US Office Products Annual Review 2011

US Office Products

2011 Annual Review

Neil Austrian on public sector audits p12 Government contracts - who’s got them? p18

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US Office Products Industry Annual Review 2011 | Contents

Contents 12

5 Editor’s comment 6 The year that was

In a month-by-month review of the past year in office products, we look at some of the highlights of 2011

12 Austrian on audits

In part two of OPI’s Big Interview with Neil Austrian, the Office Depot CEO answers questions about public sector audits, the role of Steve Schmidt and his plans to grow the company

18 Extending the runway

Andy Braithwaite takes a look at the rate at which independent dealers are making inroads into the big-boxdominated government business

24 Wholesale exchanges

The two major wholesalers both held successful events in 2011 and brought out several programmes, and more is in store for the coming year

30

28 Still big as they come?

It’s been a shaky year for the power channel, with even giant Staples feeling the effects of an uncertain economy, and increased competition certainly hasn’t helped...

30 Alternative remedies

Kmart, Walmart, Target, Best Buy, Walgreens, Amazon, eBay – competitors are moving in on office products suppliers from all sides, so how did the back-to-school season pan out?

36 Tech on track

New products and offerings are helping dealers feel increasingly well-armed; here we name a few of the best

40 Three’s a crowd

OPI takes a closer look at how three of the major product categories have fared in 2011: furniture, jan/san and core office products

46 Show of the year

It was a night to remember, as this year’s winners of the North American Office Products Awards 2011 were announced during SP Richards’ ABC in Las Vegas

46

49 Questions, questions

Felicity Francis has a few thoughts about what the coming year might reveal; will any questions be answered? www.opi.net/USAnnualReview2011

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Editorial Editor Felicity Francis

+44 (0)20 7841 2946 felicity.francis@opi.net

Features Editor Heike Dieckmann

+44 (0)20 7841 2944 heike.dieckmann@opi.net

Editor’s comment

News Editor Andy Braithwaite

+33 (0)4 32 62 71 07 andy.braithwaite@opi.net

Editorial Assistant Saqib Shah

+44 (0)20 7841 2950 saqib.shah@opi.net

A year of ups and downs

Sales and Marketing

There is a good reason why the iconic image of Uncle Sam graces the cover of this year’s US Office Products Industry Annual Review. As a recognised national personification of the American government, he ties in with one of the main themes of this special publication – government contracts.

This has remained a strong element of the ongoing battle between the independents and the big boxes throughout 2011, as Andy Braithwaite discusses on page 18.

Similarly, we hope that adopting, and adapting, the famous tagline of Obama’s during his election campaign, ‘yes we can’, will inspire in our readers a sense of hope and a celebration of the achievements of the past year. It’s not been easy, given rising unemployment figures and increasingly cut budgets, but many of you have achieved great things.

Take software providers, for example. They never fail to bring out new offerings each year to try to help independent dealers compete with bigger rivals on an equal footing (see ‘Tech on track’ on page 36). More and more resellers are coming to the conclusion that top-notch technology is where the key to prosperity lies. Whether they’re right or not – and I do think that a firm grasp of a good website and excellent business processes are key to success – it won’t hurt.

Similarly, the two wholesalers have not only held excellent dealer conferences, but have further developed programmes and offerings to help their dealers. Like attentive mother hens, they watch over their dealers with concern and advice during these tricky times.

Our interview with Neil Austrian about government contracts (see ‘Austrian on audits’ on page 12) reveals the CEO’s belief that it’s time to move on; to work through past mistakes and look to the future. Perhaps generating this apparent optimism is Office Depot’s achievement of the year.

It’s always good to look back over what we’ve learned and what mistakes we made, and this publication hopes to take a broad overview. Planning for the year ahead won’t be easy – the stability of three years ago is still noticeably absent – but reminisce, reflect and ponder over these pages and you might generate some ideas.

Felicity Francis, Editor

VP – Continental Europe, Middle East and Africa Ewan Dickson

+44 (0)20 7841 2954 ewan.dickson@opi.net

VP – North America and UK Chris Turness +44 (0)20 7841 2953 chris.turness@opi.net

VP – Asia Tony Yao

+86 186 021 29588 tony.yao@opi.net

Marketing and Database Executive India Pride

+44 (0)20 7841 2959 india.pride@opi.net

Business Development Executive Stephen Dias

+44 (0)20 7841 2952 stephen.dias@opi.net

Events Events Manager Lisa Haywood

+44 (0)20 7841 2957 lisa.haywood@opi.net

Production and Finance Studio Manager Adam Morris

+44 (0)20 7841 2943 adam.morris@opi.net

Designer Andy Peat

andy@andypeatdesign.co.uk

Operations Manager Nicky Coulson

+44 (0)20 7841 2944 nicky.coulson@opi.net

Accountant Charles Edwards

+44 (0)20 7841 2956 charles.edwards@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 OPI is printed in the UK by This publication is printed on Satimat Silk which is produced on pulp manufactured wood obtained from recognised sustainable forests and at an FSC accredited mill. It is polywrapped in recycleable plastic that will biodegrade within six months. The carrier sheet is also made of recycled paper.

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OPI magazine (ISSN: 1360-8460) is published monthly by Office Products International Limited and distributed in the USA by SPDSW, 95 Aberdeen Road, Emigsville, PA 17318. Periodicals postage paid at Emigsville PA. POSTMASTER: send address changes to OPI PO Box 437, Emigsville PA 17318-0437.

No part of this magazine may be reproduced, copied, stored in an electronic retrieval system or transmitted save with written permission or in accordance with provision of the copyright designs and patents act of 1988. Stringent efforts have been made by Office Products International to ensure accuracy. However, due principally to the fact that data cannot always be verified, it is possible that some errors or omissions may occur.

Office Products International cannot accept responsibility for such errors or omissions. Office Products International accepts no responsibility for comments made by contributing authors or interviewees that may offend.

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The year that was November 2010 US industry icon Howard Brown and his son Michael, who had returned to the office products scene in May with the creation of HiTouch Business Services, propelled themselves to the top of the independent dealer charts after swooping for $130 million Tennessee reseller MyOfficeProducts (MYOP).

One big change to the MYOP business is a transition from its stockless model to a stocking model that the Browns favoured during their time at Allied, a move requiring major infrastructure investments.

December 2010 The government contracts issue was still grabbing the headlines as the holiday season approached. San Diego County sensationally cancelled its bid for the new National IPA cooperative contract, only for National IPA to reveal days later that it had agreed to piggyback onto Office Depot’s Florida state contract.

That agreement was not without controversy, however. A new off-contract product pricing amendment to the Florida contract appeared to give Office Depot a free hand to set pricing on non-core items.

Staples – which had jointly been awarded the Florida contract – revealed that it had refused to sign a

January 2011 As Independent Stationers began the year as the holder of the US Communities contract, the dealer group received another boost for its national accounts programme after agreeing a three-year deal in the healthcare vertical with the CHAMPS purchasing organisation.

Rumours resurfaced about a possible merger between Office Depot and OfficeMax after the South Florida Business Journal speculated that Depot could be hearing “wedding bells”.

A Los Angeles jury unanimously sided with Accentra, maker of the PaperPro stapler, in its patent infringement case against Staples.

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US Office Products Industry Annual Review 2011

Mergers, acquisitions, appointments and new structures; the past year in office products has thrown up some interesting developments Staples’ third quarter results showed that it was gaining share from its big-box rivals, its delivery business posting swings of 6% and 5% on those of Depot and ‘Max respectively.

CEO Ron Sargent said that things were “heating up” in the government contract business ahead of the US Communities contract switch to Independent Stationers in January.

On the M&A front, MWV announced that it had agreed to sell its EPG envelope manufacturing business – producing around 25 billion envelopes a year – to Quality Park owner Cenveo. Katun acquired the toner cartridge business of struggling aftermarket manufacturer Media Sciences International (MSI) and agreed to be the exclusive distributor of its solid ink sticks – a move which eventually led to MSI being wound down. similar pricing amendment and told OPI that it found the situation “distressing”. NOPA President Chris Bates called the amendment “a major step backward”.

In California, the City of San Francisco and Office Depot reached an agreement in their long-running dispute over alleged overcharging by the supplier. Depot agreed to a $4.25 million cash and credit settlement in what it described as “a reasonable compromise”.

On the vendor front, Fellowes announced it had filed a patent infringement lawsuit against ACCO over shredder technology. ACCO said it would “vigorously defend” the allegations.

Meanwhile, ACCO promoted Boris Elisman to COO with full responsibility for the sales, marketing and operations of all the company’s businesses and products worldwide.

Accentra’s suit alleged that Staples’ OneTouch line of staplers infringed on three patents Accentra held for its PaperPro staplers. The jury agreed that Staples had “wilfully” infringed on Accentra’s patents, but the office supplier said it would appeal.

United Stationers said it was cutting 150 jobs in a move to save the company between $4-5 million a year. In what was described as a “focused workforce realignment”, United said the reduction would come from a voluntary early retirement programme.

There was sad news for the industry after well-known independent dealer figure Bob Rosa was tragically killed in a car accident. Rosa had run the family dealership in Indiana for many years before retiring in 2006, but was still active in a number of civic and charitable organisations.

US Office Products Industry Annual Review 2011 | Year in review

February 2011 All eyes were on this month’s quarterly results, especially for an indication of what US Communities customers were doing. Office Depot stated that it had retained about 85% of its former US Communities business, a figure that it was to maintain throughout the year.

School Specialty, Depot’s rival supplier on its US Communities school supplies contract, said it was terminating its agreement with US Communities in order to focus on an alternative cooperative contract.

In a SEC filing, Depot revealed that the US Department of Justice had opened an investigation into pricing practices on its former US Communities office supplies contract. The investigation is still ongoing.

March 2011 Depot was still in the news in March, this time after it had to restate full-year earnings following a tax-related ruling from the Internal Revenue Service that saw $80 million wiped off its 2010 net result and a $63 million cash hole for 2011.

The company also announced that its SVP Contract Sales Dave Grove had been dismissed for “personal misconduct” reasons.

Staples said that it had gained over 1,000 former US Communities public agency customers by the end of January. During its results conference call, Staples said that these US Communities customer gains represented

April 2011 It was the end of the line for Office Depot’s last remaining stores in Canada as it announced it was pulling out of the retail channel in a market dominated by Staples.

OfficeMax turned to experience in its retail division, naming 60-year-old Michael Lewis as President of Retail.

Meanwhile, CEO Ravi Saligram announced a number of

Overall, quarterly results from OP companies came in ahead of analysts’ expectations following an improvement in trading conditions at the end of 2010, and there was some optimism that this trend would continue throughout 2011, especially in the B2B sector.

At an eagerly-awaited presentation in San Francisco, HP revealed its TouchPad tablet device. Heralded as a challenger to the dominance of Apple’s iPad, HP said the tablet would go on sale in the summer.

Manufacturers’ rep group Highlands expanded in the west of the country with the acquisition of California-based group Office Products Suppliers.

a 2011 run-rate of around $50 million and said that there was “more to come”.

There was quite a bit of acquisitions activity this month. WB Mason acquired two more local businesses in its march towards the $1 billion annual sales figure; California dealer AAA bought a $5 million furniture dealer based to the north of San Francisco taking its annual run-rate to around $25 million; ECi increased its managed print capabilities by acquiring FMAudit; Clover expanded its consumer electronics recycling operations after making a move for The Wireless Source; and vendor Acme announced the $3.4 million acquisition of first-aid products maker Pac-Kit.

new initiatives after saying he was “disappointed” with the company’s first quarter results.

Wholesalers United and SP Richards both reported Q1 sales increases with the independent dealer channel helping to drive growth as sales to big boxes declined.

Staples strengthened its ties with the cooperative purchasing organisation National Joint Powers Alliance after being awarded a new janitorial supplies contract, an indication of the reseller’s growing capabilities in the facilities management segment.

Still on the national accounts scene, independent dealer network AOPD revealed that it had been awarded a new national contract with the group purchasing unit of Premier Healthcare, an alliance of more than 2,500 US hospitals and over 73,000 other healthcare sites.

Consumer electronics retailer Best Buy said it would focus on growing its mobile standalone store format to between 600-800 outlets in the US by 2015, and that it aimed to double its online sales to $4 billion over the next three to five years.

www.opi.net/USAnnualReview2011

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US Office Products Industry Annual Review 2011 | Year in review

May 2011 News broke that TriMega was leaving the BPGI purchasing consortium from January 2012. The announcement was not a major surprise after TriMega’s purchasing alignment with wholesaler SP Richards had put a strain on its relationship with BPGI. As expected, Cody Phipps succeeded Dick Gochnauer as CEO of United Stationers.

