesale, retail or direct-to-consumer. Today we’re having success with this model and are applying it to a variety of products: dog food, mouthwash, personal accessories, leather goods, business supplies – you name it.

OPI: Do you have an example?

GW: For instance, we deal with a mouthwash company called Smartmouth. We have the product in our warehouses – but we don’t own the inventory like a typical wholesaler – and we handle the in-store retail

OPI: So where’s the sweet spot for the business supplies industry?

GW: The traditional OP distribution model in the US is either dealers stocking products or buying inventory from SP Richards or Essendant. The model can be prohibitive for some manufacturers in terms of overall supply chain scale, inventory management or cost. We are currently a tertiary supplier for the OP market, but I believe our hybrid model can help in terms of making the supply chain more efficient, which will ultimately create a highly cost-effective model well into the future.

Greg Welchans

OPI: What are your plans for DM Fulfillment?

GW: DM Fulfillment is growing quite nicely purely as a 3PF provider. We’re still evolving this hybrid model, but we’ve been talking directly to the OP manufacturers and rep groups that have products which fit this drop-ship and carrier distribution platform. Carrier simply meaning we utilise companies (UPS, FedEx, USPS, local carriers, etc) to distribute the products from our distribution centres.

I believe our hybrid model can help in terms of making the supply chain more efficient, which will ultimately create a highly cost-effective model OPI: What has been the response so far?

GW: It has been overwhelmingly positive for those that have engaged with us. It has become clear to us that many have struggled to modernise their supply chain in the face of rapid change over recent years. A few have tried this hybrid model with one product as a pilot and as they’ve seen success, expanded not only the product mix but the partners to whom they want the products to be distributed. We might start out in the OP channel with a manufacturer, but then expand into other channels we serve, for example.

While OP and related manufacturers are a good target, we are also talking to independent dealers and have already engaged with some of the buying groups.

A huge selling point is that we already offer 1-2 day delivery to 99% of the US population. DM Fulfillment offers an alternative path to Amazon or Walmart.com, for example, because we offer those delivery times as standard.

OPI: Earlier you alluded to international expansion for DM Fulfillment.

GW: We are looking to offer DM Fulfillment to European manufacturers as a pure 3PF service model to enable them to distribute in the US. OPI: Finally, what does the future hold for Supplies Network?

GW: We see a bright future. We’re excited about the print hardware segment of our business. We are now Lexmark’s largest distributor and on 1 May 2018, we were awarded Authorized (Tier 1) distribution of HP Inc A3 copier products, A4 M series printers and HP Samsung products.

We’re also really focused on the print-related parts side of the business. We have invested significant resources in adjacent categories such as the thermal and barcode space which is a huge market and a growing division for us.

As security becomes more and more crucial, it’s no coincidence that much of our hardware line-up presents the same message. It’s an endpoint that people can tap into and most of our manufacturers are heading into security solutions.

MPS, which is a core competency for us, also continues to grow. We are really the only distributor that has a complete solution which also ties nicely into the burgeoning security market.

Even though we have almost tripled space in our distribution centres over the past three years, I see that same trend happening over the next several years. To manage our growth, we will have to add new facilities and locations.

June 2018

OPI: Has Amazon disrupted the distribution chain from your point of view?

GW: As I’ve mentioned, we already offer an exceptional delivery model for our Supplies Network customers. Many of them are highly specialised in business printing, so they don’t seem to be too

impacted by Amazon, though maybe a bit more on the OP dealer side. The fulfilment part of our business has absolutely been favourably impacted as it has driven manufacturers to us because they didn’t have a competitive way to distribute their product within their existing as well as newer marketplace channels.

We also know from having discussions with various intermediaries that there are companies and merchants where almost all of their business goes through a particular e-commerce platform such as Amazon, Walmart.com or eBay, for example. Now they’re looking for ways to diversify their portfolio of partners because they’re fearful something might happen to that provider or the rules of engagement might change. They’re looking for different options to get product to the customer.

ADVERTORIAL Supplies Network/DM Fulfillment

fulfilment, direct e-commerce orders, Amazon and Walmart.com orders, and now we’re beginning to offer this into the OP e-commerce channels. Some of this is purely as a fulfilment service and some is done as a wholesale transaction, but regardless we’re managing orders for all channels from one set of inventory.

