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BIG INTERVIEW

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John Givens, Source Office & Technology November 2018

INSIDE THIS ISSUE l Staples/Essendant data concerns l Depot acquires again l Officeworks names new MD l Fallout from US/China trade war l Imaging supplies: opportunities remain l MRO, PPE & safety in focus l New format Green Light l The last EPIC reviewed

CONTENTS 16 Big Interview Source Office & Technology is one of many US dealers facing turbulent times right now, but CEO John Givens and his team are embracing the journey 26 Hot Topic As President Trump has declared trade war on China, what are the implications for our industry?

30 Category Update Adding to the sales mix: MRO, PPE and safety 36 Category Update The imaging supplies sector is facing some major hurdles, but with adversity comes opportunity 41 Preview A glance at this year’s new format VOW Green Light

Big Interview: John Givens, Source Office & Technology

Transactional business standalone has almost become marginal to Source Office & Technology. Instead, CEO John Givens and his team thrive on the concept of partnerships and collaboration, combined with a focus on service and solutions. What this means is that this progressive Denver, Colorado-based independent dealer has become an expert in every single line of business it operates in – and there are quite a few of them.

43 Review The last EPIC reviewed

REGULARS 5 Comment 6 News 44 5 minutes with...

Nicholas Alvarez 46 Final Word Doug Ramsdale

HOT TOPIC: CHINA TRADE WAR

November 2018

While we are a large US manufacturer and strongly believe in having local manufacturing capabilities in the countries where we operate, we do not agree that increasing tariffs will benefit our company or the US office products industry as a whole.

In the near term, tariffs will raise prices for US consumers which will reduce demand for our products. When applied to every other industry, this may have an impact on the overall US economy.

In the long term, if tariffs are sustained, the industry’s supply chain for the sorts of products manufactured in China will shift to other low-cost manufacturing locations, which are unlikely to be in the US.

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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 Lily Elden +44 (0)20 7841 2952 lily.elden@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 Chief Commercial Officer Chris Exner +44 (0)7973 186801 chris.exner@opi.net Head of Media Sales Chris Turness +44 (0)7872 684746 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 (0)7718 660249 debbie.garrand@opi.net

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The SOURCE of all knowledge

here are people in this industry that have the ability to leave a mark, a lasting impression. When I recently spoke to Source Office & Technology’s John Givens for this month’s Big Interview (see page 16), I came away with a great deal of admiration for this progressive and inspiring leader.

Our industry is awash with talk of collaboration and partnerships, never more so than in these current turbulent times. Much of it is genuine, I’m sure, but occasionally it can appear a little hollow, with too much rhetoric clouding the real agendas. I’m not pointing a finger here and the proof of the pudding, as they say, is very much in the eating. Back to Givens, he and his team have nothing to prove. With a whopping 65% of Source’s revenues coming from its contractual business, that reflects trust, partnerships and indeed collaboration over a sustained period of time.

President Trump himself took centre stage when his ongoing trade war with China escalated following the implementation of further import tariffs Some of you will have the chance to see exactly what I mean when they meet Givens at this month’s OPI Global Forum in Chicago which, I have no doubt, he will be expertly chairing, imparting his knowledge, expertise as well as plain old common sense. The topics to be discussed in detail have been highlighted before and no prizes for guessing what the main talking points will be, on and off the conference floor (see pages 6, 7 & 8 in particular).

But, of course, Essendant/Staples and indeed ADVEO might not take the spotlight alone. President Trump himself took centre stage when his ongoing trade war with China escalated following the implementation of further import tariffs (see page 26), first in September, with more to follow in January 2019. This will cause more than just short-term ripples for the entire supply chain.

In among the big issues our industry is facing, let’s not forget the fact that OPI readers are in the business of selling ‘office’ supplies.

And while here too there’s some doom and gloom (see page 36), opportunities abound, nowhere more so than in the PPE and safety category (see page 30). As the workplace has seemingly gone health and safety mad – look out for our Health & Well-being Special next month – now is the time to jump on board and maximise all that potential.

HEIKE DIECKMANN, EDITOR Have a great month.

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NEWS

Analysis:

The devil’s in the data Would Staples have access to Essendant’s customers’ data if it bought the wholesaler? That’s the question independent dealers in the US are asking as the deal enters the home straight As the Federal Trade Commission (FTC) antitrust investigation into Staples Inc’s acquisition of Essendant nears its conclusion, a key issue that has emerged over the past few weeks is what access, if any, Staples will have to the data of the wholesaler’s customers.

Speaking to OPI at the end of September, Staples CEO Sandy Douglas said the reseller aims for Essendant to be run independently after it is acquired, and that includes the firewalling of customer data.

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We can 100% guarantee to dealers that their private customer information and all the related commercial details will be strictly protected

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“We want dealers to know that we fully intend for Essendant to operate independently and that there will be no interaction between Staples’ commercial operations and Essendant’s commercial operations,” he stated, saying there would be a firewall put in place which guaranteed the security of dealers’ data.

“We can 100% guarantee to dealers that their private customer information and all the related commercial details will be strictly protected,” he added.

Douglas reiterated his points in a letter to Essendant CEO Ric Phillips that was made public in a filing with the US Securities and Exchange Commission. “I recognise it may be tough for dealers to see themselves working with a company owned

by Staples, which they have long viewed as a big, arrogant competitor,” he wrote.

“For example, some may be worried about Staples leveraging their customer data in competition with them. We can say unequivocally that we will put in place a strong, externally-monitored firewall to preserve the integrity of Essendant dealers’ data, keeping it 100% insulated from Staples’ sales teams. Staples’ commercial operations will remain completely separate: dealers, other than the benefits they will receive from Essendant’s added capabilities, will continue to compete with Staples as they do today.”

DEALER GROUP OPPOSITION Nevertheless, Douglas’ comments did not stop the leading dealer group organisations in the US from forming a united front to lobby the FTC about the issue of data and other concerns they have regarding Staples’ proposed acquisition of Essendant.

TriMega, Independent Stationers (IS), AOPD and NOPA all got together to hire the services of a law firm specialising in antitrust and FTC issues in order to produce a letter for the FTC. It details specific reasons against the Staples/Essendant transaction and

How ironclad is the firewall?

What kind of data is going to be walled off?

How long will Staples be required to maintain it?

Who is responsible for policing it?

If [Staples] violates the conditions imposed, what are the consequences? l Would there be any conditions whereby the FTC would waive the requirement (for instance, Essendant’s inability to meet revenue or profitability targets)? l l

LONG-TERM PROMISE? Following news of the letter, Staples confirmed to OPI that it would establish a data firewall whether it was required to do so by the FTC or not.

Nevertheless, IS CEO Mike Gentile said dealers were still “very concerned” about the issue of data and that there remains a high level of scepticism about Staples’ assurances.

Maggio added: “I believe Staples and Essendant are sincere in their comments that, on day one, ‘nothing will change’, and that this acquisition ‘is in the best interests of independent dealers’. However, experience tells us change is a constant in this industry and happens quickly!”

I believe Staples and Essendant are sincere in their comments that, on day one, ‘nothing will change’. [...] Day one is not the concern...

Sandy Douglas

PRECEDENTS A requirement by the FTC for Staples to ringfence Essendant’s data would be far from unprecedented.

Earlier this year, the antitrust regulator ordered US defence contractor Northrop to establish a firewall as a condition for its acquisition of rocket maker Orbital ATK; and in 2017, semiconductor manufacturer Broadcom was required to build a firewall to complete its $6 billion acquisition of Brocade Communications Systems.

For Northrop, compliance with the FTC’s conditions was put in the hands of a US Defense Department monitor, while in Broadcom’s case, the commission appointed a monitor for a five-year period with the possibility to extend this for a further five years.

Whether or not the FTC imposes conditions on Staples’ proposed acquisition of Essendant, the data issue is certainly on the reseller’s radar screen.

Staples would appear ready to comply with a consent order should that be a requirement to close the transaction. If a firewall is not an FTC condition, then it will be a question of trust, and that – in the short term at least – could be more problematic for dealers.

STAPLES SECURES ESSENDANT SHARES A potential banana skin in Staples’ attempt to acquire Essendant was avoided after a majority of the wholesaler’s shares were tendered for the transaction. Staples launched a tender offer at a price of $12.80 for all outstanding shares of Essendant common stock on 24 September. The offer initially had an expiry date of midnight on the evening of 22 October. A joint Essendant/Staples press release the following morning confirmed that, including the 11.16% shareholding Staples already has in Essendant, 62.5% of shares had been validly tendered.

Staples required a majority of Essendant shares to be tendered and, although the 62.5% figure is far from a landslide, it is sufficient for the reseller to complete the transaction assuming that the deal is not blocked by the Federal Trade Commission. The tender offer has been extended to 5 November and, technically, shares can still be withdrawn, although that is highly unlikely.

There had been some doubt about shareholder backing of the Staples acquisition after Essendant’s largest shareholder, Pzena Investment Management, publicly opposed the deal. It argued that Staples’ $12.80 per share offer was not superior to the proposed merger with SP Richards and that it “significantly undervalued” the company.

November 2018

He continued: “Day one is not the concern, but a year or two down the road might be, as changes occur. Will Staples/Sycamore Partners stay committed to Essendant operating independently? Will they be required to maintain the requirements imposed by the FTC to allow the acquisition to proceed? We would like answers to those questions, along with assurances that the protections imposed by the FTC to prevent Staples from having access to everything from independent dealer customer usage and pricing to confidential financial information are off limits and will not be compromised.”

In a subsequent, separate communication to TriMega members, Maggio explained that he had been contacted by the FTC in early October – indicating that its investigation was still ongoing at that time – and that he had been able to convey the “deep distrust and concerns about our largest competitor owning our largest supplier”.

He said the FTC was still open to hearing from dealers and encouraged his members to remind the commission that Essendant possesses competitive data that Staples “would love to have visibility to”. In addition, Maggio detailed specific questions that dealers should raise with the FTC over the data firewall issue:

NEWS

l l l

provides guidance on conditions the FTC should impose on Staples if it’s not blocked outright.

In addition to the separation of Essendant and Staples’ data, areas that the groups want the FTC to look at include maintaining Essendant private label brands and potentially the divestment of some distribution centres to SP Richards.

TriMega President Mike Maggio – who was behind the joint action – said he was encouraging all of his group’s members to send the letter to the FTC, and that it would have even greater impact if members of other dealer organisations also did the same.

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NEWS

ADVEO in creditor protection European business products wholesaler ADVEO has entered pre-insolvency proceedings after negotiations between its lenders and Staples Solutions ended without an agreement.

ADVEO revealed in September that talks were taking place between its banking syndicate and Cerberus-owned Staples Solutions over the latter’s acquisition of around €150 million ($175 million) of financial debt.

However, in an 18 October filing to the Spanish stock market, the wholesaler revealed that these talks had ended without an agreement. ADVEO said that its board has unanimously agreed to enter into a period of creditor protection in order to give the company “a stable framework” in which to continue the negotiations with financial institutions and other potential investors that are currently underway.