One of Phipps’ first tasks was to oversee United’s Vision conference in Orlando.

The wholesaler used the event to launch its coffee initiative and

June 2011 Independent Stationers revealed that it had acquired more than 100 new members in the preceding 12 months thanks, in part, to its federal government and US Communities contract wins.

The Depot-‘Max merger was on the agenda again this month. Speaking at a Sanford Bernstein conference, Staples CEO Ron Sargent said that a tie-up between his two rivals would be a “natural pairing”. Neil Austrian added fuel to the flames when he told a Florida newspaper that Depot would be open to a deal, sparking a jump in each company’s share price, but then said that an attempted merger would probably be blocked by regulators.

July 2011 MYOP acquired the volume it needed in Florida to open a regional distribution centre in the state by snapping up $6.5 million Tallahassee-based dealer Service Office Supply.

Dave Guernsey’s Pinnacle group added two new members, taking aggregate sales above $800 million and moving another step closer to being able to provide nationwide coverage.

Trade association NOPA urged President Obama to restore full competitive access to the federal market for office products for all small business GSA Schedule 75 contract holders. NOPA claimed that hundreds of office suppliers had been shut out of the federal government arena following the Federal Strategic Sourcing Initiative (FSSI) award of 15 office supplies blanket purchase agreements.

It was a busy month for quarterly results. Avery’s Office and Consumer Products division continued to see sales

urged independent dealers to improve brand awareness in order to keep up with the growing e-commerce retail channel.

One appointment that did come as a major surprise was Neil Austrian taking on the Office Depot CEO role on a full-time basis after seven months as Interim CEO. Depot had been on the verge of offering the position to an external candidate, but the board decided at the last minute that Austrian was the best person for the job.

Technology provider Red Cheetah acquired the Blue Planet Group, naming former Corporate Express VP Greg Shewmaker as COO in the process and appointing another ex-power channel exec John Ormson as VP E-Commerce.

Independent dealer Kenny Sayes was named as the 2011 Louisiana Small Business Person of the Year by the US Small Business Administration.

Depot agreed to pay a total of almost $190,000 to more than 100 governmental agencies in Colorado after a year-long investigation into pricing-plan switching between 2006 and 2009.

OfficeMax’s under-pressure EVP Jim Durkin resigned after over 20 years with the company following disappointing results from ‘Max’s contract division.

The month ended with a bang as the second North American Office Products Awards were held during a special presentation dinner at the SP Richards ABC event in Las Vegas (see ‘Show of the year’ on page 46).

decline in the face of stiff competition and weak end-user demand, while rival 3M reported sales increases.

Neil Austrian made his first major management changes since his full-time appointment as CEO, naming Kevin Peters as President North America in a restructure that saw BSD President Steve Schmidt take on a business development role.

Depot reported a net loss for the second quarter of $29 million, but there was some cheer as its earnings still came in ahead of Wall Street expectations.

Meanwhile, both United Stationers and SP Richards reported growth in their respective quarters.

There was bad news for US bookstore chain Borders after it failed to emerge from Chapter 11 bankruptcy protection, resulting in the closure of almost 400 stores. www.opi.net/USAnnualReview2011

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August 2011 Renewed fears of a double-dip recession took their toll on the share prices of companies in the OP sector, with many firms seeing double-digit declines.

Staples proved to be more resilient than its peers, especially after posting a solid set of Q2 results which included positive same-store comparisons in its US retail network.

Depot was again hit by fresh overcharging claims following a public sector audit. This time it was Dallas County, which claimed almost $1.8 million relating

September 2011 Point Nationwide, the national accounts programme of dealer group TriMega, received a boost when it announced that it had piggybacked onto a contract that allowed its members to participate in the federal government’s FSSI contract.

The announcement took place during TriMega’s annual conference in San Diego, CA. The event was also the setting for the next phase in the development of Office Products Women in Leadership, the international community for high achieving professional women in the OP industry, which announced the formation of its first-ever board.

Detroit Public Schools (DPS) became the latest public agency to claim that it had been overcharged by Office Depot. In its annual report, DPS determined that the

October 2011 The industry was shocked to learn that Office Depot whistle-blower David Sherwin had been diagnosed with terminal cancer. An unrelenting critic of Office Depot since his dismissal from the company in 2008, Sherwin has spent the last three and a half years running a campaign to expose alleged price switching and overcharging in Office Depot’s US government contracts business. News of his ill health prompted glowing tributes and messages of support from many prominent members of the independent dealer community.

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US Office Products Industry Annual Review 2011

to transactions between 2005 and 2010 under the US Communities contract.

The main talking point in the back half of the month was the future of HP after CEO Leo Apotheker’s dramatic 19 August announcement, which included the news that HP was ditching its TouchPad and smartphones, looking at selling off its computer division, and planning to pay around $10 billion for UK data firm Autonomy. It marked the beginning of the end for Apotheker who was ousted shortly after with former eBay CEO Meg Whitman taking over in September.

Meanwhile, the leading smartphone and tablet manufacturer Apple made a dramatic announcement of its own. The company’s CEO and co-founder Steve Jobs stated that ongoing health problems were forcing him to step down. Technology icon Jobs passed away a few weeks later in October.

office supplies company had overcharged it by $5.2 million.

Depot was in the news again later in the month when it announced the dismissal of President International Charlie Brown for improper conduct.

The US OP industry came together for the annual City of Hope’s Spirit of Life gala in Chicago. More than 700 industry executives attended the event, which saw Jay Mutschler of Staples collect the 2011 Spirit of Life award. Mutschler had been leading the office products industry’s fundraising efforts for City of Hope with this year’s Committed To Hope campaign, raising a record $9.3 million.

To the relief of many, HP stated that it was not selling or spinning off its PSG computer division after all. The company said that a strategic review had revealed the depth of the integration across key operations such as supply chain, IT and procurement, meaning the cost to recreate a standalone company outweighed any benefits of separation.

It was quarterly results time again in October with operating efficiencies and cost savings recurrent themes, as companies struggled with soft sales in many markets.

Newell Rubbermaid announced restructuring plans alongside its results. The company said it would consolidate its operating groups in order to reduce structural costs.

Current President of its Office Products division Penny McIntyre was chosen to head a new division to be known as Newell Consumer, effective 1 January 2012.

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Austrian on audits In part two of OPI’s interview with Neil Austrian, the Office Depot CEO hits out at public sector auditors and defends former BSD President Steve Schmidt

Interview by Andy Braithwaite andy.braithwaite@opi.net

W

hen OPI interviewed Office Depot CEO Neil Austrian back in September, one line of questioning related to the continued controversy surrounding allegations of overcharging in the company’s government contracts business.

Published exclusively for this annual review, here is that part of the interview in full.

OPI: Let’s turn to the North American Business Services Division (BSD). One area that OPI readers are very interested in is the public sector audits that have been performed over the last two or three years.

We had two more reports recently from Dallas and Detroit claiming that Office Depot had overcharged them. So it seems to be a problem that’s not going away.

When and how is all this going to end?

NA: Well, I can’t answer when it’s going to end.

Both of those audits – Dallas and Detroit – relate to a contract entered into many years ago that has now expired. As you probably know, public sector contracts are extremely lengthy, the wording is difficult, the interpretation can be on either side and in some cases these contracts run hundreds of pages. I’m not denying that we’ve made mistakes because we have. In Dallas, though, we strongly disagree with the auditor’s assertions that the County was entitled to certain additional

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discounts. The auditor’s contention is based on a fundamental misunderstanding of the contract. In Detroit we are aware of, and have been cooperating with, the audit by the Detroit Public Schools. As we understand it, the audit is ongoing and we are continuing to work with the customer to ensure that the results are based on a correct understanding of the relevant contract terms.

But let me say, at the end of the day if we were wrong, we make it right. And I would say that in the past, in a large number of these situations where we had public sector issues, the customers have stayed with Office Depot going forward. That indicates something. It indicates the fact that they have the confidence in us, in the new systems that we’ve put in place in terms of contract compliance, in terms of how we’re going to go to market and really define things in the contract on both sides far better. And I think if you look at the former US Communities customers, we’ve retained over 85% of our customer base.

OPI: The latest figure you have quoted is 86%. Does that refer to the number of customers or the sales figure?

NA: Basically our revenue and our customers.

It almost matches. It’s pretty close.

OPI: Does that include other US Communities contracts? I know you have a separate contract for school supplies and you also have something with Tech Depot as well.

NA: It’s inclusive in terms of what we’ve kept.

US Office Products Industry Annual Review 2011

US Office Products Industry Annual Review 2011 | Big interview

Photographs by Kelly West Photography www.kellywestphotography.com www.opi.net/USAnnualReview2011

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US Office Products Industry Annual Review 2011 | Big interview

“In Dallas […] the auditor’s contention is based on a fundamental misunderstanding of the contract” OPI: So, as far as you are concerned, the impact of all this has been fairly minimal on the business.

NA: You know it’s certainly hurt our reputation.

I’m not going to deny that, but I think we’re gaining it back. I think people understand that mistakes were made; we’ve admitted that and we’re moving forward. On an economic basis that has not been the major issue in terms of the performance of the company.

OPI: Where have the former US Communities customers gone in terms of your other cooperative contracts? I know you were pushing TCPN quite hard earlier this year.

NA: We’ve got two different consortiums that we’re involved with: TCPN and National IPA. OPI: You’ve mentioned some customers coming back to Office Depot who had moved away. Can you quantify that at all?

NA: No, I can’t.

OPI: You mentioned the word “mistakes”.

Can you be a bit more specific about what those mistakes might have been?

NA: I think we’ve publicly talked about the two price plans – Option 1 and Option 2 – under our now expired office supplies cooperative agreement. As we have said before, the issue related to concerns regarding the past marketing of the Option 2 price plan, which Office Depot had begun to address before any allegations were made regarding it. Importantly, there was nothing wrong with the Option 2 price plan itself, which simply gave customers the choice of a flat discount from retail pricing. These price plans were implemented several years ago and the contract has now expired. We have made significant changes since that time, including the implementation of a world-class contract compliance organisation and training programmes to ensure that the contracts we enter into are unambiguous and that we can comply with the terms.

go up any higher than that. Would you stick by that version of events?

NA: I’m not going to get into whether it was one salesman or ten salesmen. But as I said before, we have made significant changes since that time and the organisation is benefiting from the new systems, the new training, and the new processes we have put in place.

OPI: There has been a line of argument that all these auditors have been influenced by one “disgruntled former employee” called David Sherwin. How is it that one person could have such a major influence on all these auditors?

NA: I’ve never said that. I don’t know that any company executive has ever said that. (Pause) I’m not going to comment on David Sherwin at this point, Andy.

Office Depot • Founded 1986 • Headquarters: Boca Raton, FL • 2010 sales: $11.6 billion • Employees: c.

40,000 • Number of stores worldwide: 1,620 (approx. 1,130 in the US) • Operates in 56 countries

OPI: Something that has come out of the Dallas and Detroit issues, as well as the Option 1 versus Option 2 pricing, is this issue of most favoured government pricing. Surely that has to be a major concern going forward if other agencies start…

NA: I understand from my teams that Dallas County and Detroit are operating under a fundamental misinterpretation of a key contract provision. But remember, this is a contract entered into several years ago and that has now expired. We are working with and cooperating with these customers. I’m focused on going forward right now.

OPI: There seem to be a lot of disagreements from your side with some of the reports from the auditors.

NA: When you say disagreements, all I’ll say is that with multi-hundred-page contracts,

OPI: The message coming out of Office Depot, certainly if I go back to 2008 to 2009, is that these option switches were the work of rogue sales reps and it didn’t www.opi.net/USAnnualReview2011

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OPI: It doesn’t hurt that he has a legal background though.

NA: No, it doesn’t.

OPI: I know there are some other investigations going on – the Department of Justice and some other federal investigations. Are you able to give an update on the status of where those investigations are at the moment?

NA: No, I’m not. Although I can tell you that we cooperate fully with all regulatory enquiries and investigations.

“I want to make it very clear on the record that Steve [Schmidt] did a yeoman job sorting out the issues” in a lot of cases it’s a matter of how clauses and words and phrases get interpreted. There are usually two sides to every story on that, and Office Depot has a long history of being a reputable company. As I say, in every case that this happened, we’ve provided credits or refunds if warranted. Also, in a large number of cases, we’ve kept the customer.

Additional content Part one of the interview with Neil Austrian can be found at www.opi.net

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OPI: I guess detractors would say it’s a question of smoke and mirrors in the wording of the contracts. Has there been any change in the contracts, the way they’re put together in the last couple of years? I know you’ve had a contracts compliance committee that was put together some time ago.