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HOW TO...

In the second part of our How to… guide to reputation management, Tamara Littleton explains how to deal with a crisis as it spreads on social and digital media

I

n the first part of this guide in the May issue of OPI, I talked about the importance of being open and honest in your social media communications. Never is this more important than when your organisation is facing a crisis.

A crisis on social media is broadly defined as an event that has a significant negative effect on your company – it could be a serious drop in sales or share price, or lasting damage to your company’s reputation.

Some crises will come from nowhere and turn your company upside down. A natural disaster, an unforeseen scandal involving a senior employee or a cyberattack are examples of those. Some might be slower burns – an ethical issue with your supply chain, a tax or regulatory change that hasn’t been addressed, or environmental concerns. Mostly, a crisis is something that could have been imagined, with the right preparation. In all cases, the vast majority of good crisis management work is done before the problem actually hits.

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PREPARE AND PRACTICE Most companies have a disaster recovery plan in place. But many of these plans tend to tackle how to manage the business, customers and traditional media, rather than addressing social media specifically. To have the best chance of surviving a crisis that is breaking and spreading over social media takes preparation and practice. Here’s how to do it:

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Bank some goodwill The reputation you have before a problem occurs is the one that will see you through the crisis. Take the time to build up credit in the trust bank with your

clients on social media. Invest in good community management, or work with a social media agency to help you. If your customers trust you and are positive about you during the good times, they will be your greatest advocates during the bad times.

Represent the full business in your crisis team Nominate a crisis team with clear roles and responsibilities, including a robust decision-making and approval process. The best teams include people from legal, HR and employee communications, PR and marketing, social media, tech support, and someone from senior management who will be on hand to make decisions quickly.

Tamara Littleton is founder and CEO of The Social Element, a global social media agency set up in 2002, which now operates in 45 countries and works with some of the world’s largest brands, including Oreo, Toyota, The Oprah Winfrey Network and Nissan. In 2013, Littleton also co-founded Polpeo, a crisis simulation platform for companies and their agencies.

Include social media in your crisis plans I’m always surprised at how many companies’ crisis plans don’t specifically include social media. Think about who will post to which channels, the approval process needed to get information out quickly on social media, and the most appropriate tone of voice for these channels.

Remember that on social media, you’re not just talking to your customers, but to the public. Everyone with a Twitter account will have a view on your brand when things go wrong. And they can have a real influence on the people that matter to your success.

Imagine the worst things that could happen Consider anything that might have a negative impact on your reputation or your ability to run your business: big market issues that could affect your company; your competitors’ activity; internal threats; regulations; cyberattacks; natural disasters; environmental issues; product faults and recalls; business downtime; sabotage; health and safety; and human rights issues.

There are plenty more.

Group those issues according to the impact they might have, and then decide on the best course of action for each group.

Be prepared to take action now The best-managed crisis is the one that never materialises. Is there business action you can take now to avoid the crisis in the first place? Can you make your product less damaging to the environment, or shore up your security plans? Is there training you could put in place to minimise the risk of an internal threat?

Practise You wouldn’t put your CEO on TV to talk about a crisis without giving him/her a brief and some media training.

So don’t put your crisis team in the firing line on social media without practising first. Run a full rehearsal or simulation on one or more of the issues you could face, to see how your team would cope under pressure. Practise making statements relevant and short enough for social media. Role-play how the public might respond. If there are holes in your crisis plan, it’s better to find them during a rehearsal than during the real thing.

To have the best chance of surviving a crisis that is breaking and spreading over social media takes preparation and practice THE REAL THING Once a crisis hits, there is only one thing to do: communicate, communicate, communicate.

Focus on information The most important thing is to get information out to the people who need it. Forget shoehorning your brand messages into every statement. If those messages

weren’t apparent to the public already, it’s too late to start communicating them now.

Act quickly to establish yourself as the voice of authority Acknowledge the issue fast, so that people know you’re on top of it. If they don’t get the information from you, they’ll get it from somewhere else. That will put you on the back foot, meaning you might have to deal with misinformation, rumour and sometimes downright lies. Share verified facts as soon as you have them and correct misinformation.

