OPI February 2013 US Edition by OPI

Big Interview

The word in office.

magazine

Ingo Dewitz, MD of Büroring p22 February 2014

Putting it all together Will Depot and ‘Max make a good fit? p30

Are we seeing ‘de-globalisation’ in the OP industry? p45 does the future hold p14 Vendor consolidation continues p49 What for writing instruments?

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Contents February 2014

www.opi.net

News

8 Round-up

New look for Guernsey; ACCO cuts jobs; Pukka acquisition; Staples stores selling iPads

45 Tom Schinkel Is the OP industry de-globalising? Tom Schinkel puts his case forward

Category Analysis

10 Beyond OP

49 Writing instruments

IS teams up with education association; Bunzl buys safety companies

The writing instruments category is increasingly being influenced by its digital counterpart

12 Analysis

53 Arts and crafts

What’s hot from CES 2014; vendor consolidation continues; Staples rebrands

The heyday of arts and crafts may be gone, but there remains plenty of potential left for OP resellers

Features

22 The future is bright

Büroring’s Ingo Dewitz explains why he is bullish about the prospects of independent dealers in Germany

Regulars

30 Making it all fit What’s next on the agenda for Office Depot as it integrates OfficeMax?

7 Editor’s comment 56 On the move

37 Mobile trendsetter

Mobilegear is a relatively new company, but it’s certainly making waves with its novel approach

40 Vendor Focus

Pilot Corporation of America has been making writing fashionable, again

59 5 minutes with... Charles Forman

60 What’s on

Key dates for your calendar

62 Final word

Diane Hund

Industry sources have suggested that new Office Depot Roland Smith is not hanging around when it comes to kicking off the integration process with OfficeMax, and that jobs are going thick and fast already.What other important decisions does he have to take in the next few months? For full story turn to page 30

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Editorial Editor Andy Braithwaite +33 4 32 62 71 07 andy.braithwaite@opi.net

Features Editor Heike Dieckmann

Editor’s comment

+44 (0)20 7841 2950 heike.dieckmann@opi.net

Sales and Marketing VP – Continental Europe, Middle East and Africa Ewan Dickson +44 (0)20 7841 2954 ewan.dickson@opi.net

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

Digital Manager India Pride +44 (0)20 7841 2959 india.pride@opi.net

Sales Executive Fergus Cox +44 (0)20 7841 2952 fergus.cox@opi.net

Events Events Manager Lisa Haywood +44 (0)20 7841 2945 lisa.haywood@opi.net

Production and Finance Operations Manager Nicky Coulson Designer Charlotte Gerhardt +44 (0)20 7841 2943 charlotte.gerhardt@opi.net

Production Assistant Jack Francis +44 (0)20 7841 2950 jack.francis@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 The carrier sheet is printed on Satimat Silk paper, which is produced on pulp manufactured wood obtained from recognised responsible forests and at an FSC® certified mill. It is polywrapped in recycleable plastic that will biodegrade within six months.

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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.

More of the same Since our last issue published in mid-December we have seen three further examples of vendor consolidation with Pukka Pads acquiring Concord Filing in the UK, ADVEO selling its Spanish production facilities (not really ‘consolidation’, I know, but it could turn into that – see pages 14-15) and Esselte’s North American business being snapped up by RR Donnelley. This is a pattern that could well continue throughout the year as secular declines in traditional categories show no sign of easing up. And of course, we’ll be keeping a close eye on the goings on at Staples and Office Depot this year. Staples has just launched a major rebranding campaign (page 16) and is adding We have updated our former new categories all Facilities Focus page, which is the time. Incidentally, now known as Beyond OP, to we have updated reflect the importance of these our former Facilities adjacent product groups Focus page, which is now known as Beyond OP, to reflect the importance of these adjacent product groups (page 8). And Office Depot is the subject of this month’s Hot Topic following its merger with OfficeMax (page 28), a story which is bound to develop as the year goes on and progress is made with integrating the two former rivals. This issue of OPI will also be available at Paperworld in Frankfurt and I hope to see many of our readers there again this year. Despite its challenges, Paperworld remains the largest international show in our industry and let’s hope it will evolve in a positive way for the office channel. All the best,