Spain’s insolvency laws provide companies in financial difficulty with a three-month creditor protection period that gives them some breathing space during which to negotiate a financial agreement. If, after three months, no solution has been agreed upon, then ADVEO will have a further month to initiate bankruptcy proceedings. The wholesaler also revealed in the stock market filing that it continues to operate as normal and that there has been no change to its management organisation.

IN BRIEF Independent Stationers to rebrand US dealer group Independent Stationers has announced a major rebranding of its corporate identity. The group is now known as Independent Suppliers Group, with the tagline ‘Innovative Thinking. Purchasing Power.’

New identity for Lyreco France-based office products reseller Lyreco has unveiled its new company identity and positioning. The name and the construction of the logo remains the same, with the colour green now incorporated. The new signature ‘Working Together for Tomorrow’ will remain in English for all subsidiaries.

Maul and Schneider expand in France Germany-based OP manufacturers Maul and Schneider are collaborating on a joint subsidiary in France. It will open on 1 January 2019 near Paris and trade under the name of Maul Schneider France.

Online Tech Stores welcomes new CEO US-based imaging supplies distributor Online Tech Stores has announced Greg Greenwell as its new CEO, effective 1 November. He has over 20 years of industry experience, most recently as founder of MPS firm TotalPrint.

Neil Ringel leaves Staples

Staples Advantage has confirmed that Neil Ringel left the company in October. Ringel joined Staples in 1995, playing a key role in the launch of the reseller’s B2B division. During his time at Staples, he held several leadership positions including EVP Contract Division and President North American Delivery. Ringel most recently served as EVP Business Development. The company has not yet announced a replacement.

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Depot acquires another dealer

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Office Depot has purchased US dealer Business Essentials.

The company, formerly known as Bertleson’s, was founded in Minneapolis, Minnesota, in 1906 and has expanded into Fargo and Grand Forks (both in North Dakota).

This is the latest in a string of acquisitions for Depot, which includes the purchase of Garvey’s Office Products in August and Sandia in March.

Kyocera advances European strategy Printing OEM Kyocera Document Solutions Europe has acquired Czech Republic-based printing solutions firm Janus. Janus will become a sales company, operating under the name Kyocera Document Solutions Czech from 5 November.

Office Club announces 2019 conference UK dealer group Office Club has confirmed the date and venue of its 2019 annual conference. Next year’s event will take place on 14-15 June at the Crowne Plaza Hotel in Stratford-upon-Avon, UK. Iron Mountain expands presence in China Document storage company Iron Mountain has acquired the Chinese branch of US-based document solutions firm GRM. Senior management appointment for Knoll Office furniture vendor Knoll has announced Christopher Baldwin as its new COO and President. He will be responsible for sales, marketing and manufacturing operations for the Knoll range of workplace lines and services.

Fujifilm wins appeal in Xerox case Japan-based imaging company Fujifilm has won an appeal in its legal battle with Xerox.

Fujifilm claimed Xerox breached its agreement by terminating a $6.1 billion proposed merger.

Fujifilm is also seeking punitive damages which total $1 billion.

New office products retail brand in France French cooperative Groupe Alkor has launched a new retail brand called IOBuro. Managing Director Laurent Proy had told OPI last year that Alkor was preparing to introduce a retail concept, and the IOBuro name was revealed during a recent event held to mark the company’s 60th anniversary – the group began life as SCOOL (Sociéte Coopérative des Librairies) in 1958.

IOBuro stores will have a surface area of around 400-500 sq m (4,000-5,000 sq ft) and target both consumers and SMB customers. The goal is to have approximately 15 stores up and running by the end of 2019 and up to 50 outlets by the end of 2021. BPGI member Alkor has two other reseller brands, Majuscule and Burolike.

Officeworks names new MD Australian office supplies retailer Officeworks has announced its replacement for Mark Ward. On 1 January 2019, Sarah Hunter will take over as Managing Director from Ward, who revealed his plans to retire earlier this year.

Hunter will join the company from parent company Wesfarmers’ subsidiary Coles, where she is currently Demerger Program Director, working on its split from Wesfarmers. Since joining Coles in 2010, she has held several positions including General Manager Workplace Strategy and General Manager of Finance for Coles Express. Prior to Coles, Hunter worked in the UK in a number of senior commercial positions in banking and airports.

NEWS

Anti-dumping relief for Navigator

The impact of US-imposed anti-dumping duties on Portugal-based paper manufacturer Navigator is set to be less dramatic than predicted. While the company will still be affected by the duties, the United States Department of Commerce (DoC) has lowered the amount that the company has to pay, from 37.34% of sales to 1.75% for the period from August 2015 to February 2017.

Following a preliminary assessment, the DoC had informed Navigator in March this year that the anti-dumping duty to be applied would be 0%, before settling on the 37.34% figure in August.

Navigator immediately reacted to this decision, leading to a re-examination of the figures by the DoC. This has now resulted in the new final rate of 1.75% which is expected to be applied shortly.

Navigator had expected the higher rate to have a negative impact of €66 million ($76 million) on EBITDA and €45 million on net profit for the current financial year. It has now revised these estimations downwards to a loss of €3 million and €2 million respectively.

In addition, Navigator is taking steps to recover around €22 million, representing the difference between sums deposited during the period to February 2017 and the revised amount of duty owed.

Business owners favour Amazon

According to new research, almost two thirds (62%) of business owners in the UK are more inclined to buy products for their company from Amazon over an independent online store.

The Attracting and Retaining B2B Customers in a World of Choice report by e-commerce agency PushON surveyed 1,000 business decision-makers in the UK. The report found that for 50% of respondents, convenience was the main reason for shopping with a large online retailer – such as Amazon – for products including computer software, furniture and office supplies.

55% surveyed also believe that Amazon offers greater choice than independent counterparts.

When asked why they would buy from a smaller business over a retail giant, 40% of participants replied expertise and the offer of solid advice and customer service support. Second to this was improved online security for the reassurance of safe monetary transactions (37%), followed by a desire for a small business to provide more in-depth product information (35%).

In support of this, 52% of those surveyed said they would buy their office supplies from a small online outlet if they have previously experienced a good level of service from them, while 45% commented they wanted to support smaller businesses when making purchases.

The survey also found that:

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• 80% of companies implementing B2B e-commerce believe that their customer expectations have changed due to the influence of B2C practices.

• 93% of B2B consumers prefer to shop online.

• 98% say the quality of customer service support was an extremely important factor in their choice of online retailer.

• 42% of business customers purchase their furniture online because it is quicker than shopping in a physical store.

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9% $61

EXPECTED CAGR OF THE GLOBAL SAFETY APPAREL MARKET 2018-2022

BILLION

ESTIMATED VALUE OF THE GLOBAL MANAGED PRINT SERVICES MARKET BY 2025

BIRD FEED

@KCCorp Since 2015, we have helped more than 900,000 people gain access to #sanitation and learn about safe hygiene practices through our #ToiletsChangeLives program

@StationeryBytes We love a highlighter! What’s your favourite colour?

@Staples Help stop the spread of germs! Whether you are at home, at work, or travelling, handwashing is one of the best ways to avoid getting sick and spreading germs to others #GlobalHandwashingDay

@LouiseFGCambs It’s official – the Cambridge office now has the coolest hard hats around #fgouldcareers #PPE Follow us on Twitter @opinews

Complete upgrades delivery system

Germany-based stationery trade fair Insights-X has reported a successful show, despite being one day shorter than in previous years. The show was open for three days, rather than the usual four, due to a public holiday.

Now in its fourth year, more than 5,500 trade visitors from 92 countries attended the show in Nuremberg from 4-6 October. The event featured 311 exhibitors from 39 countries, as well as a diverse support programme of workshops and seminars.

Office Choice and GNS launch expo

Australian dealer group Office Choice and stationery wholesaler GNS have announced a joint event to take place next year. The Office Product Reseller Supplier Expo will consist of a full-day supplier event for both newsagent and dealer group participants, and will be held alongside the 2019 Office Choice Conference and Gala Awards.

The expo is an extension of the two companies’ existing relationship. Earlier in the year, they partnered to provide support management and marketing support services to GNS-affiliated Officesmart dealers.

The organisers hope that with the participation of other industry groups, the event will become the highlight of the Australian annual industry calendar. The Office Product Reseller Supplier Expo will take place on 16-18 August at the Hyatt Regency in Sydney.

IN BRIEF Lavazza acquires Mars Drinks Italian coffee brand Lavazza has agreed to purchase the drinks business from Mars.

The acquisition will include Flavia and Klinx, which are leading brands in the office coffee service and vending machine segments.

NEWS

Global support for Insights-X

Highlands expands team US sales and marketing agency Highlands has added Rachel Croll and John Richardson to its operations in Texas. They have over 35 years’ sales experience between them.

UK independent office supplies dealer Complete Business Solutions has implemented a cloud-based management and mobile working system to carry out its delivery operations.

The new system from mobile workforce management firm BigChange includes electronic proof of delivery with a sign-on-glass app that connects to Complete’s accounts system. The integration means that customers now receive an immediate confirmation of delivery and invoices can be raised straightaway.

Delivery vehicles are also equipped with satellite trackers, giving customer services a live view of vehicle locations and expected delivery times, which is passed on to customers through text or email alerts.

Beta Distribution enters administration

Office Distribution joins BPGI Italian wholesaler Office Distribution has joined international buying group consortium BPGI. The agreement strengthens BPGI’s membership in Italy where dealer group In Ufficio has been a long-standing member.

Cott grows water portfolio DS Services, a subsidiary of Canada-based beverage solutions provider Cott, has acquired US water brand Mountain Valley Spring Company for $78.5 million in cash from private equity firm Great Range Capital.

New executives for Diversey US-based jan/san vendor Diversey has announced that CEO Dr Ilham Kadri is resigning her position as of 31 December 2018. Diversey CFO Carlos Sagasta, along with Global President Professional Division Gaetano Redaelli, have become joint deputy CEOs for the time being.

Shachihata expands UK sales team Writing instruments vendor Shachihata Europe has appointed Chris Collins as its new UK Sales Business Development Manager.

November 2018

UK IT and EOS distributor Beta Distribution has gone into administration. There had been concerns about the sustainability of Beta following reports at the end of September which was recently confirmed by a message on its website: “Clare Boardman and Richard Michael Hawes were appointed Joint Administrators of Beta Distribution Plc, Beta Distribution Employee Services LLP, Beta Services (UK) Limited, The Content Wall Limited (“the Companies”) on 15 October 2018.

The affairs, business and property of the Companies are managed by the Joint Administrators. The Joint Administrators act as agents of the Companies and contract without personal liability. All Insolvency Practitioners of Deloitte LLP are licensed in the UK. At present, no new customer orders are being accepted. Further information will be provided in due course.”

eBay sues Amazon Online marketplace eBay has filed a lawsuit accusing e-commerce giant Amazon of poaching high-value sellers from its platform.

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Integra announces 2018 award winners

WHO’S WHO IN OP

UK dealer group Integra Business Solutions hosted its annual ‘Innovate for Growth’ national conference on 20 September. The event, which was attended by over 200 delegates, also marked the 20th anniversary of Integra’s Initiative brand.