Be open and honest Never ever cover up the truth. If people have the slightest suspicion that they’re being ‘spun’, they’ll stop trusting you and you’ll lose control.

HOW TO... Reputation Management

Use a social listening tool to understand what people are saying about you on social media If there are issues that keep cropping up, address them. Map trends in sentiments to predict the big issues that your customers care about, and incorporate them into your product or service plans.

Assume that everything you say will be leaked In almost every major crisis of our time, there’s a leak from somewhere within the business.

Remember your employees They’ll be at the frontline of the crisis. Their friends will ask them for the inside scoop; at worst, they could be hijacked by journalists wanting a quote.

Make sure they know the facts.

Don’t put up with abuse However bad the crisis is, you shouldn’t have to put up with abuse. Protect your social media team.

Stay consistent to your page guidelines in your own communities, and don’t respond to trolls on Twitter.

Trust your crisis team If you’ve done the prep work and rehearsed with your team, empower them to respond. You may not have time to get every post approved in time to stay on top of the crisis. Trust them to do their job within your crisis guidelines.

Above all, during a crisis, stay true to your brand.

Behave openly and honestly, be authentic and focus on restoring trust.

June 2018 49

EVENT

AS easy ABC PREVIEW

ith all the change that’s going on in the business supplies industry, it’s comforting to know that some things have stood the test of time.

SP Richards’ (SPR) annual Advantage Business Conference (ABC) is one of these staples – the event is celebrating its 20th anniversary this year.

From 19-22 August 2018, about 3,100 attendees representing over 500 dealerships in the US will converge in San Antonio, Texas, to “re-envision, re-invent and re-invigorate”, to quote the event’s theme this year. SPR itself is only too aware of the need to do all of that, of course, having recently started merger talks with fellow OP wholesaler Essendant.

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invent|invigorate

ABC OVERVIEW 19 AUGUST • Networking Reception 20 AUGUST • General Session & Keynote • Seminar Sessions • Evening event 21 AUGUST • Business Solutions Expo • General Session Recap & Prize Drawings • NAOPA – Vendor & Dealer Awards

NAOPA BACK AT THE ABC AGAIN The North American Office Products Awards (NAOPA) will be back for the ninth year at the ABC. The awards – comprising the Dealer and Vendor Awards – will be presented on the second full day of the event, during the Business Solutions Expo as well as the concluding general session.

For more on the NAOPA, visit www.opi.net/ naopa2018. The shortlist will be published this month on opi.net, but also look out for the July/ August issue of OPI for a full NAOPA preview.

June 2018

THE VALUE OF PARTNERSHIPS Partnerships are the way forward, according to SPR’s SVP of Sales and Marketing Bryan Wight – who this year follows in the footsteps of the retired Jim O’Brien as ABC emcee. His message is this: “Independents, if you want to remain independent, perhaps it’s time to consider giving up a little of your autonomy in exchange for partnerships that will enable you to win consumer mindshare and drive volume through our channel.

What and who do you need to help you create an incomparable value and service offering that effectively cements customer relationships and protects your volume from existing and emerging competitors? How do all of us leverage partnerships to build stronger and more profitable businesses?”

Some answers to these and many other questions will be provided during three days of education and networking. After a Sunday evening networking reception, the ABC kicks off in earnest on 20 August with a general session and keynote speaker Renée Mauborgne who will be sharing her tips on how to shift dealers’ culture, product mix and strategy

away from a scenario of intense competition into a more liberating state of an uncontested marketplace. Continuing with the educational theme, the rest of the day is given over to a wide range of seminars and workshops, covering topics ranging from innovation, sales and tax reform to social media and Amazon. There will also be two category growth sessions on furniture and facilities, breakroom and safety, run by an experienced team of SPR’s experts in these fields.

Day two is given over to the Business Solutions Expo, held at the Henry B González Convention Center which is adjacent to the Grand Hyatt San Antonio ABC host hotel. Over 250 exhibitors from a wide range of product sectors will be showing their wares, keen to illustrate that despite the challenges all channels are facing, innovation in the manufacturing community is alive and well.