Office Products International Ltd (OPI), Diamond House, 36-38 Hatton Garden, London EC1N 8EB, UK

Andy Braithwaite , Editor

Tel: +44 (0)20 7841 2950 Fax: +44 (0)20 7841 2951

opi.net/ linkedin

@opinews

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News from opi.net ACCO cuts to hit 12% of US jobs ACCO has announced a new round of job cuts that will hit 12% of its North American employees. In a regulatory filing, ACCO said the restructuring was “primarily focused on streamlining its North American operations for school, office and computer products in light of current economic and industry conditions, and in anticipation of an uncertain demand environment and the impact of industry consolidation in 2014”. The company declined to specify how many jobs would go, but OPI estimates the number to be around 350. The reductions are expected to be completed by the end of the year. These latest measures are in addition to cost-saving actions already taken last year in North America and Europe, and are expected to lead to almost $24 million in annualised savings when fully realised in 2015.

New look for progressive Guernsey Leading US independent dealer Guernsey has unveiled the most comprehensive rebranding initiative in its 43-year history. From now on, the firm will be known simply as Guernsey, having dropped the ‘Office Products’ part of the name as it positions itself as a provider of a broader range of workplace products. The dealer’s new tagline is ‘the workplace source’ and the word ‘workplace’ is then used in other ways depending on the product category. According to CEO Dave Guernsey, there were three reasons behind the rebranding effort. “Our look was dated, having seen only minor tweaks in 43 years,” he said. “Second, our company does so much more than the name Guernsey Office Products implied. And third, we needed to integrate the former Phillips office supplies division into the Guernsey brand, so we opted to tackle the effort corporate-wide.” Consistent with the rebranding, the Guernsey website is also changing, with a first-stage overhaul launched on 1 January 2014, shifting from www.guernseyop.com to www.buyguernsey.com The rebrand is just one of a number of recent major developments for Guernsey. These include a territorial expansion with new distribution capabilities in the Central Pennsylvania region, an expansion into the janitorial and facilities product category, and the development of programmes and services designed to serve the healthcare and educational markets.

3D adds Xerox dimension 3D printing firm 3D Systems has agreed to acquire Xerox’s Wilsonville, Oregon-based product design, engineering and chemistry group for $32.5 million. The all-cash transaction adds more than 100 Xerox engineers and contractors specialising in product design and materials science to 3D’s global R&D team. 3D has already begun to operate its own facility within the Xerox Wilsonville campus. Xerox said it would maintain ink and print head development resources along with research relevant for digital printing and the 3D markets.

OPI Magazine | February 2014

Pukka lands Concord Filing Products Pukka Pads has announced further expansion of its rapidly growing business with the news it has acquired fellow UK vendor Concord Filing Products. The acquisition of the London, UK-based manufacturer, which produces a wide range of filing products, secures jobs and the future of the company’s two production plants in the capital and Liverpool. Commenting on the news, Pukka’s Managing Director Chris Stott said: “I am delighted with the acquisition as the product portfolios of both companies complement each other so well, and this is just another example of how Pukka is committed to manufacturing in the UK.” The new company will be known as Pukka Filing Products Ltd.

Japanese reseller ASKUL has reported interim sales of ¥119 billion ($1.1 billion), an 8.6% jump on the same period last year. About 40% of this growth was due to sales from the LOHACO e-commerce platform, ASKUL’s joint venture with internet giant Yahoo Japan that began trading in the third quarter of the previous financial year. LOHACO’s sales in the six months to mid-November were ¥4.2 billion and ASKUL said it was aiming to exceed its previous full-year goal of ¥10 billion by 20%, although this still remained “the biggest challenge” the company was facing in the second half of the year. ASKUL is pouring about ¥1.3 billion into LOHACO for a large-scale advertising and promotional campaign, and the business is still expected to make a FY operating loss of around ¥2.3 billion. Other growth areas for ASKUL include MRO, medical supplies and living supplies. These categories all saw double-digit growth in the first six months of the financial year and now collectively represent about a third of total sales. Gross profit for the six-month period was up about 9% to ¥26.6 billion, while gross profit margin increased ten basis points to 22.4%. Private label now represents over 16% of sales, and the number of own brand products increased by 24% last year to more than 5,100 items.