NA: Yes, we now have a robust and strong contract compliance team. We have invested significantly in people and systems whose function is to ensure contract pricing accuracy and compliance. This includes assembling the team, and implementing software applications and system enhancements to manage written contracts and price changes.

OPI: And Steve Calkins [who became EVP, Contract Sales Division at Depot in April, taking over from Steve Schmidt] comes from a legal background. Was that a coincidence?

NA: A total coincidence. He wanted to run a business, get P&L experience and move up into general management. He was eager to do it, he knew the people, he knew the business and he knew the customers, so it was a good choice.

US Office Products Industry Annual Review 2011

OPI: Obviously Steve Schmidt was very closely associated with BSD and the troubles that were reported from that division. It just seems strange to an outsider that he’s been put into another high level position within the company.

NA: That’s really a total mischaracterisation of Steve Schmidt’s role in BSD. Steve Schmidt came to BSD after the fact and during his time all he did was try to solve the problems that existed before he got here. Virtually all the contracts we’re talking about were written prior to Steve Schmidt taking over the BSD business. I want to make it very clear on the record that Steve did a yeoman job sorting out the issues, reorganising the department such that we could go forward. The current change here at North America had nothing to do with these contracts. The job that Steve now has is a very high level job and I’m not certain I could have found anybody more capable than Steve to do it. [Ed. – Steve Schmidt has since been appointed President of International] OPI: Do you think, in hindsight, the whole situation could have been handled in a humbler way? Perhaps being a bit quicker to admit that mistakes were made?

NA: No. I wasn’t here when all this happened, so I’m not sure of that.

OPI: But you were still on the board weren’t you?

NA: I was on the board, but I wasn’t there day-to-day in the trenches understanding who’s saying what and what’s being done.

Every situation can always be handled better in hindsight. Hindsight’s great – I could tell you who won the game last night. So sure, I guess the answer has to be yes, because with the benefit of hindsight you’d do some things differently. But just because you can improve on something does not mean that it was handled incorrectly. I believe we have acted professionally and in the best interests of our customers.

Extending the runway Independent dealers continue to make inroads into the big-box-dominated government business, but perhaps not at the rate they would have hoped for

18

US Office Products Industry Annual Review 2011

US Office Products Industry Annual Review 2011 | Government contracts

by Andy Braithwaite andy.braithwaite@opi.net

W

ith 2010 generally being accepted as a historical year for the US independent dealer channel following the award of the US Communities contract to Independent Stationers (IS), how would 2011 pan out now that dealers have had the chance to go after more government business?

Certainly, no-one believed that it was just a question of turning on the tap and allowing business to gush in; dealers would have to go out and win contracts and the big boxes – and Office Depot in particular – would put up a strong fight to hold on to what they had.

Let’s not forget that Office Depot held the US Communities contract for 14 years and in that time was able to develop relationships with its customers.

After deciding not to rebid on the contract in 2010, Depot put together two other cooperative contract deals last year – National IPA and TCPN – allowing it to potentially hold on to its customer base.

It also offered agencies aggressive pricing incentives, especially under TCPN, to switch to another Depot cooperative contract. Add to the

mix the notorious reluctance of government purchasing agents to change suppliers and it’s obvious that dealers were not being offered a free lunch.

So how well are both sides doing?

To recap, in its heyday a few years ago Depot was generating around $600 million a year in sales through the US Communities office supplies contract. A chunk of that was spun off into a separate school supplies contract awarded jointly to Depot and School Specialty in April 2010 (although School Specialty pulled out

Clearly, the figures don’t add up somewhere.

Speaking to OPI for this article, Mike Gentile declined to provide exact sales revenues that IS is generating from US Communities, but stated that he didn’t give much credibility to Office Depot’s public statements.

Nevertheless, the IS CEO did admit to being “disappointed” at the overall revenue from US Communities.

“I’m a sales guy – I always want more, better, faster – so I’m not going to sugar-coat things and say I’m not disappointed, of course I am,” he said.

“We see the runway as longer than we originally anticipated, but the good news is that we’re making progress every month,” he added.

Gentile said that a number of public school systems had been added to the contract at the start of the new school year and that talks were ongoing with about half a dozen states.

“We have had a significant learning curve and have done something that had never been done before in the independent dealer channel.”

The announcement of the US Communities award – in conjunction with other national accounts and federal awards – has certainly been a factor in IS’s membership growth as it added over 120 new members in 12 months.

Almost 200 dealers are now part of IS’s US Communities programme and Gentile argues that there is something

“We see the runway as longer than we originally anticipated, but the good news is that we’re making progress every month” – Mike Gentile, Independent Stationers

Mike Gentile

of the contract a year later), and Depot is also a contractor on another US Communities contract via Tech Depot.

The rebid office supplies contract which went to IS was estimated at $500 million a year.

A numbers game Over the last year, Depot has consistently been claiming that it has retained between 85-86% of its US Communities business. CEO Neil Austrian told OPI (see ‘Austrian on audits’ on page 12) that this refers to the company’s total business with US Communities, including the school supplies and Tech Depot contracts, estimated at an overall figure of around $600 million.

Using this figure, Depot’s loss of business would be between $84-90 million per year.

Back in March, IS CEO Mike Gentile told OPI that committed US Communities business was tracking at a run-rate of around $110 million.

At the same time, Staples also reported strong gains in its government business, in particular stating that it had gained over 1,000 former US Communities customers at an annual run-rate of around $50 million.

The award of the US Communities contract to Independent Stationers was a landmark decision

www.opi.net/USAnnualReview2011

19

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US Office Products Industry Annual Review 2011 | Government contracts for everyone, regardless of the size of the dealership.

While leading dealers such as Guernsey Office Products (not an IS member, but able to participate in the US Communities programme as part of the Pinnacle group) have the operational expertise and sales-force depth to tackle major contracts such as the $11 million Fairfax County contract, Gentile says that there are plenty of other contracts, such as smaller school systems and counties, that are suitable for small to mid-sized resellers.

However, he is realistic when it comes to the question of whether doing business with public sector agencies is suitable for all dealers. “We have more and more dealers getting involved and some are recognising that this is not their cup of tea.”

More than US Communities Gentile was also at pains to highlight that there is much more to IS’s national accounts programme than US Communities. Earlier this year it

is known as a Schedule 75 award enabling them to do business with the federal government. New Schedule 75 awards and renewals have been frozen, meaning that while it is still possible to use current awards, it is becoming more difficult to do business in the federal arena without an FSSI award.

“We had our biggest month ever in October and our federal sales have quadrupled in the last 12 months,” enthused Gentile.

Pointing in the right direction?

With IS grabbing the headlines for its US Communities and FSSI wins, the pressure has been on rival dealer group TriMega to get up to speed with its Point Nationwide national accounts programme which was officially launched in June 2010, especially after 40 TriMega members switched to IS following the US Communities announcement.

Representing a major investment

by TriMega and wholesaler partner SP Richards, Point Nationwide has not

“We anticipate close to 200 total dealers up and running with our TCPN programme by early 2012” – Tom VanHootegem, Point Nationwide was awarded the CHAMPS healthcare contract and there are a number of other national accounts awards that have not been publicly announced.

Importantly, IS was also one of the 15 contractors to be awarded a new Federal Strategic Sourcing Initiative (FSSI) blanket purchase agreement (BPA) which came into effect at the beginning of this year. FSSI is part of the current US Administration’s programme to reduce federal procurement spending by $40 billion annually, and 18 federal agencies employing almost two million staff have been mandated to use the new office supplies BPAs. Furthermore, the total federal market opportunity for office supplies is estimated to exceed $1.6 billion annually.

The uptake of FSSI has hit the federal agency sales of hundreds of smaller resellers that hold what

been able to secure a major national local government cooperative contract or federal FSSI BPA in its own right.

It has therefore taken the route of piggybacking onto two existing contracts held by TriMega members.

Tom VanHootegem

TriMega is under pressure to drive more sales through the Point Nationwide programme The first of these was announced in April with Texas dealer Gonzalez Office Products. This agreement allows TriMega members to use Gonzalez’s TCPN contract to compete in the state and local government arena.

After a short pilot phase with a number of key Point Nationwide members, a full roll-out was implemented across the TriMega membership in July.

TriMega’s VP of National Accounts Tom VanHootegem told OPI that there have been a number of early contract wins, including in California, Texas and New York.

“We currently have approximately 100 Point Nationwide members ramping up under TCPN, alongside many TriMega members who are not part of our Point Nationwide programme, but who also have access to the system,” he said.

“We anticipate close to 200 total dealers up and running with our TCPN programme by early 2012,” VanHootegem added.

More recently, Point Nationwide received another boost with the announcement that it had piggybacked onto an FSSI BPA held by California dealer EZ Print.

It was actually TriMega that approached EZ Print with a view to setting up the new agreement, a move that resulted in the California reseller joining the dealer group earlier this year.

TriMega members on their new FSSI programme don’t necessarily have

www.opi.net/USAnnualReview2011

21

to belong to Point Nationwide, but it helps – they get better support and a lower fee structure.

Dealers have to play by a strict set of requirements to be eligible for the FSSI business. Officially they are ‘authorised participating dealers’ and, as such, have to represent themselves as EZ Print and incorporate EZ Print branding into all FSSI contract communications, marketing documentation, websites, and so on.

SP Richards must also be used as the first call wholesaler for all of the FSSI business.

“There has been a tremendous amount of FSSI activity since we last updated members [at the Emerge conference] in September,” VanHootegem told OPI. “We have 60 dealers up on GSA Advantage via our FSSI contract with EZ Print and we should see that number grow to 100 in the months to come.

“GSA has implemented some new rules such as a single order entry portal and we are the only piggyback player which is meeting and exceeding GSA requirements at this time. We are taking orders from California to Florida and have almost 9,000 users already set up with ordering credentials – with many more to come.”

The FSSI agreement is an important one for TriMega after seeing volume on its Schedule 75 GoverNet programme fall by around a third so far this year.

Now the onus is on VanHootegem and his team to drive volume through the Point Nationwide system. There has been some speculation as to how

Bud Mundt 22

long TriMega and SP Richards will keep bankrolling the initiative – the addition of some former power channel sales reps is being seen by some as a last roll of the dice before a difficult decision may have to be taken. Whether that’s true or not, there is certainly pressure on Point

“Independent dealers have scared the big boxes” – Bud Mundt, AOPD Nationwide to ramp up its sales, whether it be with local/state, federal or private sector customers. TriMega believes it has the best technology, but it now needs the sales figures to do the talking.

48 new contracts One person who has not been overly troubled by the changes in federal purchasing is AOPD Executive Director Bud Mundt.

True, AOPD’s federal sales have taken a hit due to FSSI, but so far this year the group’s overall sales are up 15% as it enjoys success with new programmes such as the America’s Choice cooperative contract and its healthcare sector agreement with Premier, which both rolled out earlier this year.

AOPD members are not locked out of FSSI altogether. A number of its members have joined the GSA programme of Virginia-based AOPD dealer Sita which is said to be driving good sales with a number of local hospitals.

US Office Products Industry Annual Review 2011

Mundt has by no means given up on Schedule 75 either.

“We’re still doing millions of dollars on Schedule 75,” he told OPI. “We feel that at some point in time GSA will go back out to bid on FSSI, and when they do ramp up, we want to maintain our GSA contract so that we’re eligible to bid on that,” although he added that this may not happen until 2013.

Mundt revealed that AOPD had signed 48 new contracts in 2011 through to the end of October and said that there is a growing desire from regional and national organisations, both in the private and public sector, to work with local dealers.

“Independent dealers have scared the big boxes,” he stated.

However, he warned that independents should choose their battles carefully, as the big boxes themselves hit back with pricing which can be “pretty scary”.

A point echoed by IS’s Mike Gentile who said that OfficeMax in particular was coming in with pricing on certain products that he described as “irresponsible”.

For its part, TriMega noted the continued strong presence of Office Depot in the market with its TCPN contract.

“While this is certainly unfortunate from an independent dealer channel perspective, we also believe this presents a powerful opportunity for TriMega dealers – and all independent dealers – to emphasise the value of being local, and the benefits of flexibility and personal service […] with competitive, flexible pricing,” said VanHootegem.

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Wholesale exchanges As with many companies in 2011, improvements in overall market conditions proved to be something of a tease for wholesalers

by Bruce Ackland bruce.ackland@opi.net

W

hile the market was somewhat more favourable than in recent years, there was still little significant white-collar job growth to boost OP wholesalers in 2011.