The official side of the ABC will conclude with a recap general session after the expo. Thereafter, dealers are free to explore San Antonio, which is not only one of the most picturesque cities in the US, but also famed for its tex-mex cuisine. As such, there is plenty of choice in terms of spending an evening with family, friends and, of course, fellow dealers.

2018

as ABC...

W

RE env s on

AUGUST 19-22

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5 MINUTES WITH...

Savannah Guernsey

CAREER Q&A Describe your current job.

As VP Marketing & Merchandising at Guernsey, I have the privilege of working with a great team of designers, coders, purchasers and operations gurus.

Describe yourself in one sentence.

I don’t like to sit still, physically or mentally.

What’s your most prized possession?

If I had to pick something, it would be the first edition of Toni Morrison’s Beloved that I scored for $3 some years ago. Honestly though, while I like things as much as the next person, the excitement of owning something tends to wane for me. I suppose memories are more important to me than physical items, and when I have money to spend and time available, I would always prefer to spend it on travel.

Favourite author?

It varies. Right now, it’s John Steinbeck – I love his simple, clean descriptions and rich subtext, though JRR Tolkien is growing on me.

Where is your favourite place to go in the US? My parents’ second home in Breckenridge, Colorado, where there’s always a glass of wine, a pretty view and a small dog waiting to snuggle up with you.

What was your last online search?

How to house train a puppy while working full time.

Your favourite gadget?

Airbnb.Granted, it’s not a physical gadget, but it has an app so that’s close enough. Some of the best places I’ve stayed in – a tiny one-bedroom apartment off the Shuk in Jerusalem (Israel), a student’s studio in Södermalm (Sweden), a cabin in West Virginia (US) – were found through the lovely hosts on Airbnb.

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Best compliment you’ve ever received?

“I’m proud of you, not just as my daughter, but as a professional.” I know it exactly, because I wrote it on a Post-it Note and taped it to my desk.

Since I started working with my father [Dave Guernsey], he hasn’t talked about being proud of me as much as when I was a kid, so I really treasured hearing that (it could be because I’m a disappointment now, of course, but let’s hope not).

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What’s your favourite cuisine?

Indian food, specifically takeouts. Between board meetings, work and my MBA programme, I live on burritos and avocados, so takeaways really elevate things.

What words do you use the most?

Excellent. Shenanigans. Snarky. Quirky. Charming.

Sweet. Thanks.

If you could have the answer to any question, what would you ask?

What happens to our souls after we die?

What was the last gift you gave someone?

A toothbrush and toothpaste for my stepmother, and a comb and sewing kit for my father, all courtesy of the Cordis hotel in Hong Kong. If a hotel had nice soap, lotion, etc, we’d always grab extras when I was travelling with my parents as a kid.

What’s your worst character trait?

I do not like to lose, which means I generally push harder than most people like.

If the world had a President, who would you vote for?

I don’t see one person being capable of leading all the world’s populace – there are too many divergent cultures that need different leadership styles. If individual companies and industries need independent types of leaders for their varying cultures, how could we expect a single person to lead all of humanity?

What is humankind’s greatest invention?

Capitalism. Everything else that I might suggest – the Gutenberg press, penicillin, Microsoft Excel – sprang from our drive to achieve great things and be rewarded accordingly.

If you weren’t doing your present job, what would you like to be doing?

I’d either be in management consulting, learning from different industries with every new contract, or working in experiential design.

By the latter I mean that I’m fascinated by the crossroads between transactional business and experience.

The work done building experiences of a brand through pop-up shops, but also by high-end hotels, luxury retailers and even amusement parks really excites me.

The industry figure you most admire?

Shelley deSilva from The HON Company. She’s retired now, but I’m impressed not only by her team’s marketing and design work, which pushes the boundaries in our industry, but also with the way she carries herself.

Your best piece of advice to someone who has just joined the OP industry?

This isn’t the whole world! Keep your eyes open, watch what other industries do and if you see something innovative that you can apply here, push for it.

If you could change one thing about the industry, what would it be?