Belgian office supplies trade association BOSTA is to develop a website to help purchasers make better-informed decisions about sustainable products. BOSTA said that, despite the efforts of resellers, public sector and corporate buyers were still complaining that environmental and CSR information from the office and school supplies sector was hard to find. The new website will serve as a platform that purchasing departments can use to assess the environmental impact of products they use. In order to guarantee “absolute independence”, BOSTA said that product information would be based solely on recognised third-party certifications such as ISO9001, ISO14001, Blue Angel, FSC, PEFC and Nordic Swan. A contract for the development of the site – which will have the URL www.sustainable-office.be – was signed in December and BOSTA said it expects the project to be finalised this year.

Staples seeks more of Apple pie Staples has started selling Apple tablets in-store, having previously had them available only for online customers. In a significant move for the big box retailer, the line-up now in stores throughout the US includes the new iPad Air and Retina iPad Mini. Customers can also get up to $300 off a new iPad by trading in their old one. The company is believed to be testing the water with the stocking of the tablets before deciding on additional Apple products for its in-store offerings. Staples has been negotiating with Apple for some time for the right to sell the manufacturer’s hardware in its US store network. Although margins on these products are notoriously thin, they are a strong driver of store traffic.

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News n Round-up

Yahoo joint venture boosts ASKUL

Belgium tackles OP green confusion

News n Beyond OP

Big Q3 for Michaels US hobby and craft retailer Michaels Stores reported third quarter comparable store sales growth of almost 8%. Sales for the quarter ended 2 November were $1.12 billion, a 10.3% improvement versus last year and a comparable store increase of 7.9%. Two thirds of the comp increase was due to the craze of rubber band bracelets: Michaels has the exclusive distribution rights to the Rainbow Loom rubber band bracelet-making kit and this has proved to be a hot product over the past few months. Michaels other key indicators moved in the right direction too: • Gross profit was up 12.7% to $453 million and gross profit margin increased 90 basis points to 40.5%. • Operating income climbed 15.4% to $135 million and operating margin was up 60 basis points to 12.1%. • Net profit jumped almost 66% to $58 million. Private equity-owned Michaels ended the quarter with 1,259 stores, including 122 Aaron Brothers framing stores.

Bunzl buys overseas Bunzl has completed three international acquisitions of personal protection equipment suppliers in the US, Germany and Brazil. California-based SAS Safety Corp was expected to record revenue of $48 million in 2013; Düsseldorf, Germany-based Klöcker f6 million ($8 million); and Brazil’s De Santis Distribuição Industrial R$18 million ($7.5 million). These latest deals bring Bunzl’s total acquisition spend for 2013 to around £290 million ($477 million).

Depot’s new fitness regime Office Depot has expanded its technology product line to include digital fitness products. Depot hopes the products will appeal to busy business professionals looking for easy ways to maintain and improve their fitness at home, in the office or on the road. The range of items will include the Rhythm bluetooth armband heart rate monitor, the Striiv smart pedometer and the SYNC Elite activity tracker that captures all-day motion data by tracking core metrics such as distance, steps and speed. Tom Lee, VP of Merchandising & New Product Acquisition for Office Depot, said: “Our expansion into this area is part of the company’s growing assortment of wireless technology gadgets that allow professionals to remain productive wherever they go. Offering customers easy access to products to help enhance and impact their lives in all realms is an obvious move for our brand.”

IS adds restroom; Tracking the educates dealers mobile life US dealer group Independent Stationers (IS) has added restroom products to its federal government sales programme and teamed up with the National School Supply and Equipment Association (NSSEA). IS is now authorised to sell to federal customers restroom products that come under Special Item Number (SIN) 75-85 of the General Services Administration’s Schedule 75 office supplies programme.