The agenda included a keynote address from dealer group CEO Aidan McDonough, a supplier exhibition and a digital marketing workshop. The Initiative Award winners 2018 were also revealed: •

• • •

Members of the Year: Active Office, Emerald Office and Office Plus Manufacturer of the Year: Brother UK Distributor of the Year: Antalis UK Product of the Show: Zebra Pen UK

Acquisition for Office Peeps US reseller Office Peeps has acquired fellow South Dakota-based furniture and OP firm Central Business Supply. Over the next few months, the companies will merge under the name Office Peeps.

Current Office Peeps President Joel Vockrodt will retain his position in the combined business. Central Business Supply co-owner Kent Leibel will remain with the company as part of the management team along with the rest of the employees.

Top 100 new entry 2018: Bob Hodan, President, Basics Office Products Following the retirement of Sean Macy at the end of April, Bob Hodan became President of Canadian dealer group Basics Office Products, following a short stint as its EVP earlier in the year.

Prior to joining Basics, Hodan was President of ACCO Brands Canada, a position he had held since 2012. He began his career in the office products industry back in 2003, working for Canadian OP supplier Hilroy.

The Basics group was founded in 1976 when several independent OP dealers got together to pool resources and buying power, with the idea that they could each grow their businesses and become dominant forces in their respective markets without sacrificing their independence or responsibility to local communities.

Today, Basics Office Products’ membership includes 110 dealers from over 65 different locations across Canada.

JGBM embraces cloudbased marketing UK-based distributor JGBM has revealed plans to expand its cloud-based marketing platform TechStuff. The platform is currently used by over 350 of JGBM’s 1,200 UK dealers, with the company saying that it aims to ultimately have all of them on it.

TechStuff is designed to push office technology-based promotions direct to dealers’ customers through linking products to PDFs and videos. JGBM has made cloud-based platforms a key feature of its marketing strategy, which includes a cloud e-commerce platform at sister company 2020 Digital Media.

Using this type of marketing, the company can make sure that promotions, new products and any content is released to dealers’ customers faster. It also updates product descriptions on the websites, so a consumer browsing similar products can see the differences without having to scrutinise specifications.

Stationers’ Company reveals 2019 Warrants London-based Stationers’ Company has revealed the winners of its 2019 Warrants. The programme is now in its fourth year and rewards excellence.

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The new Warrants are:

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• • • •

Brown Fox – fine stationery range Collins – wool/leather bound diary Durable – RFID credit card wallet Manuscript Pen Company – ML1856 fountain pen

The following had their Warrants extended: • EO Group – Office Power dealer network programme • Gopak – Ultralight Staging • Victor Stationery – Rhino Notebook • Office Club – Cool Earth paper The judging for the 2020 Stationers’ Warrant will commence in March 2019.

BIG INTERVIEW

The secret

SOURCE OF SERVICE SOLUTIONS

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Independent dealers in the US are facing turbulent times right now. And while Source Office & Technology is no exception, CEO John Givens knows exactly where he’s going and who he’d like to take on the journey with him

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ransactional business is certainly a term that exists in the vocabulary of John Givens, CEO of Denver, Colorado-based dealer Source Office & Technology. But, while not to be underestimated in an industry dominated by commodity products, it’s almost become marginal to a company that thrives on the concept of partnerships, collaboration and commitment.

These are words that repeatedly came up when Heike Dieckmann spoke to Givens ahead of OPI’s Global Forum in Chicago in November. Givens will be chairing the conference this year, guiding delegates through the veritable minefield that is the business supplies sector today, nowhere more so than in the US right now – more on that also in the following pages.

There’s no doubt that the aforementioned terms will come up at the forum as well, along with two others: service and solutions. Source has perfected the art of combining all of these attributes, not just in dealing with customers, but also with its supplier, vendor and wholesale partners. What it means is that this progressive dealer has become an expert in every single line of business it operates in – and there are quite a few of them.

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OPI: Many of our US readers will know you, of course, but for those who don’t and also from outside the US, who is John Givens?

John Givens: It’s quite straightforward. I graduated from Duquesne University in Pittsburgh, Pennsylvania, in the early 1980s, but moved quickly from the area which, at that time, was known as the ‘Rust Belt’ because it was going through a sharp economic and industrial decline. Instead, my wife Maria and I went to Clearwater, Florida – the ‘Sun Belt’ – where plenty of jobs were being generated.

My first career position was with Lanier Business Products as a sales representative. I was promoted to the National Sales Trainer position in Atlanta, Georgia, in 1984, and in 1986 moved to Denver, Colorado, as a Sales Manager. We started Source Office & Technology in 1990.

OPI: I know Source well as one of the early adopters of managed print services (MPS), but I’m not that familiar with your overall journey. Could you chart your history briefly?

JG: Sure. We started in the shadows of the remanufacturing industry in 1990 before we found the bright lights of HP-branded solutions – that’s how I always sum it up. We began as a reman consumables reseller and evolved into a dominant regional player for HP. We quickly added HP printer services and in 1999 started offering office supplies, later followed by MPS, jan/san, breakroom, transactional and contractual workspace solutions and specifically office coffee services (OCS).

OPI: What prompted that early diversion into OP? JG: It was a defensive strategy. At the time, office supplies companies like Corporate Express, Staples and Office Depot had figured out selling toner cartridges just wasn’t that difficult. It started the race to the bottom on pricing.

BIG INTERVIEW John Givens

We started in the shadows of the remanufacturing industry in 1990 before we found the bright lights of HP-branded solutions Their strategy was to give away toner and then make money selling office supplies. We had to do something, because we couldn’t simply match their prices on toner, so we learned how to sell OP.

OPI: In a few facts and figures, can you sum up Source as it stands today?

JG: We are based in Denver and our main focus geographically is on Colorado and Wyoming where 75% of our revenues are generated. We have customers on a national level as well and indeed deliver to 44 US states. Almost all of the business outside Colorado and Wyoming is either office supplies through our long-standing partner SP Richards (SPR) or copiers and printers with Canon or HP. We also have a limited partnership presence in Canada.

We generate revenues of around $40 million and have about 120 team members.

OPI: Who are your customers?

JG: Large mid-market and enterprise level accounts as well as ‘fed and sled’ customers – federal government, state, local and education – that’s our core. We also serve small businesses, but our sweet spot is definitely the large mid-market.

November 2018

OPI: Let’s go back to your relationship with HP and your MPS offering for a moment.

JG: That’s the technology part of the business, yes, and it’s the longest-standing one. We work with HP, Canon and Xerox, the latter having been a recent addition. We have relationships with these players in what’s often referred to as ‘open market’ or ‘closed market’ capacities. Canon and Xerox are both authorised or closed market manufacturers.

Closed market means you have to be an authorised or qualified dealer to sell some of their products – it’s quite selective with very high levels of entry because of the service solutions, installation and training aspects that are required.

OPI: What about HP? JG: HP in the MPS arena and in the A3 product category is closed market, so we’re an authorised dealer. That’s different from ‘qualified’. To be authorised, you have to have the service team, be able to manage the parts, have training, installation, and so on.

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John Givens BIG INTERVIEW www.opi.net

OPI: The contractual side seems to be considerable given your involvement in the MPS space and with HP and Canon.

JG: Yes, it’s huge, about 65% of sales is contractual.

The reason it’s so high is because, as you say, the printer/copier/MPS space is a big part of what we’re doing. Our HP MPS programme is contractually based. When we put copiers and printers in the field, that revenue is under contract, typically for four or five years. OCS is also contractual, as are a number of our office supply agreements.

Another huge category for us is furniture, which is a mix of transactional and contractual business.

In this space, we also work with partners under an open or closed market umbrella. We have very long-standing relationships, depending on the customer base and requirements, with HON, Teknion and SPR’s Lorell brand.

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OPI: These contractual agreements must protect you to some extent from the headwinds in challenging – and declining – categories such as EOS and office supplies?

JG: They help in several ways. MPS and copier transactions are almost always contractual. Also, if customers are not buying office supplies from us already when we put in the print fleet, we give them the opportunity to aggregate their spend with us. It means many of our large clients are buying all of our lines – office supplies, coffee service, printers and copiers, and jan/san.

OPI: You mentioned coffee as a category a couple of times. I assume that’s more than selling Keurig machines and pods?

JG: Very much so. We have an integrated bean-to-cup solution for customers that are looking to provide a workplace experience and become employers of choice in the markets they occupy.

We’ve been doing this for about five or six years, but are by no means early adopters – there are office supplies companies that have been selling coffee products for 10-15 years. Where we are unique is in the sense that we offer an in-depth experience similar to that of a standalone OCS company such as Royal Cup, ie the full coffee solution. But in addition to that, we’re also selling all the other categories to our customers.

OPI: Where are you headed; what are your strategic goals?

JG: We want to be the anti-Amazon/Staples/Office Depot of our industry – I put them all in the same basket. We want to take the deep and enriched relationships we have with our clients and provide them with creative solutions and services that improve their business processes, cut the cost of their consumables and reduce the number of suppliers they have to work with.

Amazon, Staples and Depot are spectacular at supply chain management and at providing low-cost product solutions and efficient delivery. If large accounts are simply looking for the best price on a product, we don’t play in that sandbox – that’s not who we are and where we excel. Where we compete is in areas where clients require more integrated solutions.

I’ll give you an example. We’ve been working with a very large bank for approximately ten years. We do a custom-print shop for them at the beginning of each year for deposit slips and the type of papers that you would see if you went into the bank doing a

one for office supplies, one for furniture, etc. But none of them seemingly sell one solution that integrates all the various aspects. It’s all done in business silos which creates inefficiencies.

OPI: And this happens with just this customer?

JG: Not really. Our entire customer base is on somewhat of a pilot programme because most copier companies don’t deliver paper and most office supplies firms don’t deliver printers and copiers. What we’ve done is take the full MPS solution and provide the paper, the printer and the toner as part of that package – through HP, IP and SPR. Going back to your question about strategic goals: getting into the 3D print market with sales, service and support is another one, starting with the education sector. This initiative begins this quarter.

We have recently added ‘grab and go’ to our OCS category and are investigating micro markets as another line of business. These are quite different segments under the broad vending machine umbrella. They are particularly challenging when you’re factoring in perishables.

In the context of strategic goals, I would be remiss not to mention a combination of acquisitive and organic growth. Our target is always to double revenues every five to seven years.

OPI: Can you elaborate on that?

JG: Sure, I’ll explain. There are three models we are aware of that exist today for an independent dealer.

The first model is to remain independent, do what you’ve always done and do it with whom you’ve always done it with, provided the supplier remains true to the past relationship. Remaining independent is still a viable option and nobody in a progressive company with a good succession plan should be afraid to choose that path.

The second model: align with a national. As we understand it, Office Depot and Staples are acquiring 100% of dealerships, allowing the owners and management team varying levels of autonomy with the promise of better pricing. That’s their value proposition.