Office job vacancy rates continued to peak with little help in the way of inflation, and the stronger growth earlier in the year that caused pulses to race was challenged by soft conditions as the year went on.

Nevertheless, at United Stationers product categories that remained somewhat shielded from the economy such as jan/san, breakroom, food service disposable and safety have continued to perform well. On the other hand, those products that traditionally feel the brunt of negative

economic forces – principally furniture – continue to have difficulties although encouragingly not as severely as in previous years.

SP Richards’ Furniture Advantage programme and the strong results in its proprietary Lorell brand have supported challenging furniture sales overall. Again, the cleaning and breakroom category has delivered strong results with mid-teen sales growth supported by an investment in business development managers that have been strategically located around the country. The company has said that traditional office products and technology categories will experience low to mid-single digit sales growth in 2011.

MPS One area that the wholesalers, and United in particular, have been enthusiastically pushing is, of course, managed print services (MPS). A genuine area of opportunity, United has really focused on helping its dealers take advantage of this area.

To supplement its current HQueue MPS portfolio, United’s MPS division released HQueue Basic during 2011 – a

simple print monitoring solution that provides resellers with the ability to directly fulfil imaging supplies and receive automated service alerts they can manage as they desire. In contrast to United’s fully automated MPS solutions – which provide automated toner and service fulfilment on behalf of the reseller – HQueue Basic sends resellers an email to alert them when and where supplies and services are needed for printers, MFPs, and copiers from most major manufacturers.

The new solution can support any sized print environment, and comes with reseller support that includes proprietary online reporting and analysis capabilities that provide visibility into the print fleet. In addition, ongoing meter reports, live tech support and real-time device utilisation are all visible through a web-based portal. End-consumer support includes live tech support during set-up, ongoing meter reads, and online reporting.

MPS adoption by United dealers has been strong during 2011. Year-over-year, United has grown its reseller MPS customer base by 50% as MPS drives its way down the SMB chain, largely owing to reseller fears of losing business to copier vendors.

SP Richards has also been very pleased with the strides it has made with its PrintSmart MPS programme and has further developments in this area in store for its dealers in 2012.

Dealers All in all, the two key US wholesalers have been very pleased with the performance of their dealer customers in 2011 with solid and encouraging results, although there is a word of warning for those independents that are not differentiating themselves or using poor business models.

United Stationers’ 2011 Vision conference 24

US Office Products Industry Annual Review 2011

US Office Products Industry Annual Review 2011 | Wholesalers Jim O’Brien, SVP at SP Richards, says: “This has been a very solid year for our base of independent dealers, which represents 83% of our overall revenue.

Growth will be in the mid to high single digits for 2011.

“However, there is a growing divide for many dealers. Those dealers that embrace e-commerce, analytics and place a premium on new customer acquisition have been able to separate themselves. New customer acquisition must become a fanatical way of life for dealers.”

Laura Gale, VP Marketing for United, adds: “One of the things that makes United’s business model strong is the diversity of industry channels we serve and different types of customers we work with. For example, those resellers with a strong business model and growth plan tend to have exceeded the market. E-tailers and traditional resellers with an e-commerce model have benefited from consumers’ growing preference

United Stationers 2011 key initiatives • Launched a software-as-a-service cloud option, so that MBS Dev solutions can now be deployed on premise or on a hosted basis • Entered into an agreement as the exclusive sales agent in the US for UK-based software company Evolution • Developed ‘rich’ content for its top 7,200 jan/san items as part of a new Electronic Content Data Base (ECDB) 2.0 release • Released several in a series of white papers on its consumer research • Launched an office coffee programme, ‘Enriching Breakrooms to Boardrooms’, to help resellers capture a share of the $4 billion market for buying in that manner. We’ve also been fortunate to work closely with resellers and reseller groups that have capitalised on some large public sector opportunities. So having those types of customers certainly helps our own performance. At the same time, some resellers utilising poorly-devised business models are struggling harder against the economic headwinds.”

Last year saw a fairly unprecedented meeting of minds between dealers and

“Some resellers utilising poorly-devised business models are struggling harder against the economic headwinds” – Laura Gale, VP Marketing, United Stationers

Innovations

New products in the OP industry For further information please email stephen.dias@opi.net or call +44 (0)20 7841 2952 or visit www.opi.net/innovations

www.opi.net/USAnnualReview2011

25

wholesalers and a sense of togetherness. One of the causes of this was SPR’s strategic sourcing alliance with dealer group TriMega regarding its Business Source brand of products.

This year that collaboration thrived as the organisations worked together to lower the cost of goods for all independents by leveraging combined volumes.

O’Brien explains: “Business Source sales have greatly exceeded our expectations. But, more importantly, there are a very significant number of dealers from all buying groups, and with different wholesale affiliations, taking advantage of the direct buy component made possible by this alliance. We have now moved

thought of the wholesalers this year?

For the most part the end of year report has been positive. Dealers are recognising attempts by wholesalers to help independents capitalise on new areas of potential growth while their catalogues and dealer shows brought a general thumbs up. A special mention went to United’s Vision 2011 conference which instructed dealers that it was ‘Time to Get Loud’ about their achievements and advantages in the marketplace.

Sid Lerman, from dealer Weeks Lerman, says: “Both wholesalers have devoted more resources to supporting the independents with more competitive prices on their respective private brands, more marketing and more technologies, such as improvements in search capabilities.

It would seem that the ‘relatively’ slow start to the national initiatives gives them both more insight into how aggressively priced the power channel is with its private labels and how difficult it has been for the local mid-sized independent dealers to

SP Richards 2011 key initiatives • Business Source brand expanded to nearly 800 items for 2012 • Furniture Advantage programme brings quick ship solution for over 10,000 furniture items (driving positive sales growth in difficult year) • MyAnalystPro enhanced to bring world-leading B2B pricing software and the industry’s most comprehensive pricing intelligence to the independent dealer. Dealer adoption is accelerating and driving improved margin performance beyond core office products and expanded the programme to both the technology and fast-growing cleaning and breakroom supplies categories.

These offerings will include products from our proprietary Elite Image and Genuine Joe brands as well as name brands such as Angel Soft toilet tissue. The strategic sourcing alliance will continue to expand into other areas where there are supply chain and buying efficiencies.”

Well, that’s how the wholesalers have read the performance of their dealers but what have the dealers

26

compete. Their vision and intentions are good and many of their efforts have had positive results – so overall we would submit that they have both performed fairly well.”

In terms of the burgeoning public sector business now on offer for hungry independents, United’s Orbit Point tools and resources enabled a growing number of resellers to capture an increasing piece of this pie and large regional account business in 2011. Orbit Point includes systems, logistics, marketing and other support services specifically designed

US Office Products Industry Annual Review 2011

to help the independent reseller compete for, win and serve these larger account opportunities.

Next year’s plans It certainly seems that the majority of dealers are confident that United and SPR are intimately aware of the challenges that the independents have and the impact the economic downswing has had on consumers.

Lerman believes they are “clearly light years ahead of where they were perhaps five years ago” in terms of the array of tools that are available to support dealers in products, marketing and technology.

He adds: “We hope both SPR and United continue to work to drive costs down on the private labels, find creative ways to offset the impact of freight to the national business and continue to invest in marketing and social networking mentoring for the independents.”

Looking ahead to 2012 marketing programmes, the wholesalers will be refreshing their offerings to give dealers the best possible tools for success and indeed address those areas of particular interest for dealers.

United has developed some enhancements to its Marketing Power portfolio including an entire planning guide for public sector marketing to help resellers understand the public sector marketplace, buying influences, marketing approaches and specific tools.

The new-look portfolio includes greatly expanded information about how to employ specific social media tools, including Facebook, Twitter, LinkedIn, YouTube and List Assistant, a tool that helps resellers create and maintain a database of consumer lists.

Meanwhile, SPR has enhanced its Create-A-Flyer programme that will now enable dealers to build custom emails as well as print flyers.

It is also introducing Sitelynx, a tool that will allow dealers to take advantage of a series of videos to help educate and entertain current and prospective customers.

The wholesaler believes these initiatives, along with the continued development of buying pattern analytics and improved content and rich media, will deliver more “stickiness” to dealer websites.

big

Still as they come?

Last year the independents made great strides in snatching market share from the big boxes, so what have they been up to in 2011 to defend their positions?

Read on for an overview

28

by Felicity Francis felicity.francis@opi.net

A

s usual, it’s been a big year of change for the big boxes. How long they will hold their positions as the giants of the office supplies world is a matter frequently debated, as other players – such as Walmart and Amazon – move in on their ever-precious market share on two sides, B2B and retail.

First, though, to the competition between each other. Staples remains, as Office Depot CEO Neil Austrian recently mentioned in November’s Big Interview (see OPI #214), bigger than OfficeMax and Depot put together. After a few less-than-rosy results earlier in 2011, the giant reported flat sales for the second quarter, as well as modest gains for its US operations, compared to same-store sales declines for Depot and ‘Max (at the time of writing, Staples’ Q3 results were not yet in). Looking still at Q2, Depot and ‘Max struggled to achieve top-line growth and positive bottom lines. As well as seeing sales declines, they reported net losses for the quarter of $29 million and $3 million respectively – this compares to a net profit of $176 million for Staples. The biggest difference between the three remains US contract.

Of course there are many factors behind these figures, but one we can look at is the leadership of each company. While Staples has remained a steady ship under the guidance of long-time CEO Ron Sargent, both Office Depot and OfficeMax have new CEOs at the helm.

‘Max’s Ravi Saligram has been in his post just over a year while Neil Austrian only became Depot’s permanent CEO in May. It won’t be the first time that continuity of leadership has prospered while new leaders still need time to get their feet under the desk. Austrian certainly has plans for the next two years to lead Depot back to prosperity, and Saligram

US Office Products Industry Annual Review 2011

recently unveiled a five-year plan – look out for the winter issue of OPI for our Big Interview with the ‘Max CEO.

Retail The size and number of stores in the US has remained a subject for consideration for all three superstores. The rush to populate the world with office superstore outlets is a thing of the past; at the beginning of 2011 Staples announced it would be opening fewer than expected and this has proved to be the case.

However, Sargent did say at a Goldman Sachs conference in September that Staples would still invest in store growth, though less aggressively than in the past; collectively, the big boxes still own around 4,000 stores in the US, Canada and Mexico, almost half of which belong to Staples.

In terms of size, the average warehouse-style superstore of about 24,000 sq ft (2,400 sq m) is starting to become a thing of the past as the resellers tune in to what might be consumers’ preferred way of visiting a store – that is, to be in and out in a hurry. Many are being downsized to 15,000-17,000 sq ft, at Depot at least, and there has been an increase of smaller format stores (about 5,000 sq ft) in business areas. This smaller size could be another way that the big three are aiming to win market share back from smaller convenience stores that are now selling office supplies, as well as to save money on rent. The time to reflect as leases come up for review provides opportunity for new sizes, and locations, to be explored.

It could be a wise decision for Staples, ‘Max and Ron Sargent

US Office Products Industry Annual Review 2011 | Big boxes services, as margins are low in the products themselves. Computer repair centres are now present in many superstores, and perhaps this is an area for development in the coming year.

Office Depot became the first big box to throw its hat into the managed print services ring in April, partnering with Xerox in Europe.

Products aside, other technological developments have been occurring. Early in

Sargent himself voiced the opinion that “consolidation will happen” in the next five years

Depot to reassess store sizes, given the competition.

Best Buy announced earlier this year a 10% reduction in its store format sizes, and Walmart is apparently pleased with the five Express stores it trialled this year and aims to bring the number up to 11 by the end of the year.

Walmart also opened two new ‘pop up’ stores of 1,000 and 3,000 sq ft, designed to drive traffic to the online store.

Technology It seems as though the superstores, considered together, have been brought kicking and screaming into this decade in terms of technology.

This year OfficeMax realised that it needs to stock technology products after all in order to drive customers into stores, although issues with its assortment contributed to its store sales in the US falling by almost 6% in the third quarter due to “teething problems”. Staples similarly has announced new technology offerings throughout 2011.

All three now have more robust technology strategies, such as increased copy and print offerings. They are now stocking tablets and e-readers, while Staples is beginning to stock mobiles. Of course, the biggest downer for all three is that they do not stock the Apple iPad in the US – by far the market leader. They just don’t have the business relationship with Apple. Best Buy and Walmart both stock iPads in abundance, dooming the big boxes in this area from the outset given that customers are likely to want to compare all options.

An element to selling hardware that the big boxes must be aware of is the importance of add-on accessories and technology

2011 Staples relaunched its Staples Advantage website, which now has a cleaner look and a push to its growth areas such as jan/san.