I would make it eager and hungry for innovation, and fearless when faced with it.

FINAL WORD

Visions of a CIRCULAR ECONOMY I

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read with great interest last month’s Plastic Soup Hot Topic (see OPI May 2018, page 24) where Michelle Sturman pointed out that the world is awash with single-use plastic packaging. Thankfully, countries all over the world – especially coastal and island countries – are now responding to the crisis and citizens are demanding action. Bans on all things plastic – bags, packaging, straws and cups, for example – are being proposed, passed and implemented at unprecedented rates.

Responding to public pressure, some of the world’s biggest businesses and most popular brands have committed to reducing plastic pollution, with Coca-Cola, McDonald’s, Procter & Gamble, Unilever, Birds Eye and Nestlé all moving to compostable or recyclable packaging and eliminating plastics wherever possible. Large corporations, organisations and supermarket chains including KPMG, the UK’s National Health Service, Iceland and Waitrose have also made big pledges to reduce their use of plastic in a variety of ways. With just the latter two in mind, what would be the impact if we all refused to buy foods packaged in plastic?

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CALL FOR ALTERNATIVES We need alternatives to plastic, and we need them now. Mass production has accelerated so rapidly that it has created 6.3 billion tonnes of plastic waste. Of that, only 9% is recycled. The vast majority – 79% – is accumulating in landfills and in our oceans. If present trends continue, by 2050, there will be 12 billion tonnes of plastic. And it’s a material that takes more than 400 years to degrade.

As mentioned in the Hot Topic, China recently stopped allowing the import of millions of tonnes of plastic waste from many countries due to contamination concerns. As such, nations around the world are suddenly struggling with excess amounts of waste, with nowhere to send it.

I believe that we need to rethink plastic packaging altogether. It is single-use, made from fossil fuels, less than 10% is recycled and it lasts for centuries – there’s nothing positive to say about it. The solution, in my opinion, is to create a circular economy model where packaging is made from existing waste or recycled materials and rapidly reintegrated with nature after its job is done.

Several years ago, I saw a need in the marketplace for compostable alternatives to single-use plastic and styrofoam packaging. I started Eco Guardian with a philosophy of ‘pure products for a clean future’. We now offer compostable or eco-friendly packaging for the foodservice, grocery, food processing, healthcare, hospitality and agriculture industry, and demand for our product continues to grow year after year.

For a material to be considered compostable, the product must break down into water, carbon dioxide and biomass, with no residual toxins. The biomass material is rich in nutrients and can be used to fertilise soil. To be officially labelled ‘compostable’, third-party independent laboratory testing is done and, if a material passes, an official certification is issued.

PLENTY OF OPTIONS Compostable packaging can be made from materials like sugarcane and wheat stalk leftovers, as well as bamboo which is a fast-growing annual grass. These are all materials that were once considered manufacturing by-products and were

Anil Abrol, President/CEO, Eco Guardian

[Plastic packaging] is single-use, made from fossil fuels, less than 10% is recycled and it lasts for centuries – there’s nothing positive to say about it discarded or burned – now they are cleaned, washed, pulped and compressed for use in the production of compostable packaging.

Unlike trees that can take decades of growth before harvest, these are annual crops, considered rapidly renewable, sustainable and eco-friendly. Using specialised moulds, these fibres can be made into almost any shape, are certified-compostable, chemical-free and food-safe.

Where the unique features of plastic packaging are required, there is also a compostable plastic-like material made from plants, not oil.

Polylactic acid (PLA) is different from traditional fossil fuel-based plastics in that it is derived from renewable resources like corn starch or sugarcane.

I strongly feel that we can all make the move Special Issue to a sustainable, resource-efficient economy by TECHNOLOGY a) re-inventing how we design, produce and sell SOLUTIONS products; b) re-thinking how we use and consume products; and c) re-defining what is possible through our use of compostable alternatives, new materials and technologies, and improved recycling and re-purposing processes.

I sincerely hope that articles like this Hot Topic – and maybe my thoughts here too – will get people to investigate alternatives to plastics. After all, no one wants plastic in their soup.

For more information on Canada-based Eco Guardian, visit www.ecoguardian.com.

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