The positive aspect of this for a business owner who no longer wants to be in the company is to get full value for the dealership today. But there are a number of negatives to be considered in this model as well. There is a very real risk of losing your autonomy and for an owner who has only answered to himself for many years, that is a big deal. There will also be changes to the culture of the business, placing pressure on employees to conform to a significantly different operating model.

As many have predicted, we’re now starting to hear that some of the “we’ll leave you alone” promises are being reversed. Further, the loss of independent dealers weakens purchasing volumes for buying groups, reduces market routes making manufacturers more vulnerable to large national price squeezing, and reduces consumer buying options.

The third model is to partner with a wholesaler.

We want to be the anti-Amazon/ Staples/Office Depot of our industry – I put them all in the same basket

OPI: So you want to be the acquirer rather than the acquired party – is that right? I’m asking as obviously Office Depot and Staples are on somewhat of a dealer recruitment drive right now.

JG: That’s correct. And we’re certainly not up for sale for the national operators.

OPI: When you say ‘partner’, you mean the wholesalers buying equity stakes in dealers?

JG: Potentially that and much more. In the past, most sizeable independent dealers have had some kind of integrated financial relationship with either Essendant or SPR. But now there are different options available for consideration.

Partnering with a wholesaler such as SPR provides a financial opportunity for the business to be worth more in the future than it is today. It also provides added potential flexibility on succession planning.

November 2018

OPI: What’s your growth rate at the moment?

JG: It’s been relatively flat over the past three years.

There’s been a churn of where we’re doing well and where there’s been a decline, but overall the barometer hasn’t risen.

We went from $20 million to $40 million pretty quickly some years back, but at $40 million we had to stop focusing on growth and spend time on figuring out how our ERP system is supporting the organisation.

One of the challenges is how to integrate our multi-line business strategy and manage the different elements?

It’s a complex issue we have with the technology solutions providers – we spend an extraordinary amount of time on business process integration. They sell different solutions – one for printers and copiers,

OPI: You’ve just alluded to your growth plans and that they include acquisitions. Is that a new strategy?

JG: No. We have done several acquisitions in the past and we’d like to have another four to six in the next three to five years. Based on our line-of-business expansion, copier/print, OCS, office supply and workspace solution companies all represent potential opportunities.

BIG INTERVIEW John Givens

deposit or withdrawal. We do a bulk order for them, bring that inventory into our warehouse and then deliver to their branch offices together with their office supplies and other products they order from us in an aggregate fashion.

Alternatively, one of our HP MPS customers – a very large healthcare provider with multiple locations and a huge printfleet – has a full-time Source employee who delivers paper, toner and provides services to the fleet on a per-printer basis. Especially in a healthcare environment, it’s vital everybody has exactly what they need, including a partner that responds immediately to whatever is required.

Quality paper is part of a new programme whereby we’re offering an integrated and high-quality paper and MPS – the latter meaning toner and services – solution.

We are working closely with HP, International Paper (IP) and SPR on this and call it the three Ps – IP, HP, SP. It’s not a product and price, but a quality of print, delivery, inventory control and services solution.

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John Givens BIG INTERVIEW

Wholesalers readily acknowledge that we are better in the customer-facing roles. What they bring to us is a new business discipline and a rigour around operations that is energising and has the potential to drive enhanced profits and ultimately, an enhanced business valuation.

When you think about it, the wholesalers have always invested in the independent dealer. But in some of these newer investment models, we have the opportunity to truly partner together. When we choose to do so, we are fully aligned on serving customers in the most personal, yet operationally-efficient manner.

That simply cannot be said for any partnership with Office Depot, Staples or other direct sellers.

For the moment, the stability of the SPR leadership, backed and supported by GPC, provides a safe harbour in an otherwise very turbulent market OPI: And is such an offer on the table from SPR? JG: The specifics of what we’re doing with SPR are confidential, but we are excited about our ongoing partnership. We’ve been working with the wholesaler since 1994 – starting with Horizon originally – and many contractual agreements have been in place for a long time.

The SPR team has included us in every step of their growth, making sure that we are well aware of all the options – private label, adjacent categories through acquired companies – available to us, but never telling us what to do. As such, the benefits of our strategic alignment are completely clear to us.

Both Essendant and SPR had good options on the table initially, but now that Sycamore is involved I’m not sure Essendant could guarantee true autonomy in the long term – I don’t mean for us, but for anyone.

For the moment, the stability of the SPR leadership, backed and supported by GPC, provides a safe harbour in an otherwise very turbulent market.

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OPI: On that note, let’s talk about the gigantic elephant in the room – Staples and Essendant’s likely coming together. What’s your view?

JG: Well, I think Sycamore Partners has pulled off a brilliant move with its acquisition offer to Essendant, scuppering a potential $7 billion SPR/Essendant force with a huge number of aligned dealers.

I’m not sure that Staples would want to compete against another large national player, which is what Essendant and SPR combined with the dealer community would have evolved into.

We would have been a great national force. One wholesaler. One dealership community. But at this point, that doesn’t appear to be an option.

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OPI: Right now, you potentially have a large group of independents trying to figure out what to do. Do you foresee a mass exodus of Essendant dealers before the deal is even completed?

JG: The smart ones will certainly be thinking about it. It would be doubtful that SPR could take on the full load of everything Essendant is doing and be prepared to handle the massive influx of business.

Essentially, there’s a finite number of dealers that it will be able to work with, so if I were one of those dealers, the uncertainty surrounding Essendant and Staples would cause me to act quickly and be one of the first to at least talk to SPR in detail. We are confident that SPR can ramp up its capabilities and capacity in a very short period of time.

OPI: WB Mason is closely aligned with Essendant…

JG: Yes, that’s quite a unique situation. Mason and Essendant by all accounts have a deeply-involved and financially-integrated relationship. How that can be worked out I have no idea, as there’s obviously no love lost between Staples and WB Mason. Knowing CEO Leo Meahan, it will be the right decision for the current ownership and his team.

OPI: Back to SPR, can a $2 billion wholesaler compete with what will be a $15 billion entity?

JG: Absolutely it can. This is a game changer for SPR’s parent Genuine Parts Company (GPC). Yes, it may have wanted to spin SPR off with the initial Essendant merger (retaining 51% ownership of the new entity), but why would it do that now?

There’s the opportunity to increase revenues by 15%, 20% or 30%. I’m confident that GPC’s CEO Paul Donahue and SPR’s Rick Toppin will be very strategic, wise and financially prudent figuring out who they want to partner with, how they want to partner and what they want to do in a way that’s going to be financially sustainable and hold true to the partnership relationships that they have both with manufacturers and dealers.

There is always room in the market for innovation, blue ocean strategies and thoughtful insight into better services and distribution models.

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John Givens BIG INTERVIEW

example. Essendant and Staples combined have millions of square feet of warehouse space. Why would you have two warehouses? And why two teams servicing two different customer groups? Yes, initially you might do that in order to figure out when the leases are up and how quickly you can sublease the space, etc. But ultimately, business logic dictates that consolidation means consolidation of warehouse, of management and of who your large customers are.

Everything that Staples and Depot do will be driven by their P&L statement. As for these dealers they’re buying, yes, they will have the ability to run autonomously but only until the first time they stub their toe – then there’ll be talk of changes. When they sprain their ankle, changes will be implemented more quickly; when they break their leg, someone else will take over and make those changes for them. It’s all just good old-fashioned common sense.

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OPI: Who do you think benefits or suffers the most as a result of this consolidation? I’m not just referring to Staples/Essendant, but also the dealer purchases of the national operators. Is this notion of independence and autonomy under Staples/ Depot realistic or just pretence?

JG: Let’s start with who suffers the most. I think it will be the end consumer, for a number of reasons.

Typically, after consolidation occurs, price increases to the end user customer are common. Secondly, there’s less choice and opportunity in the market.

If the deal goes through, Essendant will be the wholesaler for the remaining dealers that don’t hit the exit door. It has to have a tremendous amount of control over pricing and service levels, and it’s undoubtedly a worrying time for these dealers.

With regards to an autonomous business model for dealers – and indeed Essendant – under a Staples or Depot umbrella, it’s less about what the chief executives of these big companies proclaim and more about what the analyst community says. Analysts won’t like the idea of having excess warehouse capacity in a market or three different locations in the same city. So in the case of Depot, the propensity to want to make changes won’t be driven by its executive team, but by analysts.

Sycamore Partners is obviously privately held and, in that sense, can move quicker with less concern.

That said, it’s all very well talking about autonomy, but the first quarter you don’t hit your numbers, they will insist on changes.

As regards Essendant as part of Staples, it means uncertainty. Who is going to run the wholesaler? Will the Essendant culture prevail?

Will service levels remain at acceptable levels with additional investments being made, or will it be a case of cost-cutting and short-term profit?

Generally speaking, private equity firms bring out the chainsaws, not the clippers.

And again, if you were a financial analyst and you had a large business supplies company with wholesale distribution opportunities across the country, why would you have a Staples warehouse and an Essendant warehouse? Take Denver as an

OPI: What about the manufacturers – will they be impacted by consolidation in the reseller channel?

JG: Dramatically, yes. All manufacturers have to decide what their go-to-market strategy is and who they want as their partner. Amazon? If so, the online player has a very known and clear strategy – whatever it’s selling the most of, it will offshore to its own facilities.

Do they go via the wholesalers or indeed the independent dealer directly? Alternatively, do they want to set up an e-commerce site and compete directly with wholesalers and dealers?

There is a lot of opportunity for all of us to become better at supply chain management. The first question on the list is: what does the customer want?

Everybody wants a good price on a product, but there are other preferences and requirements. For instance, we have a number of clients who ask us to buy product on Amazon, add it to our delivery routing and allow us to add a surcharge for the handling that we do for them in order to aggregate the delivery.

There are plenty of things we do that bring a level of service support and solutions to customers that value low price, but also efficient supply chain management.

We always want our customers to understand that we’re never going to be the cheapest when it comes to product pricing and we’re actually proud of that fact OPI: In short, what’s Source’s recipe for success?

JG: We have an extraordinary team starting with our President David Sass who has immeasurably valuable industry experience, complemented by a dedicated, highly energetic and motivated workforce.

We always want our customers to understand that we’re never going to be the cheapest when it comes to product pricing and we’re actually proud of that fact. But when it comes to providing solutions and services in an open, honest and collaborative relationship, we don’t believe there’s anyone else in the nation that does what we do in the way we do it and with the methods and business processes we use. I can’t stress the collaborative aspect enough – it runs through everything we do.

HOT TOPIC

Face OFF

To say US/Chinese trade relations have been volatile over the past ten months or so would be an understatement. The implementation of tariffs on both sides is also having some serious repercussions for the business supplies sector, as OPI’s Heike Dieckmann finds out

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C

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hina has long been a popular and lucrative destination for the sourcing as well as manufacturing of all manner of office products (for more on the ‘why’, see Doug Ramsdale’s Final Word on page 46). But the country has come under considerable pressure from the US government due to “not playing fair”, sparking a prolonged trade war to counteract “acts, policies, or practices that are unreasonable or discriminatory and that burden or restrict US commerce”.