OfficeMax recently embraced Google Wallet, a mobile app that allows customers to use mobile payment terminals, as well as a mobile print app that allows customers to pick up orders in stores.

Consolidation?

Rumours still abound about a possible merger between the big boxes. This wasn’t, of course, new to 2011 but it seems the rumour hasn’t vanished. Indeed, at a Goldman Sachs conference in September Sargent himself voiced the opinion that “consolidation will happen” in the next five years.

Saligram and Austrian have been less forthcoming about the issue, with the former keeping his cards close to his chest – ‘Max is “reviewing strategic alternatives that maximise shareholder value” – and the latter saying he believes it will happen at some point, though not in the short term.

Given continuing soft market conditions in the US and the ‘do more with less’ attitude of many companies that is affecting the whole industry, not just big boxes, 2012 isn’t likely to be a record-breaking year for any of the three. As Sargent said at the Goldman Sachs conference: “I wish I could say we’re seeing the upturn in 2011, but I think […] that’s probably a little premature.”

Their quest for relevance continues as multiple retailers such as Target and Walmart increasingly become OP destinations for consumers (see ‘Alternative remedies’ on page 30). And add to this bricks and mortar competition the fact that more and more consumers are heading online to purchase office supplies, is there still a need for the traditional office supplies store? The answer is probably yes, but not as we know it. www.opi.net/USAnnualReview2011

29

Alternative

remedies

30

US Office Products Industry Annual Review 2011

US Office Products Industry Annual Review 2011 | Alternative channels

Kmart, Walmart, Target, Best Buy, Walgreens, Amazon, eBay – it’s no wonder OP specialists are feeling the pressure from the alternative retail channels, particularly during one all-important season

by Bruce Ackland and Saqib Shah bruce.ackland@opi.net saqib.shah@opi.net

T

he competition out there is enough to make your head spin if you’re a specialist OP reseller, and it must seem as if everyone is out to get a piece of your pie. It feels like a real war out there and this year the battle was at its most ferocious in the all-important back-to-school (BTS) season.

On the face of it it’s a very easy sell for the mass market retailers to offer a hearty selection of BTS products; parents can make the often stressful task of preparing their offspring for a new school term so much easier by getting all they need in the one place. After all, in Walmart they buy new school shirts, school shoes and stationery all in the same place.

Unless the likes of Office Depot and Staples start stocking shoes and cardigans there’s always going to be a convenience option for busy parents that the OP guys simply can’t match.

And during the past summer those non-OP specialists ramped up their attack on the BTS market like never before, with super early sales, discounts and hefty new marketing campaigns. Major retailers offering early deals included Kmart, Sears, Office Depot, Staples, Target, Toys ‘R’ Us, Walgreens and Walmart.

BTS season is the retail industry’s second biggest after Christmas and the winter holidays, accounting for $55 billion in spending last year, according to the National Retail Federation. And more and more statistics are showing that parents are looking to buy earlier and do all their shopping in one place.

Costs One typical American mother, when asked why she favoured an early BTS shopping trip at a single location, told

the Chicago Sun Times: “I’ve made the mistake of waiting until the last minute, and I ended up driving to four stores to find scissors with pointed ends. I spent twice as much, if not more, than I would have otherwise because of the gasoline prices, not to mention the aggravation.”

It’s worth taking another look at that quote to notice the role that the rising cost of fuel is having on the desire to shop in one place – its not just a convenience, it makes the whole process cheaper. And that’s before you account for having to balance up the rising cost of traditional BTS items with the cost of school clothes (due to the rising cost of cotton) and shoes estimated to have both risen 3.5% and books 1.5%, according to the International Council of Shopping Centers.

Kmart’s Chief Marketing Officer, Mark Snyder, remarked during the 2011 BTS summer season: “We are seeing Mum planning trips more carefully. She’s choosing one store

and targeting that one trip to get her shopping done.”

Snyder added that “the high price of gas has compressed the frequency of trips” to shops, and that one of the key items parents are looking for are those super discount lines such as Kmart’s ‘Smart Sense’ where prices are 20-25% lower than national brands.

EBay EBay was another company heavy in promotion in the 2011 BTS season and even teamed up with designer, TV personality and lifestyle expert Kelly Edwards in a BTS promotion aimed at college-bound students. Quite apart from just selling stationery to new students this promotion was aimed at kitting out their whole dorm room on eBay including chairs and desks. The promotion even included a ‘Gear up and show off your pad’ contest where the winner scooped $50,000 towards their college tuition.

The monster online shopping market also offered a prize of a

More and more statistics are showing that parents are looking to buy earlier

Big box BTS performances The BTS season is critical to the OP sector, so much so that it can shape the full-year results of both big boxes and manufacturers.

This was evidenced when both Office Depot and Newell Rubbermaid admitted that their respective performances in the sector had to be strong if they were to meet their full-year forecasts. A strong BTS season is a great way for companies to restore investor confidence and surge ahead of the competition. However, this year provided a mixed bag of results due to both the volatile markets and their subsequent impact on consumer spending.

Earlier this year, an NRF survey predicted a flat BTS season. The research showed that families with children at school would spend an average of $603 on apparel, school supplies and electronics, within a few dollars

of last year’s $606 average. Nearly half of the consumers who took part in the survey blamed the economy, which they claimed was forcing them to spend less in general.

That immediately dampened the outlook of many OP companies, spelling out what they possibly knew all along; this was going to be a difficult year. Then towards the end of the BTS season both Office Depot and OfficeMax gave presentations at the annual Goldman Sachs retail conference. While the former outlined a positive performance in the category, stating that its BTS sales and gross margins were both up over 150 basis points, the latter painted an altogether different picture. OfficeMax CEO Ravi Saligram spoke of soft BTS sales and attributed the decline to price conscious consumers.

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The quarter that counts On the bright side there has been modest overall growth in the BTS sector for OP companies, with certain product segments such as technology witnessing a significant rise. Still, individually they point to an unpredictable market at best.

Manufacturers had their ups and downs during the season. Writing instruments manufacturer BIC saw flat sales during the quarter due to competitive pricing, while 3M on the other hand noted that its BTS sales had met expectations and highlighted the strong performance of its Command brand of products.

Both OfficeMax and Office Depot were proved to be right in their respective assessments of the category (see box ‘Big box BTS performances’ on page 31). The former didn’t meet Wall Street expectations and cited soft BTS sales as the main reason behind its decrease in revenue. Meanwhile, despite witnessing a dip in North American sales, Depot saw an increase in comparable sales of its BTS essentials.

The bad news, however, was mainly restricted to the commercial channel.

According to NPD, during the July to September period all BTS retail channels grew apart from commercial. Within that channel contract stationers saw a 0.3% overall decline in sales and independent dealers fared even worse, witnessing a 4.7% drop.

The market analyst claimed that this was due to a shift in purchasing habits and the growth in e-commerce retail (see box ‘The e-commerce results’ on page 33).

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“Shopping multiple office supply sources for essential office products and office supplies isn’t the most productive use of time” – Amazon $5,000 shopping spree for the best designer of a virtual dorm room in its ‘Build your college dream pad’ sweepstakes.

Richelle Parham, Chief Marketing Officer of eBay North America, says: “From laptops, flat screens and coffee machines to bedding, bikes and text books, we are working with top sellers to deliver deep discounts on the most popular BTS items, and delivering a one-stop shop for students to gear up for the school year on eBay.” This summer also saw eBay put a ‘Shop for school’ image on the header of its website in a more prominent place than usual.

went a week later than normal as it was still identifying a mid-August peak in BTS shopping patterns.

The company also actioned a cause marketing campaign called ‘Pennies From Heaven’, where shoppers were invited to round up purchases to the nearest dollar, with the additional sums, up to $1 million, being donated to local after-school programmes such as the Boys and Girls Clubs of America.

Early sales Newspaper circulars at the start of July saw Target and Toys ‘R’ Us joining Staples on advertising BTS offerings.

Other chains such as Best Buy shortly joined them while the big bumper summer issues of popular US family magazines such as Family Circle and Martha Stewart Living featured BTS ads for Lands’ End Kids, Target and Walmart.

The big department stores were also on the bandwagon early on and using social media as their route to customers, with Macy’s particularly prominent on Twitter.

At Target, BTS merchandise was available at the same time this year as it was last year but there the company put a renewed emphasis on savings through coupon offers. One promotion, called ‘Text to get coupon’, enabled shoppers to receive an instant mobile coupon on specific items such as General Electric light bulbs.

A retailer that did buck the early BTS campaign trend was J. C. Penney, which actually

US Office Products Industry Annual Review 2011

Amazon This year, the massive online retailer Amazon took the specialist OP retailers head on in its marketing speech, no matter what the season was.

A promotional statement on its office supplies webstore front said: “From small business owners and office managers to freelancers and consultants, everyone has a lot of work to do, and shopping multiple office supply sources for essential office products and office supplies

US Office Products Industry Annual Review 2011 | Alternative channels isn’t the most productive use of time.”

Ouch! It continues: “Without those essential office products and office supplies, though, conducting business becomes difficult. Instead of spending time running office supply errands or managing multiple sources for the best prices, let us do the work for you.” Double ouch!

And Amazon wasn’t finished there, painting an almost Norman Rockwell-style utopian vision of shopping for office supplies at the world’s number one online retailer. It added: “When you buy office supplies online you get the convenience of having your office products and office supplies delivered to you. When you pair that convenience with the Office Supplies & Office Products Store here at Amazon.com, you get the added benefits of an enormous selection so you get the exact office products you want; competitive marketplace pricing so you can save on the office supplies you need; and the security of getting your office supplies online from a trusted leader in online sales.”

You know Amazon has become a serious threat to specialist OP channels when people start clamming up about them. That’s starting to happen quite a bit now, even though Amazon’s $34.2 billion annual revenue is a fraction of long-time Bogeyman Walmart’s $405 billion.

Opportunities The threat of Amazon is clear, but so is the opportunity presented for smaller online OP retailers as shown in OPI’s Hot Topic entitled ‘Beauty or Beast’ (see OPI #207). As Amazon is a trading platform as well as a giant retailer in its own right there is an opportunity for its marketplace sellers, including independent dealers, to grab a portion of the Amazon sales traffic.

Dan Callies, Director of Amazon’s US Office Products store, says that the

The e-commerce results Media Measurement and Media Behavior Institute also found that the most precious of all BTS consumers, namely mothers, are increasingly consuming media through mobile phones. Mothers aged 18-33 were reported to consume more media through their mobiles than the medium of television, with the majority preferring interactive ads such as those found online.

Getting back to e-commerce, even some independent OP e-tailers fared well in the BTS season this year. One reseller in particular that witnessed significant growth is Wisconsin-based online OP reseller DiscountOfficeItems.com. The company reported that its sales increased by 30% during the BTS season.

“This year our focus was more targeted marketing to those shopping for school supplies,” said Joe Schaefer, VP of Sales and Marketing.

“We’re confident that new presentation methods helped customers find what they were looking for quickly and easily.”

Consequently, DiscountOfficeItems.com was ranked number 369 on the latest Internet Retailer Top 500 Guide and its sales are projected to exceed $30 million this year.

According to NPD, during this year’s BTS season, the e-commerce retail channel saw the most growth at 9%. And it wasn’t just the usual suspects dominating online market share. Although e-commerce and superstore retailers such as Walmart and Amazon fared well online, the big boxes also continued to make headway in the channel.

Research conducted by BIGresearch this year found that consumers were increasingly purchasing items on the web. Appropriately, it was the tech-savvy college-aged respondents that took to this platform in droves, with 33.4% claiming that they would shop online in 2011 up from 28.6% in 2010. However, older respondents also showed a liking of the medium citing its cost-efficient nature, alongside its convenience, as major draws.

Taking these trends into account, the big boxes further focused on their online strategies. Staples recently implemented a new IBM e-commerce software implementation to improve page download times on its website. Office Depot, on the other hand, concentrated on mobile commerce (m-commerce). This year the retailer introduced a competition that offered shoppers the chance to win prizes, including BTS coupons, by using their phones to take photos of speciality tags located around Depot stores nationwide and then mailing the images to the retailer.

M-commerce shouldn’t be taken lightly, however, according to Deloite LLP. In a recent survey, the market researcher noted that 64% of respondents said that they planned on using their smartphones to shop for BTS products online. Recent findings by the Coalition for Innovative

company is dedicated to increasing the percentage of products offered and fulfilled by Amazon but that the number of OP sellers on its marketplace has grown substantially since the launch of the store in 2008.