OPI Magazine | February 2014

The dealer group said the expansion was necessary in order to bid on the new Federal Strategic Sourcing Initiative (FSSI) jan/san and MRO contract. Meanwhile, IS and the NSSEA have announced an affiliation programme that will enable NSSEA members to participate in the US Communities School Supply programme recently awarded to the dealer group.

Kensington’s 2014 Essentials for Mobile Life Survey revealed just how essential smartphones are for parents and how easy it is for the almost indispensable item to be lost. A significant 70% of mothers said that smartphones were the most important item to get through a day, just below a purse/wallet (73%) and more than the 60% who said their car. Cars also accounted for 24% of where most smartphones are lost, with most being forgotten, lost or stolen at a family member or friend’s home (32%). ACCO brand Kensington picked up a North American Office Products Award for its Proximo offering which uses an app with a key fob and/or tag to alert users when they have forgotten or misplaced their smartphone.

News n Analysis

The stuff of fantasy Life imitated art at the International 2014 CES event from 7-10 January as the rise of the Internet of Things brought Hollywood fantasy to the real world

The

spirit of this year’s CES event can be traced back to 1999 and the remarkable mind of one of the seemingly inexhaustible supply of British technology pioneers. Not content with harnessing the power of RFID into a global standardised system, Kevin Ashton coined the phrase ‘Internet of Things’ or ‘IoT’ back in 1999, and it was that phrase that dominated the 2014 CES.

Matrix In many ways this is what the internet has been all about – a matrix that

Sarah Silverman hosts CES 2014 themselves more than they talk with their human connections. And this is already happening with thermostats, car keys, refrigerators, televisions and ATMs among many other devices. In fact, by 2020, Gartner believes that there will be nearly 26 billion devices on the Internet of Things, or the

The real under-the-radar star of the show in many ways was the Omate TrueSmart smartwatch connects the world around us through sensors and identifiers and informs our home and office life on a daily basis. It will tell us if we’ve left the cooker on, where we parked the car and when we need to re-order that particular item at our office supplies distribution centre. The IoT will monitor and control the physical world, and the different sensors will talk between

Internet of Everything as Cisco Systems likes to call it and did so at its keynote presentation at CES 2014, hosted by controversial US comedian Sarah Silverman. Describing the IoT as a $19 billion opportunity, Cisco boss John Chambers said: “This is not about technology at all. It’s about how it changes people’s lives forever.”

If this all sounds a bit too close to the computer ‘Skynet’ system from the Terminator films that becomes self-aware and brings about the apocalypse to wipe out mankind then, well, I’m afraid it is. When it comes to connected homes, the Staples Connect platform found itself demonstrating against some other big box retailers, such as the Lowe’s Iris platform, at the show and coming out on top in most observers’ opinions. Staples and its tech partner Zonoff seem to have really hit this out of the park by getting new partners on board, such as Centralite and Netgear, integrating with a robust set of external devices and being affordable and without a monthly fee. 3D was also popular at CES this year with 3D scanners, 3D printing and interfaces. In particular, Matterform unveiled the final release model of its 3D scanner at an affordable $579 and this impressed most onlookers. Also very visible at the show was 4K - as in 4K resolution TVs and home projectors - although surprisingly perhaps there is still a problem with prohibitive pricing for the new hi-res trailblazer for the office environment.

Wearables Alongside the dominance of the IoT concept, the show was also rather taken by ‘wearable technology’. This is really an alternative

OPI Magazine | February 2014

to what we might rather sheepishly call the ‘carry-able’ technology of smartphones. We’re talking smartwatches here, and the real under-the-radar star of the show in many ways was the Omate TrueSmart smartwatch. This remarkable bit of kit is part watch, part digital assistant and fully functions on its own without having to connect with a smartphone, which essentially turns some smartwatches into merely a bluetooth ear piece on your wrist. It’s a standalone smartwatch that presents a genuine glimpse at the future with its market-leading voice recognition software courtesy of Nuance’s Dragon voice recognition technology. Omate CEO Laurent Le Pen said: “The Dragon Mobile Assistant demonstrated on the Omate TrueSmart showcases how intelligent assistants are creating a new generation of wearable devices. The ability to simply speak to the device on your wrist to send emails, text messages, set reminders and search the web is an incredibly compelling experience.” Indeed, there was a very real feeling at CES that 2014 would be the breakthrough year for smartwatches and smartbands.