It started earlier this year with President Trump imposing tariffs on select raw materials imported from China, such as steel and aluminium, which then escalated to a much broader list of goods as the weeks and months went on (see also ‘The wild tariff ride of 2018’).

The most recent implementation by the US of a 10% tariff on $200 billion worth of Chinese goods on 24 September was just the start. Unless something remarkable and conciliatory happens – for now it appears to be just tit-for-tat retaliation – this will increase to 25% on 1 January 2019.

As the circle of what constitutes business products widens and encompasses ever more

categories in today’s workplace, the effect the current trade war between China and the US has on our industry is palpable.

OPI has been talking to a wide range of manufacturers that cover the gamut of business supplies, from traditional OP and filing products to electrical/technology equipment and office furniture. The response has been unanimous: unless manufacturing is predominantly domestic with only a relatively small amount of raw materials affected, there is no way round the inevitable price increases that will need to be passed on to resellers and, ultimately, end consumers.

The same applies to the wholesalers, particularly as regards their own brand products. A note from SP Richards (SPR) to its reseller partners said: “The United States government announced three lists of HTS (Harmonised Tariff Schedule) codes impacted by the tariff. The third list, which impacts SPR’s proprietary branded products, was implemented 24 September 2018. Due to this increase, SPR will be increasing pricing on select SPR proprietary branded items effective 1 November 2018 and 1 January 2019."

We have been absolutely inundated with announcements of impending price increases from a litany of manufacturers It continued: “Business Source, Compucessory, Genuine Joe, Integra, Lorell and Sparco brands all have items impacted by the tariff increase. In addition to SPR proprietary brands, other tariff-impacted branded products will be increasing in price effective 1 November 2018, 1 December 2018 and 1 January 2019. Specific pricing and item details will be available approximately two weeks prior to the start of each month.”

Paul Miller, Director of Legislative Affairs at NOPA, has been close to the action in this year’s escalating trade Paul dispute between the US and Miller the rest of the world, especially China. Here, he gives his potted macroeconomic and political summary of events so far.

Notices along similar lines from the manufacturing community have been sent to resellers up and down the country. In some instances, vendors appear to be absorbing the increases on a short-term basis or staggering price rises in an effort to mitigate the effects for their reseller partners (maybe they can also afford to do that due to remaining inventory). But on more costly products such as furniture, a whopping 10% or indeed 25% extra is a financial burden that is difficult to carry.

TIT-FOR-TAT President Trump proposed more tariffs on Chinese goods totalling $200 billion – almost half of all US imports from China. The list included everything from office products and jewellery to furniture. Despite warnings to the administration that such a move would shift supply chains and eliminate gains made from the recent Tax Cuts and Jobs Act, just as planned, the tariffs went into effect on 24 September, with an announcement that more duties may soon follow on another $267 billion in goods from China.

In the final current instalment of what’s happening, on 1 October, negotiators from the US, Canada and Mexico officially agreed on a new trilateral agreement – reining in the North American Free Trade Agreement (NAFTA) for the United States-Mexico-Canada Agreement (USMCA). The deal still has to be approved

by Congress, with action on that likely to come in 2019 following November’s mid-term elections.

Should Democrats make significant gains in either the House or Senate, it will be even more difficult for the administration to win over support for USMCA. Not only that, a bluer Congress may act to limit the administration’s tariff authority, which would be a major loss heading towards the presidential election.

Nonetheless, if trade relations continue to improve with key trade allies, international pressure will begin to weigh on China to address its unfair trade practices, potentially bringing an end to this wild ride. The bigger question is, will it be too late as the damage will already have been done?

In the short-term, with the holiday season coming up, consumers can certainly expect price increases on electronics, toys, office products, office furniture and home appliances.

November 2018

INEVITABLE PRICE INCREASES Cindy Ciaccio, VP and COO of New York-based dealer The Weeks Lerman Group (TWLG), says: “We have been absolutely inundated with announcements of impending price increases from a litany of manufacturers due to the tariff increases, including the likes of Fellowes, OFM, Acme United, Flexsteel/ DMI, Victor and Boss to name a few. Some absorbed the initial 10% and said they will raise prices in January when the 25% kicks in, but many have done so already or will be raising them over the course of the next couple of months.

“As a broad statement, I would say without hesitation that the category for TWLG which will be most affected is our ad specialties and promotions segment where the majority of products are imported from China.”

Talking to OPI recently, TriMega President Mike Maggio adds: “Causing additional concern for us is that it appears we are entering one of the more intensive inflationary periods the industry has experienced in recent memory. We now have over 30 key manufacturers with confirmed price increases set for December 2018 or January 2019 and are still receiving notices. The reasons for the increases are consistent around raw material, labour and distribution.”

Passing on increases to end consumers further down the chain is tricky, particularly on larger

It all began in February, with the release of the Department of Commerce’s findings that imports of steel and aluminium “threaten to impair national security”.

Shortly after, President Trump announced the imposition of a 25% and 10% tariff on steel and aluminium imports, respectively.

The move was met with criticism and threats of retaliation from across the globe. Key allies, including the European Union, Canada and Mexico, were given temporary exemptions as they continued to work towards common ground, though these ended in July. China, on the other hand, was granted no such exemption and responded with a 25% tariff of its own – on US wine, pork and industrial goods.

Around the same time, the United States Trade Representative (USTR) issued a report alleging China’s use of “unfair trade practices”, including forced technology transfers and intellectual property theft. Again, President Trump threatened more tariffs, this time on $150 billion worth of Chinese goods, to which Beijing again responded in kind.

Temporarily and following lengthy negotiations, there was a period of relative calm. Then came a complete breakdown and what previously had been mere threats became reality. On 6 July, the US began collecting a 25% duty on $34 billion in Chinese televisions, tablets and other electronics. Within 24 hours, China imposed similar tariffs on American agricultural goods, pork and electric vehicles.

HOT TOPIC China Trade War

THE WILD TARIFF RIDE OF 2018

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China Trade War HOT TOPIC

contracts where prices are typically guaranteed for a number of years, but by and large OPI’s enquiries were met with a stoical sense of acceptance and resignation. Ciaccio also refers to caveats in contracts that allow for price rises if proof is available for increases of more than 4% further up the supply chain.

“It doesn’t mean it will be an easy sell, but at least we can request increases under those circumstances,” she explains. “But more generally speaking, on items where we receive increases, our sales people will look to raise prices to ‘non-contract’ customers.”

As mentioned before, existing inventory can potentially soften the blow a little, but that’s merely a very short-term outlook. In the long run, the impact of the tariffs is twofold, as one manufacturer who wishes to remain anonymous, says: “Firstly, costs will rise, both for some of our raw materials and for some purchased finished goods we source from China.

We are not as dependent as many others, however, as we still have the largest proportion of our items manufactured domestically.

“Secondly, we are seeing the rising costs starting to cause some disruption as retailers and resellers are reconsidering their sourcing strategies. Where domestic alternatives are available, customers are re-engaging on product categories where they had moved volumes to China.”

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LONG-TERM BENEFIT? The point of domestic alternatives is a crucial one. Is there actually a potential upside to the situation? Put very simplistically, the overall idea of President Trump was one of protectionism of US industry. Are these tariffs likely to achieve that and is there a long-term benefit in sight?

As TWLG’s Ciaccio asserts: “From our perspective, adopting a local, single-source provider tagline has typically gone hand in hand with selling ‘domestically’

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produced goods. We've never bought imported paper, for example, so there is potential for these tariffs to make us more competitive with some of the other operators in the paper category.”

As a broad sweeping statement, however, while the tariffs and surrounding economic debates that are being held undoubtedly play a part in reducing the trade deficit between China and the US, the notion of these actions resulting in more domestic manufacturing is regarded as somewhat misguided.

In some OP categories the boat has long since sailed and the options for in-sourcing manufacturing back into the US is little more than a pipe dream As one vendor says: “In some OP categories the boat has long since sailed and the options for in-sourcing manufacturing back into the US is little more than a pipe dream: neither the capacity nor capabilities exist. Other segments may enjoy some short-term revival. Those with domestic capabilities may see some opportunities to slow the movement to China outsourcing and in some cases could see some volumes return from Chinese manufacturers.

That said, in many commodity categories prices may still be unsustainable in the long term, especially with regards to private label items."

ACCO Brands CEO Boris Elisman is equally outspoken in this assessment of the situation: “While we are a large US manufacturer and strongly believe in having local manufacturing capabilities in the countries where we operate, we do not agree that increasing tariffs will benefit our company or the US office products industry as a whole. In the

source or shift production to other countries, such as Pakistan, Vietnam, Colombia or the Czech Republic.

COMPLEX SOLUTIONS NEEDED As TriMega’s Maggio concludes: “The imbalance in trade with countries like China is real, but the solutions are more complicated than slapping on a tariff and hoping the other side backs down. No businessperson worth their salt would disagree with the premise that playing fields need to be as equal as possible for all countries. And I agree that more oftentimes than not, we are the ones struggling against unfair trade practices.

“However, the fact is many Americans have changed how they think about imported goods and services. Because they are not as sensitive to that issue as they once were, domestic capacity for many of the products we import is non-existent. Other countries know that, and when you add in the fact that their leaders are not tied to a two or four-year election cycle, you end up playing a dangerous game of chicken. Usually resulting in hurting folks that are least able to afford it.

“I hope we find a way to turn down the rhetoric and make progress in areas that are important like intellectual property, technology and farming.”

HOT TOPIC China Trade War

near term, tariffs will raise prices for US consumers which will reduce demand for our products. When applied to every other industry, this may have an impact on the overall US economy. In the long term, if tariffs are sustained, the industry’s supply chain for the sorts of products manufactured in China will shift to other low-cost manufacturing locations, which are unlikely to be in the US.” This latter point of switching to other locations outside the US is also raised by Acme United’s CEO Walter Johnsen: “Many of our products are covered by the tariffs, particularly school products such as rulers, compasses, maths sets, protractors, etc.

We are also the biggest scissor manufacturer in the world and we will not be bringing back production to the US. For a product that typically retails for under $10, the cost of domestic steel, labour, packaging and so on is prohibitive. We used to have factories in the US and I closed them, and I know how expensive it would be to bring them back and make that investment – even a 25% tariff won't change that.”

Like Elisman and ACCO Brands, the more likely scenario for Acme would be to

November 2018 29

CATEGORY UPDATE

Adjacent business supplies sectors are becoming increasingly important within the sales mix of resellers, and the safety, PPE and MRO categories are no exception – by Michelle Sturman

T

www.opi.net

he safety, personal protection equipment (PPE) and maintenance, repair and operations (MRO) categories cover a vast array of diverse products for a wide range of industries and businesses. Fuelling their growth is the increasing importance of health and safety in the workplace (whatever that may constitute).

Some might say that the huge increase in regulations equates to “health and safety gone mad”, but that’s certainly good news for those involved in the supply of relevant products. As Geoffrey Betts, Managing Director of UK-based OP manufacturer Stewart Superior points out: “In the UK, we have signs that say ‘Please read the signs’!”

He adds that designs of health and safety signs have remained static for a number of years, and the sector could benefit from an overhaul. “Fortunately, when it comes to refurbs, normally all signs are removed, and new ones are purchased, so the sector is flat or slightly growing.”