He explains: “Marketplace sellers are, and always will be, an important part of the Amazon shopping experience. There are certain areas, high-end pens for example, where we rely heavily on these sellers. Also, a large percentage of our sellers are using ‘Fulfilment by Amazon’ which allows them to provide Prime benefits to their customers.”

The ‘Prime’ referred to here is Amazon’s subscription-based VIP delivery service introduced in the US in 2005. While hardly universally welcomed by analysts at the time, who were sceptical of its upfront annual fee of $79, its guaranteed ‘free’ delivery of Amazon-fulfilled products within two days across the vast US has been credited with playing a significant role in the company’s dynamic share price and sales.

Brant Williams, Chief Marketing Officer of ReBinder, a Seattle,

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Consumer websites The recent explosion in consumer websites has been quite alarming. They are cropping up all over the Internet and in particular in the US and even more particularly around families searching for the best deals.

Websites such as couponcouch.org, consumerqueen.com, forthemommas.com, pennypinchinmom.com and couponfairies. com are all providing an online community of bargain hunters and price comparers to beat any advertising or slick marketing Washington-based manufacturer that has had much success with Amazon following the June 2010 launch of its zero waste office products, told OPI that Prime made all the difference.

He says: “When we chose to have Amazon sell our products, it was imperative that we were fully inclusive in Amazon Prime. I know, as an end-user, when I’m shopping on Amazon I always favour the products that are shipped by Amazon and are included in Amazon Prime.

to reach the hearts and minds of US consumers.

In the vital BTS season these sites were being updated on the hour and the big winner appeared to be pharmacy giant Walgreens, affectionately known by the sites’ users as ‘Wags’, which was hailed as the winner of the BTS bun-fight by many US consumers. Despite annual revenues of $67 billion, Walgreens is hungry for more and seems to have captivated the BTS audience. opportunity for OP wholesalers that is much more of a defined article than the drip-drip revenue possibilities available to dealers.

Callies says: “We do procure office products and consumables from wholesalers. Our goal is to provide a wide selection of products to our customers and these wholesalers have products from

California-based Newegg.com has come a long way since Taiwanese immigrant Fred Chang founded it in 2001. It now boasts annual revenue that tips over the $2.5 billion mark and in 2009 it was listed as #234 on the Forbes America’s Largest Private Companies list. As its revenues have grown so has its product offering and it now boasts a comprehensive selection of traditional office products, not to mention some 16 million registered customers at last count. It also now has several web-storefronts including its primary US site Newegg.com: NeweggBusiness. com for corporations, resellers, schools and non-profit organisations; a Chinese site (Newegg.com.cn); and

“I know in the world of a B2B enduser two days is a long time, but not for the B2C market” – Brant Williams, Chief Marketing Officer, ReBinder “It makes a huge difference to any purchaser, corporate or otherwise, to be able to wrap up a number of their purchases into one shopping cart and then get them very quickly. The usual shipping time by Amazon in the US is between 5-7 days, so two days guaranteed really makes a difference.

I know in the world of a B2B end-user two days is a long time, but not for the B2C market.”

Despite the opportunities for dealers on Amazon the truth is that this is not the place for independent OP dealers to build up brand loyalty or stake a strong business case, as you don’t typically build up any customer loyalty on Amazon as a marketplace trader. A customer needs a product, finds it on the marketplace and instantly forgets who supplied it.

Interestingly though, Amazon does present a potentially tantalising

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manufacturers where we do not have direct relationships. There are also certain situations with large and/or heavy products where it makes sense to have the wholesaler ship directly to the customer. For these products it doesn’t make sense logistically to ship the product from the wholesaler to Amazon and then from Amazon to the customer.”

A good egg While many of the names discussed so far are familiar household brands known the world over, private companies are also stealing a march and none more so than online computer hardware, software and accessories retailer Newegg.

US Office Products Industry Annual Review 2011

ChiefValue.com, a sister website of Newegg.com which contains mainly computer products.

There’s little question that in 2011 pressure from alternative retail channels on the OP industry grew.

And while this appears to be a case of swimming against the tide there is still plenty of opportunities for specialist OP retailers to flourish, providing they keep themselves well versed in what these competitors are doing. The motto here really should be: know your enemy.

Tech

Happily burdened with the obstinate reputation of being the great business leveller, technology in all its guises has been another powerful business motivator in 2011

on track

by Bruce Ackland bruce.ackland@opi.net

I

Ron Books 36

n the battle against the power channel, office products companies have been presented with even more shiny technology tools with which to capitalise on this year.

In 2011 there has been a particular focus on utilising the latest mobile and smartphone capabilities, managed print services (MPS), leveraging data to improve overall performance, the now common presence of cloud computing and search engine optimisation (SEO) to name a few.

Generally speaking, it appears that dealers are feeling better about the economy and know they need to make those technology decisions that they have been delaying if they want to stay competitive.

In the words of ECi Solutions CEO Ron Books: “Technology is so important to success nowadays and those that utilise it successfully will continue to compete and see returns.”

Success is something ECi saw a lot of in its second quarter, reporting that it had signed up 259 new customers in the first half of 2011, of which 73 were for new systems in the office products channel and 89 for its value

US Office Products Industry Annual Review 2011

added solutions which include the Acsellerate business intelligence software and FMAudit MPS offering. The company followed this strong quarter by buying rival software provider Digital Gateway, that’s e-automate dealer management product had been a strong competitor for ECi’s own OMD and La Crosse products for some time.

Data ECi has also been keen to ensure dealers give due time and consideration to improving and refining technology offerings, in particular in the area of leveraging data and self-service reporting and capture solutions.

By the second half of the year, ECi was helping dealers to compete more effectively with the big boxes with its new on-demand customer intelligence software Cxintelligence – from subsidiary Acsellerate. The software allows specific end-users to access their purchase information through interactive dashboards and detailed reports with the aim of helping independents compete better and win new accounts.

BMI USA enjoyed a year that included the company’s best pipeline of prospects since 2007, again demonstrating dealers’ desire to move forward with technology. It’s also had a busy time working on its hosted version giving smaller dealers the opportunity to use the same technology as the company’s larger customers.

US Office Products Industry Annual Review 2011 | Technology At JumpTech, John Freund looked at the benefits of using the power of a tablet computer, such as the iPad, Motorola Xoom or Samsung Galaxy, in the catalogue space.

Part of the wider discussion on the future of catalogues, tablet computers offer the ability to provide new and innovative ways of delivering catalogues to customers.

They provide a platform that allows printed catalogues to be replaced and offer new options such as product demos and video.

JumpTech also had an industry first by releasing a mobile device-based electronic signature and route tracking system. Branded JumpPOD, the mobile app allows delivery drivers to collect signatures and customers to check delivery statuses through their smartphones and tablets. The app is designed to make it easier for dealers and distributors to track deliveries, improve fleet productivity and reduce service costs.

Freund says: “JumpPOD leverages iOS and Android devices to provide drivers a simple to use proof-of-delivery app that’s also inexpensive to deploy.”

According to JumpTech, distributors with medium to large fleets can save tens of thousands of dollars in device costs by using the app, which is priced at $75 per truck per month.

For MBS Dev, 2011 was the year when the dust truly settled on its acquisition by United Stationers. Customers appeared to be very comfortable with the arrangement as MBS continued to act very much as a separate business unit. The company was also busy creating marketing and merchandising tools in the Microsoft CRM and Dynamics AX solution as well as the integration of the Microsoft CRM and Microsoft POS to Dynamics AX. Meanwhile, SEO became an increasing focal point at AOSware. Writing in OPI some time ago, the words of AOSware’s Jennifer Stine’s still ring true. She said: “With organic and paid ranking factors evolving at a rapid pace and engines constantly changing the way they serve us search results, complacency could

Andrew Morgan

equate to disaster for search marketers. Stay on top of the changing landscapes and search marketing techniques because, in the end, it will be well worth it.”

As an addend to this, AOS’s parent company Online Ventures USA launched PostMySite; an online marketing firm focusing on the office products industry and other similar vertical markets, with the primary focus of helping OP dealers increase online visibility.

Also on AOS’s mind was the unemployment situation in the US and the consumer’s desire to help wherever it can. As a result, AOS designed a feature for its software platform that highlights products made in the US – thus appealing to a fast-growing number of consumers looking to do their bit to help safeguard American jobs.

Stir E-commerce provider Red Cheetah caused quite a stir in 2011 when it acquired consultancy firm Blue Planet. The move saw Blue Planet head honcho and former Corporate Express Merchandising VP Greg Shewmaker join Cheetah as COO. Cheetah boss Andrew Morgan teased that his firm would be looking at focusing on areas outside of the traditional remit of software providers.

Morgan told OPI: “At Red Cheetah we are focused on the well-being of the independent dealer, and if there’s anything that we can do, whether that be from a costing perspective, or a selling/marketing/merchandising perspective, we are going to do everything we can to leverage that for the dealer.”

It certainly was a very progressive, which is not to say aggressive, year for Cheetah as it used its third and fourth quarters to target the customers of rival ECi – enticing dealers to move away from ECi’s Britannia platform with no upfront fees and the waiving of seat charges for three months.

In response, ECi said: “Today, independents are looking at more than just the cost of the system. They are looking to win against the power channel on brand, features and technology and invest in software that promotes productivity. We think we provide the best value for their money and highest return on their technology investment.”

With mobile apps, the rising take-up of cloud computing, greater understanding of the opportunities presented by SEO and the leveraging of business critical data, there is no shortage of technology-based tools out there. In 2012 you can expect this to be further refined and, yes, even added to with the biggest headache for dealers being which silicon path to go down. www.opi.net/USAnnualReview2011

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Sponsored article | Hewlett-Packard

Real reliability adds up to customer loyalty It seems a simple question: how much does a business spend on printing? If your customers are using remanufactured cartridges, they may be spending more than they know

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our customers may focus on initial price when purchasing printer supplies, but a smaller up-front bill is often a down payment on disappointment. Remanufactured cartridges simply can’t match the reliability and quality of Hewlett-Packard (HP). When it comes to real, long-term value, Original HP supplies live up to their promises – and that’s something your customers will come back for again and again.

Help your customers avoid the domino effect As a leading manufacturer of plastic and metal products, Lifetime Products knows a thing or two about HP reliability. The 25-year-old manufacturer of folding tables and chairs has relied on HP devices since 1992, and its employees print with HP multifunction devices daily.

But when Lifetime decided to use remanufactured cartridges, Chief Information Officer John Bowden began to see small printing problems quickly escalate into major issues.

“We noticed toner from the remanufactured cartridges was getting caked on the inside of our devices,” Bowden says. “Pretty soon, we had a domino effect. It was resulting in fewer prints per cartridge, shortening the life of our devices, and costing us a lot of money in repair expenses.”

After switching to Original HP cartridges, Lifetime experienced fewer reactive repairs, a reduced need for preventive maintenance and a greater print yield per cartridge. When Lifetime added up the resulting savings, it

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determined that switching to reliable Original HP cartridges lowered its total cost of printing by 13%.1 “We’d never had so many issues with our HP printers before, and had no idea remanufactured cartridges might be the problem,” Bowden continues. “We report significantly fewer problems with our printers now. We couldn’t be happier about switching to HP cartridges.”

Build loyalty with reliable performance Lifetime Products is hardly alone. In fact, an HP-commissioned third-party study by QualityLogic highlighted HP’s superior reliability and revealed serious problems associated with remanufactured cartridges.2 More than 40% of all non-HP toner cartridges that QualityLogic tested exhibited some kind of problem.

Only the Original HP LaserJet toner cartridges worked every time, with no reliability problems.2 Costs associated with unreliable cartridges can add up for your customers as their employees waste time dealing with problematic cartridges and the need for replacements, reprints and mounting repair costs. Unreliable cartridges can also result in more returns, service calls and unhappy clients for you. Why risk the costly problems that remanufactured cartridges can create? Original HP LaserJet toner cartridges deliver the efficient, reliable printing experience your customers expect and can lower support costs for your business.

US Office Products Industry Annual Review 2011

Print to impress Bargain print cartridges aren’t much of a bargain if they produce smudged, streaked, or hard-to-read pages that aren’t fit for distribution. And for your customers, print quality can mean the difference between making a good impression and losing the sale.

Original HP cartridges offer reliably consistent quality page after page, whereas remanufactured alternatives often degrade over time and print pages that aren’t fit to be seen – inside

Hewlett-Packard | Sponsored article

What’s more, unlike most remanufacturers, HP‘s portfolio of cartridge types and sizes helps you offer more choices to your customers, according to their printing needs.

Your customers with high-volume printing environments can reduce their cost per page by up to 35%4 and replace cartridges less often with Original HP high-capacity cartridges.