News n Analysis

Vendor consolidation continues apace The year begins with manufacturer transactions in North America and Europe

2014

was barely a week old and we had seen two major OP players enter agreements to sell off manufacturing operations, first with ADVEO in Europe, followed closely by Esselte in North America. OPI takes a closer look at both of these transactions and then explores a possible common denominator between them.

Unipapel

Esselte exits North America In 2002, Esselte was the subject of a $550 million takeover by Boston-based private equity firm JW Childs. Three years later the new owners more than made their money back after the sale of the DYMO division to Newell Rubbermaid for $730 million. With JW Childs then expected to exit the business before too long, it surprised the financial markets by subsequently bankrolling the 2010 acquisitions of Isaberg Rapid and Ampad. Now Esselte’s North American operations have been acquired by RR Donnelley, the owners of the well-known TOPS and Cardinal brands, for $96.5 million in a combination of cash and shares. Whether that represents a ‘bargain basement’ price or not, is difficult to tell at this stage because no financial details of the transaction – apart from the transaction value – have been

OPI Magazine | February 2014

released, and both Esselte and RR Donnelley have declined to say more until the acquisition has been finalised (even refusing to say when they expect the deal to close). Accurate financial information on the Esselte business is notoriously hard to come by, but estimates from 2011 put total sales at about $1 billion, with around 40% of that – or $400 million – coming from North America. Assuming high single-digit declines in its core filing category over the past couple of years, North American sales would now be in the region of $330 million, but industry sources have suggested that the figure is nearer $200 million.

Then there are question marks over Esselte’s profitability and debt level. Following a refinancing of the business in 2012 – which also saw more than $22 million in dividends paid to shareholders – company-wide reported debt was estimated to be about $200 million, rising to more than $350 million when adjusting for things such as operating leases and pension liabilities. However, RR Donnelley has said the acquisition is expected to be both deleveraging and accretive to its earnings per share within 12 months of closing, suggesting that it has not taken on a high amount of debt. RR Donnelley clearly thinks that ‘bigger is better’ in terms of its office products offering, but the message in a press release suggested a defensive strategy based on synergies and cost savings, not really surprising given the pressures on traditional paper-based product categories. “We expect to realise significant

savings by combining our best practices, complementary products, and manufacturing and distribution capabilities, and we look forward to taking the expanded line of products and respected brands to our combined customer base of retailers, wholesalers, contract stationers and dealers,” stated CEO Tom Quinlan. We’ll have to wait until the transaction closes to find out more details, but it does throw up questions about Esselte’s non-North American businesses, primarily in Europe where its Leitz brand is particularly strong. It would seem unlikely that JW Childs is committed to keeping a slimmed down Esselte, so we could well see a deal involving the rest of the business in the near future.

ADVEO offloads manufacturing arm When Unipapel was established in 1976, it represented the merger of three Spanish manufacturing companies. Almost 40 years later, the group – now known of course as ADVEO – is divesting its manufacturing and associated distribution units to Switzerland-based investment fund Springwater for €16 million ($22 million). True, Unipapel’s – and then ADVEO’s – production division had decreased in importance to the group over the years, especially in recent times following the acquisitions of Adimpo and Spicers Europe, and the move into the wider European wholesaling arena. In his Big Interview last year (see ‘European superpower’, OPI February 2013, page 30), CEO Millán Alvarez-Miranda said that manufacturing, although not a core

Martin Gruschka competency, remained “a very good complement to our wholesaling business”, especially with the opportunities that the Spicers private label business brought to the table, and he spoke of a three-year plan to make the manufacturing business “profitable and cash generating”. The transaction includes operations at ADVEO’s

Unipapel factories in Tres Cantos, Logrono and Aduana in Spain, the reprinting activities at its French and Moroccan workshops and the commercial business in Portugal – although no buildings are being acquired. As part of the deal, the divested businesses – which have sales of about €50 million and employ 330 staff – will continue to supply products under the ADVEO and Unipapel brands, which ADVEO will sell through its subsidiaries. Springwater Founding Partner Martin Gruschka

believes there is still potential in the stationery segment. “The future importance of paper-based office and school-related products is underestimated today from our perspective,” he told OPI.