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GROWTH SPURT According to Kimberly-Clark Professional (KCP), the market for safety and PPE products globally is enjoying growth of around 5%, as firms invest time and resources into building a robust workplace safety culture. “A rise in safety regulations and enforcement in developing markets is a large driver along with the need for specialty, high-comfort products that work seamlessly with the body. This has fuelled increased investment in innovation from the KleenGuard brand in the safety and PPE categories,” says Dave Matela, KCP North America General Manager Industrial Business.

In the US, factors influencing growth include an expansion in health and safety standards by organisation, state and federal laws; liability concerns; increased availability of full protection solutions; and enhanced designs that improve worker comfort.

“There’s been a persistent focus by businesses and regulatory bodies like the Occupational Health and Safety Act to prioritise worker safety via standards, preventative guidelines and employer initiatives. As a result, the industrial safety space continues to grow as more and more workers and worksites are required to satisfy these measures,” says Al Buczkowski, Marketing Communications Manager of Ergodyne.

In the UK, we have signs that say ‘Please read the signs’!

The US PPE market specifically is increasing in the mid-single digits, with gloves being the largest category, but eye protection and protective clothing the fastest growing. According to Acme United CEO Walter Johnsen, the company is currently setting records in the US and Europe. “In the US, 4% GDP growth and low unemployment has led to more workers in the workplace, which unfortunately results in more accidents, but also means an increase in the need for safety and first aid products,” he says.

Similar to the replacement of health and safety signs mentioned by Betts, expansion is being driven in the PPE category by quicker product replenishment rates. For global reseller Lyreco, the demand for

Safety/MRO/PPE CATEGORY UPDATE

compliance and safety products by customers prompted the strategic move to add the workplace safety sector to its mix. Today, says Arnaud Bouchez, Group Category Director for Industrial Products at Lyreco, the company is enjoying double-digit growth in the PPE sector, with hand and footwear protection being best-sellers, while workwear is also strong, followed by ‘above the neck’ products.

Lyreco is committed to the safety/PPE segment and is “very ambitious,” adds Bouchez. “The market is there and growing, and the initial excitement has now extended from the more mature countries where Lyreco has a presence, to new ones like Poland and Switzerland. We are also building up capabilities to provide a true omnichannel approach.”

For Australian office supplies retailer Officeworks, safety and PPE is part of its core range. The challenge, says General Manager Merchandise Toby Watson, is that other retailers solely focus on the safety category, thereby creating a market that continues to be very competitive within all sub-categories. “Opportunities for growth sit within PPE and first aid where we can utilise our B2B capacity,” he adds.

opi.net poll: Resellers… what is your biggest challenge selling safety/MRO/PPE products?

Connecting with the customer’s buyer Training reps in this category

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FOR THE BENEFIT OF EMPLOYEES It’s not just about access to products and coping with continuously changing legislative matters, however. Says KCP’s Matela: “There is a willingness to pay for solutions that offer employee comfort and enable them to do their job safely and with increased efficiencies. These include breathable materials that

33%

Sourcing the right products at the right price

19% 19%

Credibility in this product segment

All supply chain partners, including resellers, are now responsible for the compliance of the PPE being sold In Europe, the PPE market is driven by updated legislation – in April, the main PPE Directive was repealed by a new regulation (EU) 2016/425, which is aligned to the New Legislative Framework policy – that modifies the scope and risk categorisation of products. “Most importantly for the office supplies industry, it also clarifies the documentary obligations of economic operators, meaning that all supply chain partners, including resellers, are now responsible for the compliance of the PPE being sold,” says Rebecca Stallard, Marketing Director at UK wholesaler Spicers.

The amended legislation is designed to eliminate sub-standard products being sold, with the added dimension that it recognises the technical properties of PPE products. “With the recent updates to the PPE Directive, it is essential for all supply chain partners to be confident that quality PPE lines are being supplied,” she adds.

“For many small dealers, access to this market has been limited to the minimum order quantity requirements, inhibiting access to a wide product portfolio. Spicers has recently launched a range of over 6,000 new products in this area, and we are seeing excellent results through our proactive dealer base.”

10%

19%

Having sufficient product knowledge

provide a high degree of comfort, especially in full body apparel where there is a need for workers to stay cool and move freely without negatively impacting their protection or productivity. This has stimulated innovation in KleenGuard-branded safety solutions which are human-centric and designed around the employees’ needs.

“For example, we found the top two reasons workers don’t comply with safety eyewear is related to comfort and style. Leveraging consumer eyewear trends, we released the KleenGuard Maverick eye protection line – comfortable and stylish enough that no one would even know they are safety glasses.”

Stallard concurs, stating: “The UK PPE industry is driven by innovation and we see advances are generally being made by products becoming lighter, more comfortable and offering better protection or incorporating other technologies.”

Such is the size and scope of the safety/MRO/PPE sector that there is a myriad of sub-categories which lend themselves perfectly to being incorporated into the mix for OP dealers. One of those segments relates to blood and bodily fluids, with biohazard clean-up kits offered by Acme United’s Spill Magic (in the US) and Easy Absorb (in Europe). “As a sub-category,

Safety/MRO/PPE CATEGORY UPDATE

it is growing very quickly. Related to this are blood-clotting solutions designed to stem the flow of blood from wounds. We are seeing an interest in this around the world at all levels,” says Johnsen.

Research firm Frost & Sullivan expects that by 2030, the PPE competitive landscape will be very different, driven by innovation, disruptive business models and the emergence of smart wearable PPE, which would transform the workplace into a connected domain, enhancing worker safety and productivity. Ergodyne’s Buczkowski agrees with that outlook, adding: “Connectivity will give safety managers the ability to go from reactive to proactive. Products will go from inert to intelligent and connected, producing real-time data to and from workers related to the key safety categories of PPE and risk management, safety communications and worker engagement.”

The safety/PPE market is very sustainable with major replenishment opportunities

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INDUSTRIAL DEMAND Meanwhile, the global MRO market is expected to surpass $774 billion by 2020, according to research firm Technavio. In terms of geographical spread, APAC holds around 33% of the global market. The expansion of manufacturing in countries such as China, Malaysia and Japan will contribute to the growth of this region, while industrial production in India is expected to grow at a CAGR of around 14% through 2020.

Says Angad Singh, a procurement specialist for research on category spend intelligence at Technavio: “The suppliers in the market are using 3D printing to reduce the production cycle timelines and labour costs. The higher adoption of 3D printing technology will enable vendors to offer quick designs and to carry out changes in the internal features of products. For instance, MRO reseller Grainger has adopted 3D printing to reduce production costs of moulds and patterns.”

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Investment banking and financial advisory services firm Capstone Headwaters believes that in the US expected strong manufacturing and industrial growth will serve as a catalyst for MRO demand and growth during this year and beyond.

However, US President Trump’s decision to impose hefty import tariffs raises concerns for purchasers of steel and aluminium operating in the MRO industry, as raw material prices represent an appreciable element of the total cost of end products (see also ‘Face off’, page 26).

EXPERTISE REQUIRED While the aforementioned research bodes well for continued growth of the safety/MRO/PPE sector, resellers moving into the segment need to ensure that the requisite expertise is provided for customers. Lyreco, for example, has invested heavily in gaining knowledge and competencies to become an expert in the area – the reseller onboarded over 100 PPE experts and specialists from across Europe. “For our Industrial offering, expertise is a significant differentiator against the Amazons of this world, and we keep investing in our people to continue to drive the relevant specialist knowledge. This has been critical for us in terms of building up our credibility, as well as partnering with the right brands and preferred suppliers to help secure our compliance and increase our visibility in the market,” says Bouchez.

Lyreco is looking at workplace safety as a holistic service: “In other words,” explains Bouchez, “not just for individual protection, but providing business owners and managers with solutions to collectively secure safety and compliance, from traffic management and first aid to risk prevention products.”

Johnsen agrees that there is a necessity for a complete solution to be offered: “The safety/PPE market is very sustainable with major replenishment potential. OP dealers tend to stay away because they are uncomfortable with offering a medical sale. I would recommend them spending time with customers to see what they have in terms of safety and first aid equipment and products.”

The opportunities are out there and while there’s an inevitable learning curve, the rewards for resellers could be substantial (see also ‘Safety First’).

OPI spoke to Nick Lomax, VP of Facilities, Breakroom & Safety at US-based wholesaler SP Richards (SPR), along with Impact Products CEO Terry Neal and The Safety Zone General Manager Eric Helsel – both SPR subsidiaries – about the state of play in the safety/PPE arena.

OPI: What makes the safety/PPE market so attractive to SPR? Nick Lomax: SPR made its move in this category as it made sense for it to be the next product adjacency for our customers – much like jan/san years ago. It’s appealing because it’s an $8-$10 billion domestic end-user marketplace, and almost every business uses some kind of safety products, which equates to a growing market with huge replenishment opportunities.

OPI: What is primarily driving this growth?

NL: Companies are more cognisant of workplace regulation requirements and taking them more seriously. They are now ensuring the correct products are available in order to be compliant with the Occupational Health and Safety Act and other relevant legislation, which is ultimately driving consumption, plus it’s an untapped market for our independent dealer channel (IDC). If you contrast that with the continuing decline in the office products category, it paints a pretty good picture.

OPI: Dealers also need to contend with these safety and PPE regulations – does that make it hard to break into this market?

NL: From an IDC perspective, they often require more training, but I think it mostly boils down to a lack of confidence. The required technical knowledge makes them nervous and oftentimes this evolves into ‘if I don’t do this well, I’m going to upset my customers’.

Terry Neal: When we talk to OP dealers about safety, they do seem apprehensive as they don’t want customers to be in violation of any regulations. But there is a built-in advantage for them in that almost every facility has a safety manager or a safety committee whose duty it is to understand and deal with any regulations. This doesn’t exist in other categories such as jan/san and should help relieve any unease.

OPI: Are there any sub-categories that are doing particularly well?

Eric Helsel: More workers are wearing gloves and PPE than ever before, which is reflected in the sales figures. In 2015, on a global basis, the total gloves market reached $8.4 billion. This year, on a domestic basis, the disposable gloves space is expected to reach around $1 billion. Add durable gloves into the mix and it rises to $2.5 billion. The gloves segment used in food processing and the food service industry is growing year over year.

It’s appealing because it’s an $8-$10 billion domestic end-user marketplace TN: Nitrile gloves continue to gain market share as many end users understand the quality of this product. Tyvek alternatives are also gaining ground in the PPE arena.

OPI: What challenges are you coming up against in the safety/PPE market?

TN: Obstacles include government regulations, lack of product knowledge and, most recently, tariffs which have inflated the cost of some products.

EH: Last year, there were shortages in key categories due to pollution control measures enforced in China.

Prices went up over 35% and shipments from there were delayed by months. However, these have recently returned to normal lead times.

OPI: Talking about China and tariffs, has this affected the market?

EH: Yes. Several high-volume PPE items now have an added 10% tariff if they are made in China. These tariffs may increase to 25% on 1 January 2019.