HP multipack cartridges cost an average of 10% less compared to their standalone counterparts, and give your customers the convenience of always having a back-up cartridge on hand. or outside your customers’ walls. In fact, during QualityLogic tests, an average of 39% of inspected pages printed with remanufactured and other non-HP toner cartridges were of limited or no use, whereas 97% of the pages printed on Original HP cartridges were acceptable for all uses.2 Low-quality output isn’t just a hassle – it’s a liability. Choose HP and help your customers set themselves apart with consistent, professional-quality prints that always make a winning impression.

Help your customers get more for their money Superior quality and reliability isn’t just something your customers can count on; it creates savings they can bank on. Remanufactured cartridges’ hidden costs can add up to nearly double the price of Original HP toner cartridges3 because HP’s consistently impressive page quality can mean less wasted toner and paper, as well as greater productivity and fewer support calls. When your customers take all those factors into account, it’s easy to see how Original HP cartridges can lower their total cost of printing.

Trust HP to help your customers conserve energy and resources More and more, your customers may be coming to you to help them meet their corporate environmental goals.

Believe it or not, the reliability and consistent page quality that Original HP supplies deliver not only save your customers printing costs but can also help them to conserve energy and resources. Using Original HP supplies can lead to fewer reprints, reducing the need for unanticipated replacement supplies and saving energy, paper, and toner.5 In fact, Original HP LaserJet toner cartridges use up to six times less energy and paper for reprinting than tested remanufactured and other non-HP toner cartridges.5 HP also offers Planet Partners, a free, convenient recycling programme that converts material from HP cartridges into new products, including new Original HP cartridges.6 The 2011 Newsweek Green Rankings of the largest US and global companies recognised HP as a leader, and your customers can rely on the fact that HP cartridges returned through Planet Partners are never sent to a landfill.6 Help your customers meet their environmental goals and their

2

HP calculation based on a QualityLogic 2010 study commissioned by HP comparing Original HP LaserJet monochrome print cartridges with non-HP toner cartridges available in Europe, the Middle East, and Africa for the HP LaserJet P1505 and P4015 Printers, HP 36A and 64A. For details, see www.qualitylogic. com/EMEAmonotonertest.pdf. Calculation includes paper, cartridge replacement and labour for reprints.

Assumes equal number of pages for external, internal and individual use. Labour rate from Mercer 2009

3

Give your customers the reliability, quality, value and environmental responsibility they want Knowing how much printer supplies cost shouldn’t be a game of wait and see. So-called bargain remanufactured cartridges may boast a lower price tag, but the hidden costs associated with reprints, repairs, replacements, wasted staff time and energy use can add up in the long run.3 Give your customers what they’re looking for: a brand they can trust, value they can count on, cost-saving choices they need, and environmental responsibility they prefer. Build loyalty through HP’s standout quality, superior reliability, and maximum value – and watch your customers come back for more.

Global Pay Study. Assumes purchase price for HP print cartridge is 1140 and 42% lower purchase price for a non-HP toner cartridge. Actual prices, costs and savings may vary

A full case study is available at http://h20195.www2.hp.com/V2/GetPDF.aspx/4AA3-6027ENW.pdf

1

A QualityLogic 2010 study commissioned by HP comparing Original HP LaserJet monochrome print cartridges with nine brands of non-HP toner cartridges available in Europe, the Middle East, and Africa for the HP LaserJet P1505 and P4015 Printers, HP 36A and 64A. For details, see www.qualitylogic.com/ EMEAmonotonertest.pdf

business goals all at once – choose Original HP LaserJet toner cartridges.

Cost-per-page calculations based on ISO/IEC 19752 yield and web-based SRP for HP (X) cartridges versus their standard (A) cartridge counterparts. Does not cover (X) cartridges that do not have an (A) equivalent

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HP calculation based on the average results for 2010 mono QualityLogic study (www.qualitylogic.com/ EMEAmonotonertest.pdf). Estimated carbon footprint calculation includes paper and printer energy use for reprints. Assumes equal number of pages for external, internal and individual use. Actual results may vary

5

Programme availability varies. Original HP cartridge return and recycling is currently available in more than 50 countries, territories and regions in Asia, Europe, and North and South America through the HP Planet Partners programme. For more information, visit www.hp.com/recycle

6

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Three’s a crowd Once again, the three main OP categories, namely furniture, cleaning and breakroom and core office products, have faced their fair share of ups and downs during the year Manufacturing results

by Saqib Shah saqib.shah@opi.net

O

PI has covered the furniture, cleaning and breakroom, and core office products categories extensively throughout the year. Each segment has faced numerous challenges in regard to different aspects of the supply channel in 2011. However, all three have shown some signs of growth and continue to hold plenty of opportunity.

Meanwhile, the product offering in each category, but particularly in the cleaning and breakroom sector, continues to increase.

With product shelves bulging with SKUs and companies introducing new logistics initiatives to meet varying demand, keeping up with the progress of these disparate categories can seem daunting.

OPI has tracked the full-year progress of the three individual segments during what has been an eventful period for the entire supply channel.

The major manufacturers in the furniture category have reported solid financial results throughout the year. In its recent third quarter statement, HNI stated that its sales increased by 9.9% to $504 million and sales for its office furniture segment increased 8.9% to $422 million. Looking ahead to its fourth quarter, the company said that sales for its office furniture business are expected to increase 4-6%.

Meanwhile, earlier this year leading furniture manufacturer Steelcase reported a strong first quarter for its American division, with year-on-year organic sales jumping 26%. “Growth was strong, with almost every vertical market in North America reporting double-digit revenue growth over the prior year, and our new products continue to gain traction in the market,” explained CEO Jim Hackett.

At the same time, manufacturer Herman Miller announced solid results. The company witnessed sales of $458 million, up by over 20% compared to 2010.

Operating earnings for the quarter saw an even larger percentage increase of 68%. “Despite ongoing volatility in the financial markets and a cautious pace in the broader economy, our business has shown remarkable resilience,” commented CEO Brian Walker. In fact, Walker’s comments sum up the view for manufacturers operating in the sector as a whole.

Furniture

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gainst all the odds, the furniture sector has performed reasonably well this year. A quick glance at market conditions in general, however, reveals that the sector is performing under unpredictable circumstances.

External factors currently affecting both furniture output and sales include volatile global markets, fears of a double-dip recession and a high unemployment rate of over 9% in the US. This year also marked a contraction in US manufacturing for the first time since 2009.

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US Office Products Industry Annual Review 2011

US Office Products Industry Annual Review 2011 | Category reviews Bloomberg reported that the Institute for Supply Management’s manufacturing index fell to 48.5 last month from 50.9 in July.

The dividing line between expansion and contraction is 50, a level that the gauge last fell below more than two years ago. This, coupled with the increasing market penetration of Chinese and European exporters, has damaged sales further.

Therefore, the fact that furniture manufacturers and wholesalers continue to report positive results in regard to the sector is nothing short of miraculous. As OPI found out, the major manufacturers in the sector have all reported growth this year (see ‘Manufacturing results’ on page 40). Meanwhile, wholesalers such as United Stationers have made a bigger push into the market this year, with varying results.

With the furniture market currently valued at $20.5 billion by research firm IBISWorld, it’s no wonder that more companies want a share of it. According to IBISWorld, if the unemployment situation in the US stabilises the market could grow by over 3% annually over the next five years. The future holds plenty of opportunity for companies that can secure a place in this thriving category.

Read on to find out which companies are doing just that.

Against all odds, the furniture sector has performed reasonably well this year

Hard times for wholesalers The two major wholesalers in the US have not fared as well as furniture manufacturers in regard to the category. Wholesalers are currently feeling the brunt of the pressure in this area as they struggle to compete with manufacturers, who are increasingly incorporating the wholesale function into their businesses and creating direct links with retailers.

If the unemployment situation in the US stabilises the market could grow by over 3% annually over the next five years Despite reporting overall growth during its third quarter, SP Richards stated that its furniture division was its only main category to witness a decrease in sales. However, the impact of United’s lower sales can be viewed as greater as it made a bigger push in the category. In September, United teamed up with US furniture vendor Bush to offer a new turnkey programme for resellers, one of a number of initiatives by the wholesaler in the category. The wholesaler partnered with Bush’s business furniture unit to offer an

office suites bundle programme that features services such as market-ready advertising materials and delivery.

The programme features a collection of Bush business furniture modular office suites that have been pre-configured and are offered as a single-SKU bundle. Each bundle includes either delivery or ‘white glove’ delivery with installation, depending on customer needs.

United also added a number of enhancements to its Visual Planner tool, which allows its resellers to plan projects with existing and potential customers. New features included the addition of products that United doesn’t hold in stock and the ability to click a button on the bill of the materials page, which generates a quote that is sent to United’s customer care team.

These changes show just how serious the wholesaler is about its furniture offering.

However, the recent announcement of United’s poor third quarter results in regard to furniture sales, proves that this is a hard sector to penetrate. The wholesaler’s sales for the category were down 9.8% compared to last year, a much larger decline than it witnessed in both its office products and technology segments. www.opi.net/USAnnualReview2011

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grew by 23.7% and 10.6% respectively.

The company addressed its growth in the segment in a recent statement issued to OPI. “Our jan/san and breakroom initiative in the office channel, called OfficeJan, has shown double-digit growth in 2011,” explained United. “Office channel resellers are leveraging our deep product offering, category expertise, and advanced logistics to grow their businesses. These capabilities enable resellers to offer customers more of what they need from a single source.”

As well as the other initiatives launched in 2011, United Stationers demonstrated its commitment to the breakroom segment by making big strides into the coffee market with its Office Coffee programme (see box ‘The sweet smell of success’ below).

Meanwhile SP Richards teamed up with dealer group TriMega in September to launch a joint supply chain programme called Paper3, which combined jan/ san and paper products in one shipment. It is no wonder that the wholesaler

Cleaning and breakroom

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he cleaning and breakroom sector has consistently been a top performer for the supply channel. Time and again sales of hygiene and catering products have come to the rescue for wholesalers and dealers in an otherwise volatile market.

As Ralph Bianculli Jr, Director of Paradigm Group, puts it: “This is a resilient category that offers value through plurality.”

That doesn’t mean that the market hasn’t changed. Like most categories, cleaning and breakroom has seen its fair share of disruption due to the current economic climate. United Stationers for one has noted considerable changes in the marketplace.

Mike Miller, United’s VP of jan/ san and breakroom, attributes this to several determining factors, including a slower-than-expected economic recovery, continued softness in white-collar employment and increased end-user budget control pressure.

“Fewer people working equals fewer people using jan/san items,” he says. “With tighter budgets, the frequency of office cleaning, such as the stripping and waxing of floors, has been reduced, which equates to lower spend on jan/ san products.”

However, United itself has seen consistent growth in the sector. In its third quarter report the wholesaler’s net sales grew to $1.31 billion, mainly due to a rise in its industrial supplies and janitorial/breakroom categories, which

The sweet smell of success According to the National Coffee Association, coffee and coffee-related products accounted for $4 billion in sales during 2010. In addition, nearly 14% of all coffee consumed in offices and business settings is purchased through the office products channel. Facts such as these have led many OP dealers and wholesalers to enter the breakroom fray.

Perhaps the attraction lies in the status of beverages such as tea and coffee as add-on products for OP dealers, which can be sold more competitively than through office coffee services dealers that must cover all their costs on this sale. Although it’s not an easy market to break into, those dealers and resellers that have effectively targeted their customers have reaped the rewards.

Earlier this year United Stationers decided to step into the coffee arena with its turnkey Office Coffee programme, citing the segment’s booming sales trends as the deciding factor in its decision. United’s Office Coffee programme includes: a coffee market overview and opportunity prospectus; details surrounding coffee end-user expectations; competitor analysis; and a marketing, promotional overview.

One of the biggest partners for manufacturers alongside resellers has been coffee hardware provider Keurig. Part of the Green Mountain Coffee Roasters stable, Keurig’s products are sold by the big boxes and by OP dealers. Staples recently claimed that the biggest initiative in its US retail is Keurig single-serve coffee and brewers. The retailer currently stocks 26 varieties of Keurig coffee portion packs in all its stores.

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US Office Products Industry Annual Review 2011

US Office Products Industry Annual Review 2011 | Category reviews

“This is a resilient category that offers value through plurality” – Ralph Bianculli Jr, Director, Paradigm Group targeted the sector, as it has seen doubledigit growth in the category for the past five years.

The big boxes have also witnessed growth in the category throughout the year. Staples, which continues to outperform its big box rivals, saw its facilities and breakroom initiatives come good. The category grew by 13% during the retailer’s second quarter and also contributed to growth at retail.