A new consolidator? Regarding the acquired assets, Gruschka said there was a commitment to keeping all facilities open and that there was room to improve processes, foster and internationalise the existing brands and focus on higher margin niche segments.

Interestingly, he added that he viewed Springwater as a sector consolidator and that the fund was “very interested” in acquiring similar businesses, either in Spain or the rest of Europe. That raises the question of whether Springwater would indeed be in the market for Esselte’s European business, assuming that JW Childs is open to such offers. It’s a much larger business than ADVEO’s production division, but Springwater has previously expressed an interest for “complex” transactions. However, there are likely to be plenty more European stationery firms willing to court the Geneva-based investment firm and Esselte could well end up being just one in a long line of potential candidates.

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News n Analysis

“The future importance of paper-based office and school-related products is underestimated today from our perspective”

News n Analysis

Trying to make it happen Staples rebrands as it speeds up its BOSS strategy

STapleS

announced details of its brand relaunch at the beginning of January, as it focuses on its expansion beyond office supplies or what it calls ‘BOSS’. The company’s new tagline is ‘Make More Happen’, marking the end of the iconic ‘that was easy’ slogan introduced more than ten years ago. Staples hasn’t dropped the ‘easy’ idea altogether – the word still appears in its PR and marketing messages and the Easy Button will continue to be sold to raise money for the Boys and Girls Club of America organisation.

Reinvention “Make More Happen highlights how Staples is reinventing itself to provide every product businesses need to succeed,” said Shira Goodman, EVP of Global Growth. “We’re adding thousands of new products every day. Our expanded product assortment appeals to businesses across a wide range of industries, from medical and restaurants to professional services and retail.” A major brand advertising campaign began in the US on 6 January, with the first of four TV spots that highlight Staples’ BOSS strategy. The first spot – which was titled Big Idea – was set in a futuristic factory and showed workers using products purchased from Staples, including the

OPI Magazine | February 2014

latest technology, safety equipment, factory signs and coffee. That theme is being supported by a ‘Make Your Idea Happen’ contest for small businesses that features a grand prize worth $25,000.

What the L? To reinforce the BOSS notion, Staples has tweaked its logo by replacing the letter L – which has traditionally been represented by a bent staple – with various non-traditional products such as a mop, grease gun and even dog biscuits. The Staples.com website and Staples’ social media channels are featuring a ‘What the L is going on at Staples’ campaign, with a Twitter hashtag #WhatTheL and a new TV spot filmed at The Staples Center in Los Angeles that depicts people looking at the L-less Staples logo and saying “What the L?” The TV ad has had a mixed reaction on social media channels so far, with some comparing it to Kmart’s ‘Ship My Pants’ and ‘Big Gas’ ads that went viral on YouTube last year and others claiming that it is “offensive”. Staples’ focus on ‘more’ is understandable, but the brand is pretty much

synonymous with office supplies in the US, and it will no doubt take time to shake that off in the minds of consumers. However, rival Amazon began life as an online bookseller, and look where that is now.

StapleS caught up in Obamacare petitiOn A Staples employee has successfully been using the #WhatTheL Twitter hashtag to raise awareness of her campaign to change Staples’ policy on the working hours of part-time staff. A Change.org petition started by an anonymous Staples employee calling herself Sue Whistleblower had garnered more than 200,000 signatures at the time of writing. The petition claims that Staples has reduced the number of hours per week that part-time staff can work to 25, in order to avoid paying for healthcare as per the Affordable Care Act (aka Obamacare) which will come into effect next year. In a statement to OPI, Staples Senior Public Relations Manager Mark Cautela said: “There is a lot of misinformation on the internet and we would like to set the record straight. Staples’ policy regarding part-time associates’ weekly hours pre-dates the Affordable Care Act by many years. “In fact, this policy has been in place for more than a decade. We recently reiterated that policy to our associates as part of our efforts to improve the efficiency and competitiveness of our stores.”