November 2018

OPI: What safety/PPE resources and training do you offer to the IDC? NL: We take this pretty seriously and do our best through our business development managers, who are very well-trained on safety products. SPR has multiple learning platforms to better understand the safety category, such as live OnPoint training with the latest modules to launch in spring 2019. We also have the newly-launched OnPoint OnDemand, with new product training module additions coming soon, including safety products.

The 24/7 OnDemand access means dealers can train themselves in their own time.

CATEGORY UPDATE Safety/MRO/PPE

SAFETY FIRST

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CATEGORY UPDATE

There have been some major hurdles for the imaging supplies sector to overcome in the past year, but with adversity comes opportunity– by David Holes

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he global imaging supplies industry has seen a major shake-up in the past 12 months, with significant consolidation occurring, including HP Inc’s $1.05 billion acquisition of Samsung’s printing business. Analysts point to market saturation as the driving factor behind this and have voiced concerns regarding the future of the sector, with lack of competition a major worry in the industry.

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Acquisitions and partnerships enable businesses to combine deep industry knowledge and share resources to provide customers with value

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But not all share this negative viewpoint. At Canada-based printer software group PrintFleet, Global Marketing Manager Elise McFarlane points out: “Fewer competitors in this space don’t necessarily mean decreased innovation. Acquisitions and partnerships enable businesses to combine deep industry knowledge and share resources to provide customers with value – that is important to keep in mind as we move into 2019.”

In the UK, additional pressures on this category have come from challenging exchange rates and the demise and closure of retailers such as Maplin and

Staples. However, British franking machine cartridge remanufacturer Totalpost is seeing new potential as the country prepares to leave the European Union.

As Chairman David Hymers says: “We are bullish about Brexit. Things are already looking positive for us in non-EU markets such as the US, Canada and South Africa which augers well for the future. We are looking for further gains as we move forward with a more diverse, global outlook.”

NEW PRODUCTS But it’s not just new market prospects that are helping to mitigate sector headwinds. Innovative product and service ideas are having an impact too.

As Dan Wogan, Product Manager for Market Development, Business Imaging at Epson UK, explains: “As the market evolves, fresh opportunities arise. This year, we’ve announced our first ReadyInk partnership agreement through Network Group, which offers ‘360ink’ – a pay-as-you-go ink replenishment service to end users. Unlike subscription services such as HP’s Instant Ink you only pay for what you use. This development offers growth potential not just for Epson, but also for the channel partners and resellers that we work with. Consumers using this service will essentially never run out of ink again; when ink levels are low the printer initiates the process of ordering a new cartridge automatically.”

Hymers also mentions that Totalpost is currently working on a number of exciting technological developments, though he’s playing his cards close

MPS ON THE RISE FOR SMB SPACE On a related positive note, managed print services (MPS) in the past have seen the strongest uptake among larger organisations, but this is now growing quickly in the SMB space as well. A survey undertaken for Quocirca’s Print 2025 report indicates that 57% of European SMBs expect to adopt the ‘as-a-service’ model by 2025. Consequently, IBM IX Innovation Research estimates MPS will grow at a compound annual rate of 15% from 2017 to 2027.

Chris Marshall, Director of Business Printing & Solutions at Brother International Europe, says that this provides huge opportunities in the sector: “MPS is a top business priority for Brother and we have already seen a great deal of success here – particularly in the retail, healthcare and banking markets. In the four years ending March 2017, the number of our machines under contract across Europe grew by an average annual rate of 200%.”

(See also ‘MPS: Providing the solution to a problem’).

Security is absolutely mission-critical […] as the print environment has been identified as a point of vulnerability

November 2018

US-based Supplies Network, a wholesale distributor of IT consumables, regards the growth in the MPS programmes it offers as interrelated with one of the major issues impacting businesses today.

As Director of Marketing Bill Erpelding explains: “Security is absolutely mission-critical and is now a key component of many OEMs’ value proposition as the print environment has been identified as a point of vulnerability. As IT decision-makers seek to secure their entire ecosystem, deploying managed print makes a lot of sense as this often includes refreshing network-connected devices with modern technology that helps minimise security risk.

“Additional enhancements in productivity and green initiatives are easily added to the mix, so when you combine all of these benefits – along with simplifying procurement, minimising downtime and reducing overheads – it’s easy to understand why MPS is attractive for all in the supply chain.”

The MPS space continues to be both an opportunity and a challenge for some. Many IT resellers recognise the potential value in monitoring and managing their customers’ print devices, but they lack the resources to do so, according to McFarlane: “Their expertise lies in other devices like servers, telecoms, desktops, etc, which means vendors that offer remote monitoring tools like PrintFleet and FMAudit are in a unique position to provide them with the tools and resources they need to break into print management and help them close the knowledge gap.”

TRENDS AND TECHNOLOGY One of the key trends observed across the OP industry is a focus on sustainability and the imaging supplies sector is playing its part, according to Wogan: “Sustainability underpins everything that we do as a business and we’re committed to helping consumers and businesses reduce their environmental footprints. Our research shows that over a period of four years companies could save up to £157 million ($205 million) on their energy bill and reduce CO2 emissions in Europe by 333,041 tonnes just by choosing Epson inkjet printing technology rather than laser printers. As such, we believe that the use of inkjet technology will continue to grow and we’re investing £165 million into our PrecisionCore technology – which is at the heart of inkjet printing – over the next three years.”

Brother has also unveiled a new concept designed to save costs. Known as ‘All in box’, it – like MPS – is aimed at removing the pain of regular ink or toner procurement. However, in this instance it’s done by providing three years’ worth of ink or toner and a three-year warranty in the box, along with the device itself. This, according to the company, can generate cost savings of up to 30% compared with buying everything separately. All customers are encouraged to return their supplies to Brother through a collect-and-recycle scheme that helps create a circular supply route and reduce the use of raw materials.

Technological trends like machine learning and artificial intelligence are increasingly being used in the consumer industry, but they also have a place in the print and imaging space. McFarlane explains: “Print devices already collect all the necessary information to facilitate true automation within the industry, but remote monitoring tools have now dramatically changed the dynamic, enabling suppliers to move from a reactive to a proactive model and turn that data into actionable information. Features like PrintFleet’s ‘Estimated Days to Empty (EDTE)’ enable businesses to provide predictive, just-in-time supplies using data

CATEGORY UPDATE Imaging Supplies/MPS/Print

to his chest: “All I can say is that they will allow us much more flexibility regarding the use of harvested empty cartridges and reduce the amount of wastage.

Previously unusable empties that did not pass quality controls can now be made to do so.”

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Imaging Supplies/MPS/Print CATEGORY UPDATE

on toner level and device history. We’ve seen the first iterations of predictive analytics in MPS, but there is certainly room to expand on these applications and make them more widely available for customers.”

COUNTERING THE COUNTERFEITERS Cloning and counterfeiting remain one of the print industry’s biggest challenges. “OEMs and remanufacturers now have a common enemy,” asserts Supplies Network’s Erpelding. “New-build compatibles, also known as clones, are having a wide range of negative effects, from patent infringement to detrimental impacts on the environment. Clones are putting increased pricing pressures on OEM and remanufactured products and creating a huge divide between transactional and contractual selling models.

If resellers don’t sell in some form of contractual fashion, they have greater exposure to these pricing pressures, especially in major e-commerce channels where clones are prevalent.”

But legitimate operators are fighting back, with Epson Europe saying it has made great strides over the past year towards combatting counterfeiting across the EMEA region. “We’ve introduced new

technology measures including holographic packaging to assist law enforcement officers identify fake Epson supplies,” says Wogan. “Through collaboration with other brand owners, we’ve been working with government officials and have seized a substantial amount of counterfeit supplies from fraudulent organisations. It’s important that we have a joined-up approach across all our regional offices, as counterfeiting is a global phenomenon where criminals pay no regard to borders. We also have an in-house team dedicated to fighting online infringement and we work with various ISPs to ensure that sellers are educated, and consumers are not deceived when making online purchases.”

However, as Allen Westerfield, President of the Imaging Supplies Coalition – a non-profit trade association for OEMs of consumable imaging supplies and equipment – is keen to point out, there is only so far that the industry can go without help from consumers themselves. “It’s important the public understands that, beyond the economic issues for legitimate operators, illegal trade of this nature often helps fund terrorist and other criminal activities. Ultimately, there would be no trade in counterfeit goods if there was no demand.”

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MPS: PROVIDING THE SOLUTION TO A PROBLEM

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Day Lewis is one of the largest independent pharmacy chains in Europe, with 2,800 staff and more than 300 pharmacies located across the UK. Following the introduction of the UK government’s electronic prescriptions service (EPS2) in 2012, the volume of printing required in its pharmacies increased dramatically, to around 5,000 per month per store on average. As a result, the business needed to review its whole print management programme. Whereas it had previously managed this service in house, with just one printer in each pharmacy, a more robust solution was needed to ensure that all of the devices across the network were operating reliably and efficiently.

Following a tender process, in 2013 Day Lewis appointed Brother to implement an MPS solution and take over the management of all aspects of its printing requirements, providing hardware, consumables and full support services. Over a period of about six weeks, Brother’s installation team deployed 360 printers in pharmacies across the network and gave staff hands-on training to ensure a smooth transition.

Since its inception, the service has continued to evolve to mirror Day Lewis’ growth as a business – today the company has over 1,000 Brother printers in operation. The hardware used has also advanced – initially mono laser network printers were used, but Brother has since moved to newer wireless models, with fully-automated back-up services provided.

It tracks the status of each printer in the network

remotely and automatically sends out consumables and maintenance support engineers as and when needed.

Day Lewis says the transition to a managed service has brought significant results, with a 99% uptime for its printers during the past five years. With almost 50 million pages printed and 4,500 toner cartridges replaced, the pharmacy chain has seen a 20% saving on print costs, with more than £100,000 ($131,000) saved per year by removing the need for an internal support function.

Epson’s pay-as-you-go ink replenishment service

EVENT

New format GREEN LIGHT PREVIEW

GREEN LIGHT U

K office products wholesaler VOW is changing the format of its annual Green Light event to make it an exhibition and conference specifically dedicated to its reseller partners’ sales teams.

Scheduled to be held on 6 December 2018, once again at the Hilton Metropole Hotel in Birmingham, training is high on the agenda, both as part of the exhibition as well as during seminars and workshops, specific details of which are yet to be announced.

VOW Marketing Director Helen Wade told OPI: “The aim of Green Light this year is to bring the supply chain closer together, and to actually connect the guys that are out on the road selling with the suppliers.”

The way this will be achieved is through an interactive floorplan that will comprise the exhibition, live product demonstrations and inspiring speakers delivering sales-related seminars all in one space. Exhibitors are also being encouraged to offer sales advice at their booths, providing extra information for sales representatives, for example, on how to best market a product to customers.

MARK THE DATE

6 December 2018, Hilton Metropole Hotel, Birmingham, UK.

TAKEAWAY KNOWLEDGE Themed ‘Make Monday Matter’, Wade adds that VOW representatives from different product categories will be on hand during Green Light to show delegates how best to sell a product or solution, so that they can leave the conference “full of knowledge and ready to make a change on Monday morning”.