Earlier this year Staples expanded its jan/ san and breakroom assortments in around 400 stores and added that a further 400 were to follow suit.

Meanwhile, Depot reported double-digit growth in the sector and OfficeMax also saw growth in its jan/san segment.

The importance of jan/san training: what the industry says One thing most commentators agree on is the essential nature of training and support in the jan/san sector going forward. OPI spoke to a variety of OP companies on the subject, here is what they had to say.

“Wholesalers, distributors and suppliers are increasingly recognising the importance of cleaning and breakroom specialists that support their sellers and customers.

“Specialists are vital to training the everyday sales representative. They bring skills and knowledge that are crucial to becoming a ‘destination’ resource and capturing larger end-user business.”

Butch Ellis, VP, The Highlands Group “Over the last half-decade or so, specialists have become mandatory because decision-makers are more carefully choosing what types of products they are purchasing, particularly for sustainability and efficiency purposes. We are seeing

more educated decision makers at higher levels purchasing jan/ san, which in turn has called for specialists to represent the category correctly.”

Ralph Bianculli Jr, Director, Paradigm Group “More training is required and specialists will need to be added to the dealer’s sales organisation.

It will be extremely difficult for an OP dealer to progress to the level of being a destination for jan/san without experienced staff. Jan/san is still a product sale business so product knowledge is a key component in being perceived as a category expert.”

Mike Miller, VP JanSan and Breakroom, United Stationers

The status quo may have won in the past but that was yesterday’s story. The Highlands Group anticipates future trends and continues to evolve their single source sales model beyond traditional field sales. With national account management, national field sales coverage, expertise in eCommerce, Cleaning and Break room and marketing support,

The Highlands Group is changing the expectation of what a sales firm should be.

Sales Representation and Marketing Services www.TheHighlandsGroup.com

©2011 THE HIGHLANDS GROUP

www.opi.net/USAnnualReview2011

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Core office products

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he core office products category has traditionally provided a reliable market for the OP supply channel. Whereas other product ranges, such as technology items, have proved troublesome for some, core office products generally come good for manufacturers in particular.

This is despite the fact that the broad status of the category in regard to product range means that it is influenced by differing market trends, including the back-to-school (BTS) season and commercial consumer trends toward paper light, or paperless, offices.

However, it hasn’t been plain sailing all year long for 2011.

With the big boxes focusing on other areas such as the technology category, as previously mentioned, it seemed that the core OP sector was being neglected. There’s no doubt that this was in part due to the threat of alternative channels, including mass market retailers and e-tailers such as Amazon and eBay moving in on the area (see ‘Alternative remedies’ on page 30).

To some people, though, the sector as a

whole has stabilised after a troublesome post-recession period.

“We have started to see a slow economic recovery in the US,” admits Gary Blanchette, EVP at Amax, which distributes Stanley Bostitch throughout the US. “As the labour markets recover, the demand for core products should continue to improve.”

Improve it has, particularly for manufacturers, several of which have seen growth in the sector this year. In its third quarter results Fiskars, winner of the Core Office Product of the Year Award at the North American Office Products Awards 2011 for its

“As the labour markets recover, the demand for core products should continue to improve” – Gary Blanchette, EVP, Stanley Bostitch/Amax

Core office products generally come good for manufacturers in particular

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US Office Products Industry Annual Review 2011

Cuts+More Scissors, reported growth in North American net sales of 6%, with added growth in the office and craft segment.

Meanwhile, Newell Rubbermaid’s office products segment posted third quarter net sales of $474.9 million, a 5.5% increase over last year. However, Avery Dennison did not perform as well as its competitors, citing a soft BTS season as the cause, further linking the two sectors. Lastly, 3M also reported sales and operating profit increases at its Consumer and Office division. The division’s sales for the third quarter were $1.1 billion, a 4.6% increase over the previous year.

On the wholesaler side United Stationers has found success in its private brands range of office products. The company told OPI that resellers that have purchased its private label range have witnessed growth in their businesses. As a result, United is constantly adding to its private label offering.

“Universal, as the independent reseller’s brand, has added over 100 new items for 2012,” the company said in a statement. “These include shredders, binders, chair mats, desk accessories, boards, rule pads, tape flags and so on. Universal’s 1,300 high-quality, high brand recognition products deliver a good assortment that is priced to allow broader margin opportunities for resellers.”

As United’s comments show, the core office products category can still bring growth to those who are willing to devote time to it. But as the mixed results for the segment demonstrate, it has not only been relegated of late by some, but many OP companies just aren’t sure how to approach it in the face of competition.

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Show of the year The night glittered during the North American Office Products Awards (NAOPA) 2011, which took place during SP Richards’ ABC in Las Vegas

O

n 27 June, in the ballroom of the Mandalay Bay Hotel and Casino, an audience of almost

2,000 attendees gathered to watch the presentation of the second NAOPA. The increased number of entrants and strong shortlists demonstrate how the evening is becoming cemented into the office products calendar.

This year’s winners were decided by a judging panel comprising more than 40 well-respected industry professionals and SP Richards executives, which met in Orlando, Florida on 28 March. The award categories had been compressed into six product categories, as well as an Overall Product of the Year Award, which went to Hewlett-Packard for

its HP Envy eAll-in-One Printer with HP ePrint.

The awards dinner itself followed true Vegas style. A brace of showgirls accompanied Steve Hilleard on stage and were on hand to help award presenters dish out trophies.

Entertainment from the famed singing sensation On the Rocks got the audience in the mood to celebrate.

Read on to find out what made each product an award winner.

Entrance for the NAOPA 2012 is now open. For more information visit www.opi.net/NAOPA2012

Best Product – Cleaning and Breakroom Winner: Kimberly-Clark Professional with the Kleenex Slimfold Towel System This product is designed to fit into tight places inside or outside the washroom without sacrificing hand-drying performance. The one-at-a-time dispensing reduces waste and at a compact 14 inches high and 2.75 inches deep, it dispenses a regular-sized towel that folds five times instead of two for the same drying ability in a compact size.

In the judges’ opinion, the Kleenex Slimfold Towel System is a very saleable product, as many smaller offices face the challenge of how to fit a towel dispenser in a small space.

It also provides the lucrative opportunity for a dealer to continue to sell consumables, which is where the real money is made.

From left: Presenter Michael Morris from TriMega, Ron Beal, Dawson Bond, Emilio Gurrea and Vic Hodges

Best Product – Furniture Winner: Mayline Group with the TransAction Conference Table

From left: Don Clements, Dianna Fronk and Presenter Sean Macey of Basics

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Mayline’s aim is to develop innovative designs that provide good features and quality, but at pricing that small- to mid-sized businesses can afford. To meet this aim, TransAction conference tables are sleek on the outside, but very smart inside. The table’s base and surface have a high-end appearance, but inside it contains critical technology-support features.

US Office Products Industry Annual Review 2011

The judges believed that this was far and away the best furniture product they had seen for a while, and it received an almost unanimous vote.

Few people, nowadays, have a meeting without laptops and cables present but there is still a need to have an attractive conference table; this product presents a neat solution. Dealers felt that they could sell this product, and that it is good value for money.

US Office Products Industry Annual Review 2011 | NAOPA 2011

Best Product – Core Office Products Winner: Fiskars Brands with Cuts+More Scissors When designing this product, Fiskars wanted to meet everyday needs.

Consumer research found that general-purpose scissors are the most used tool by end-users, followed closely by the general-purpose knife.

The company decided to combine these elements and developed a multipurpose tool that’s functional.

In terms of branding, the one orange-handled, stainless steel blade

is a reference to Fiskars’ heritage. In short, the judges believed that Fiskars is an excellent example of a company taking a core office product and really improving it through innovation. They were extremely impressed by the product’s simplicity, coupled with its versatility, which were demonstrated in the excellent product video.

From left: Presenter Jerry Bircher of Express Office Products, Tammy McHenry-Cunnion, Joe Rodriguez and Theresa McArdle

OVERALL PRODUCT OF THE YEAR AWARD Best Product – Technology Product Winner: Hewlett-Packard with the HP Envy eAll-in-One Printer with HP ePrint

From left: Herbert Koeck, Presenter Bob Ray of ICC Business Products, Tappan Guha and Michele McIntire

HP believes that nowadays customers want to print anytime, anywhere.

In the past they needed a direct connection between a PC and a printer, as well as the software.

However, with HP ePrint, the location of devices that can access a web-connected HP printer is limitless. The HP ePrint has been designed to transform the mobile printing experience.

This product blew the judges away. It is deemed to be the future of technology. On a practical level, the judges believe the HP ePrint to be very saleable, as it can be used in a small office, for remote working and for hot desking.

As a product that the judges believe will represent the industry in the future, it received a unanimous vote in its category.

Best Product – Environmentally-friendly Product of the Year Winner: Deflecto with the Enviromat Chairmat This product has an extremely high environmental claim: it’s made from 100% post-consumer waste water bottles. As well as this it is 100% recyclable and made using no petroleum-based virgin resources.

The judges were extremely impressed by the high environmentally friendly factors that this product displays.

The Enviromat Chairmat still has all the features that a chairmat needs, such as a textured surface that resists scuffs and a harder rolling surface to ease chair movements. However, when this is added to such high environmental credentials the product became the clear winner in this category.

From left: Bill Schwartz, Chris Grow, Presenter Chip Hummel of Hummel’s Office Plus and Dave Vinsel

Best Product – Product Innovation of the Year Winner: Newline Products with the IdeaMax R5-600 Interactive Whiteboard

From left: Presenter Felicity Francis of OPI, Chris Bradford and Steven Rosson

IdeaMax combines state-of-the-art finger-touch technology with a durable porcelain steel surface for a scratch-resistant, dry-erase friendly interactive whiteboard solution. It lets users view and interact with their computer software and is compatible with existing PC multimedia setups.

While the IdeaMax whiteboard is not the first of its kind on the market, when seen in action the judges believed that it is very sophisticated. It is particularly suited for the lucrative back-to-school market, and employs great technology through real innovation to make it a standout product. www.opi.net/USAnnualReview2011

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US Office Products Industry Annual Review 2011 | Forward thinking

Questions, questions 2011 has thrown up possibly more questions for the OP industry than answers, leaving much up in the air for 2012

by Felicity Francis felicity.francis@opi.net

L

ooking at our predictions in last year’s US Office Products Industry Annual Review, it would be easy to write a very similar article.

Rumours do continue to abound about a possible big box merger, retail might become an even smaller part of the industry, and independent dealers may well continue to make inroads into the national accounts arena.

But there are some noticeable rumours and suspicions new to this year that are worth a mention. While a Depot/’Max merger is still on the cards – or will Staples get involved? – another possibility could be a merger of just parts of the business. Both Office Depot and OfficeMax’s models are built around having a dual route to market, both retail and delivery, so could there be a merger of just one of these parts?

The big boxes probably also need to address Walmart’s apparent success with its new Express stores. With leases coming up for renewal, it’ll be interesting to see how the number and sizes of stores vary in the coming year.

But taking another tack, considering the growth of other office supplies rivals such as Best Buy and Amazon, could a big box bankruptcy be looming around the corner? Really, anything could happen. With all these options it seems that the power channel is on something of a knife-edge.

On the dealer group side, how long will TriMega continue with Point Nationwide? As a competitor to Independent Stationers’ national accounts programme, what will happen if IS continues to make the progress Mike Gentile predicts?

Similarly, Dave Guernsey’s Pinnacle group could achieve national coverage soon, which would open up possibilities for it to have its own national accounts business. This would put pressure on AOPD and raise question marks over Pinnacle’s existing relationship with IS. We haven’t said much about giant independent dealers such as WB Mason in this publication, but we haven’t forgotten them. Though just missing its billion dollar mark this

year, WB Mason CEO Leo Meehan isn’t far off his target, so where from there? Is the dealer looking to expand west? Perhaps.

As usual, we can predict that there will be a fair amount of dealer consolidation in 2012. With a market this unsteady and a high unemployment figure this seems inevitable. It is a safe assumption that MyOfficeProducts will make more acquisitions in the coming year, expanding its reach even further.

Consolidation could also be present on the vendor side. Rumours last June circulated regarding Avery Dennison possibly selling of its office division, but we have heard nothing since.

Could 2012 be the year?

So, as usual, there are a lot of question marks. As the year progresses some will be answered, although it may be that a slow-moving economy will put off some changes until 2013. But it’ll certainly be an interesting year and we look forward to seeing what happens.

With all these options it seems that the big boxes are on something of a knife-edge

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