At the time of writing, 400 delegates had confirmed attendance, already a considerable increase on last year, while 70 exhibitors are lined up to display their wares, including ACCO Brands, 3M, ExaClair, BIC, Newell Brands and Fellowes. In addition to exhibitors in the more traditional categories, innovations in segments such as facilities supplies, furniture and technology will feature prominently, with a view to showcasing new products, solutions and services that offer the best potential for resellers in 2019.

This will be the first Green Light that is held as a day-event only, without a gala dinner or awards ceremony in the evening. There also won’t be the customary business update from VOW or indeed any keynote speeches. This, stresses Wade, is to further reinforce the focus of the event as being “a sales conference designed for sales people”.

November 2018 41

EVENT

EPIC finale EPIC REVIEW

S

ix years ago, US dealer groups Independent Stationers (IS) and TriMega confounded industry expectations by joining forces to produce a united event for their members. The result was EPIC, a three-day affair that over the years has offered member meetings, education seminars, sales symposiums, networking opportunities, charity fundraising and, of course, golf.

This year’s slightly pared down event – no golf, among other things – saw the end of the EPIC experiment. That did not, however, prevent a good turnout in New Orleans, Louisiana, last month.

The show’s chosen theme of ‘Disrupt Ordinary’ was certainly apt given the current state of the US independent dealer channel. Indeed, as IS CEO Mike Gentile said: “We couldn’t be more timely, as the industry adapts to some of the most profound disruption and change we have experienced.”

With the current state of disruption, [dealers] are not the only ones feeling some sense of angst and uncertainty In the welcome session, Gentile and his TriMega counterpart Mike Maggio highlighted the dealer buying spree by the national operators, consolidation in the vendor channel, the proliferation of private label products threatening brands, increased online competition and, of course, uncertainty in the wholesale channel as the prime motivating forces behind the disruption we’re seeing.

It is vital for independent dealers to control their own destiny, they claimed, and to take advantage of the opportunities that always come from disruption.

“It is more important than ever now that we all work together,” insisted Maggio, before seamlessly segueing into news that the two buying groups had struck a deal with SP Richards (SPR) which would allow manufacturers to provide content on SPR’s

Etilize platform for all dealers to use, regardless of their choice of first-call wholesaler.

The opening session closed with both Gentile and Maggio asserting their backing of a much talked about industry event in 2020.

The two groups then split to attend their individual meetings, with IS announcing its rebrand as the Independent Suppliers Group, before an afternoon of joint seminars that were open to all attendees. Among the learning choices on offer were an online marketing panel discussion, a presentation and workshop on instigating Buy Local campaigns and a repeat of one of the most popular seminars at this year’s SPR ABC event – Amazon: The Invisible Competitor – presented

by NOPA CEO Mike Tucker.

In the evening, EPIC delegates were treated to a trip to the famous Mardi Gras World Float Den – an enormous 80,000 sq ft (8,000 sq m) space, full of huge, colourful floats and larger-than-life props – followed by a lavish dinner at the adjacent Grand Oaks Mansion.

FUTURE COLLABORATION PLANNED The trade show the next day was well attended, with vendors and dealers happy with the level of business being done. It was a fitting end to the EPIC era, with both Maggio and Gentile saying that there is every likelihood the two groups would work together more closely in the future.

“I’m extremely happy with the event, from start to finish,” said Maggio. “We had a lot of energy and a lot of participation by dealers and suppliers. It’s clear that everybody thought it was a very productive couple of days. There are conversations going on regarding working more closely together. I think Mike and I work well together and hopefully he feels the same way.”

“It’s a bit bittersweet, because we are not doing it again next year,” added Gentile. “But it’s always great for dealers to get together and network. With the current state of disruption, they are not the only ones feeling some sense of angst and uncertainty.

Where there are ways for us to work together more synergistically, we will definitely do it.”

November 2018 43

5 MINUTES WITH...

Nicholas Alvarez

CAREER Q&A Describe your current job.

Director of Marketing for The Weeks Lerman Group.

I wear many hats in that role – from content creation to brand management, event planning to photography. I manage relationships with both our clients and an independent sales force. I stay busy and love what I do.

What makes you happy?

Music, travelling and spending time with my loved ones. If I can combine all three, that’s perfection!

If you were President, what would be the first law you pass?

I’d have a team start immediately on a plan to eliminate income tax.

It would be a fiscally responsible implementation scheme for a new fair system that would tax what you spend, not what you earn.

What secret skill do you possess?

Not many people know my special skill is creative writing. I may or may not have a secret identity online that I use whenever I feel like telling a story.

What do you do in your spare time?

I like writing and taking pictures of nature. I also love to go bowling, play poker, shoot some pool or play a video game. I’m a gamer at heart!

Describe yourself in one sentence.

I’m a light-hearted but opinionated jokester who lacks patience, but has an abundance of empathy and often spends too much time inside of his own head.

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If you could trade places with someone for a day, who would it be?

I’d switch places with LeBron James. I love the NBA and playing basketball, although I am incredibly average.

However, I am pretty good in NBA 2K19! But seriously, I think that being able to dominate on the biggest stage in the game I love so much would be a dream come true.

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Your favourite app?

Instagram. It allows me to connect with my friends and family without the constant ‘in your face’ of Facebook.

It tells you a lot about a person as they can only share through pictures. It is also my favourite app because I enjoy taking photos and sharing them. And of course, I wouldn’t be a true marketing professional without also mentioning the benefits of social media marketing.

What would be your theme song?

Camera Thief by Atmosphere. The lyrics are quite simple, but their meaning is very complex and the messages within resonate with me. Atmosphere is a favourite of mine.

Your favourite gadget?

My iPhone X. It’s actually sad how much I depend on this thing.

What’s your favourite food?

My Aunt Gina’s pasta or my Grandma Rita’s chicken cutlets.

What was your last online search?

My last personal search was for the phone number and opening hours of my local bicycle shop. I am looking to start riding as I used to love it as a kid, plus it’s great exercise.

What is humankind’s greatest invention?

The internet. We are still in its infancy, so it’s difficult to really see its true effect on humanity, but I believe it has already surpassed inventions like the wheel and the electric battery in terms of how much it’s changed everyday life.

Where would you most like to visit?

Barcelona. For many rea sons: I am a fan of the Bar celona football team, I have ancestry in Spain and, of course, it is one of the most beautiful cities in the wo rld. Plus, I’d love the foo d there.

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

I can’t picture myself working in a different industry. I love marketing and it has always fascinated me. One day though, it would be nice to have my own business – perhaps a restaurant.

The industry figure you most admire?

Weeks Lerman CEO Sid Lerman. I like the idea of a family-owned and operated business in today’s marketplace. Sid does this with noble grace and compassion.

His philanthropic nature trickles down to the rest of the employees and we are quite active within the community as a company.

I have developed great respect for this man in my time here and hope to continue to learn from him.

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

I’d get back to the art of the relationship with a focus on customer service and earning business through good values.

Naïve, I know!

What personal item do you have on your desk?

I have my Weeks Lerman fidget spinner.

It was the first branded promotional item I added to our catalogue as a new member of the team.

FINAL WORD

No trade war, but

WAR ON FREE TRADE

E

www.opi.net

lsewhere in this issue of OPI, there’s an article on the trade war with China and what the implementation of considerable tariffs on products imported from China means for our industry. Quite a lot in my opinion, but instead of getting involved in that particular conversation, I would like to highlight in this column why China has been such a compelling destination for US – global even – companies for many years and why imposing tit-for-tat tariffs is not the answer.

The decision to buy from Chinese suppliers is made for business reasons. The most obvious one is lower cost. China has the advantage of lower labour costs, but also substantially reduced costs in other areas.

Taxes are lower; subsidised basic raw materials like steel, aluminium and plastic resin are cheaper than free market equivalents. Real estate is lower. Even energy is less expensive.

Other factors decrease overall costs: the flexibility of Chinese enterprise, the fast turnaround of samples, the shorter lead times and lower cost of investment factors like tooling make for easier, less risky decisions.

46

THE FEAR FACTOR Over the course of my career, I participated in numerous meetings when decisions were made to ‘switch to China’. They all involved a lot of analysis, crunching the numbers, impact and sensitivity studies, risk assessment, and the fundamental question of ‘make or buy’. Ultimately, the driver to make that switch was either greed or fear. The former is aptly illustrated by all of the above cost reasons.

And then there’s the fear factor. In one case I’m familiar with, a US superstore alerted its US manufacturer partner to an alternative to the vendor’s successful and growing domestic product. The new competitor worked with an office, a warehouse and a phone number. The US vendor had a complete manufacturing infrastructure, marketers and engineers, IT systems – all meaning significant, fixed overheads.

The threat was enough. Fear of losing the business, losing placement and becoming less significant pushed the decision to close domestic manufacturing, cut the overheads and move to China.

A feeling of inevitability, of no other choice.

Another example is private label. A manufacturer with years invested in a stellar brand was pushed by a major direct marketer to supply essentially the same product line in private label garb, chiefly to boost its own brand and margins. Faced with competition, the manufacturer blinked.

As US businesses grew confident in Chinese supply, other advantages became apparent.

Chinese factories provided new leverage – raw material purchases, components, subcontractors; things like insurance, product and packaging

design, and of course new product development. This leverage impacted the bargaining power of US labour, not just in manufacturing, but in most unskilled and semi-skilled categories.

US businesses benefit greatly from foreign producers bearing the burden of manufacturing.

Addressing the displacement that exists requires adaptation, reinvention and education, and training – not tariffs and protection.

A worrying aspect, particularly in the OP industry, is the decline of enterprise by manufacturers. If you no longer have engineers, R&D and a network of suppliers, how do you invest in a new product line or new technology at home? It’s been too easy to go to China. Business views the country as good for growth and profits, and economists expect it to reach a point where wages would rise to those of its competitors, creating a huge base of affluent consumers for US and European goods.

Doug Ramsdale, Managing Partner, Ramsdale & Company

The idea that the US is in a war, being ripped off and losing, is false NOT PLAYING FAIR China is using its winning chips to cement its position as a global power. But it’s not playing fair.

Where the US and the West have real grievances is China’s ability as a centralised state to orchestrate factors that we usually leave to companies. One example is the use of state-owned factories to supply below-cost raw material.

I ran a US factory that employed very little labour – it was fully automated from the receipt of steel coils through to robotised packing of the end product.

We couldn’t compete. Chinese competitors offered prices below our cost and sourced subsidised steel from state-owned mills. The Federal Trade Commission enacted anti-dumping measures without resorting to a trade war.

The idea that the US is in a war, being ripped off and losing, is false. Measured by our prosperity, Special Issue employment and the value of our currency, we HEALTH & are not losing. WELL-BEING But imposing tariffs – nothing more than big taxes on buyers essentially – creates uncertainty and sows the seeds of the next recession. Instead, the focus should be on collaboration, using rules that have been in place for decades and which underpin global security and prosperity. Trade should be free to provide all the things we need to live our lives.

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