Comment

The amount that customers spent at the Apple app store in 2013

What do you think of Staples’ new tagline ‘Make More Happen’ Tom Bersch, President of Veteran Toner Services Staples and Quill have changed their taglines and now we shall see if it works. They need to sell more than office supplies to have any chance to overtake Amazon. The bigger question is the supply chain: can they really get these additional products [and] are they going to stock them? Staples is like every other distribution company: they need to have the inventory turn. What happens if they don’t get the 12-16 turns a year they need? Raj Dwivedi, Small Business Consultant They are trying to be like Amazon and FedEx, which already deliver integrated mission-critical computing and distribution services to both Fortune 1000 and small businesses, and like innovative regional competitors that deliver all kinds of overlapping solutions to the small business market. The difference is that Staples is trying to do this without the talent, willingness or resourcefulness of smaller regional competitors, FedEx or Amazon to execute better. It looks like another expensive folly that will lead to even more of their best talent jumping ship before the ship sinks.

315.9

million The amount of PCs shipped in 2013, a 10% decline on 2012’s figure

13%

The year-on-year rise in sales of mailing and shipping products in the US this past holiday season, according to NPD Group

News ■ And finally...

$10 billion

TWEET CHAT follow us on Twitter @OPInews, @andy_opi, @officedepot

#ODidYouKnow that in the past 10 years we’ve grown our green product assortment by 419%? #green #sustainability @SpicersCEO

Pointless fact: do you know which country in the world produces the highest volume of potatoes...? @TheoPaphitis

Keep being told #Theo trending on twitter, nothing to do with me! My chances of making #Worldcup ended due to talent not injury! @HP

Not so #funfact: 72% of refilled ink cartridges fail during use or right out of the box.

SNAP SHOT

Rusti Riggs, Sales Professional at Advantage Office Solutions “You can put lipstick on a pig – but it’s still a pig.” It certainly is not a professional quote, but changing a company’s tagline does not change the company. For all the small office supply dealers out there – keep giving the best personal customer service you can. It is the only thing that separates us from the big box and online resellers. No tagline is necessary for that!

Don’t forget to take part in the discussions on the OPI LinkedIn page

opi.net poll results What do you think the annual rate of volume decline in traditional office products will be over the next five years?

No decline

It will grow

On 24 December 19-year-old polar explorer and climate change campaigner Parker Liautaud arrived at the South Pole after a 19-day, 506 km (304 mile) journey. One of Liautaud’s sponsors was UK dealer group Integra, and the young explorer unfurled a flag bearing the logo of the group’s private label brand initiative at the South Pole.

5-10% decline

0-5% decline

26%

31 %

+10% decline

34%

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Big Interview | Ingo Dewitz

The future is

bright…

With the right approach, support and product assortment, the future for independent dealers in Germany remains bright. The same cannot be said for other parts of the channel, fears Ingo Dewitz

by Heike Dieckmann heike.dieckmann@opi.net

the first two-page interview with Ingo Dewitz (see ‘Man of the trade’, European Annual Review 2014, page 14), Büroring’s Managing Director alluded to an intensely challenging market in Germany and the need for a multichannel approach. Here, he elaborates on how dealers can stay strong, what they can bring to the table and how, without them, the OP industry at large would be a less dynamic place to be. He also talks about the difficulties of the wholesale channel, the need for collaboration among all players and why the global players aren’t really a threat anymore. OPI: Let’s start with a bit of history. When was Büroring established? Ingo Dewitz: Büroring was created in 1976 and its foundations lie in the office machines business. The first members were copier dealers – selling Sharp copiers, for example – and they just decided to work together and establish a purchasing group in order to get better buying conditions. We’ve always had a large amount of these business machines and also tech-oriented dealers amongst our membership and that remains the case today. Perhaps it’s part of the reason why we’re not as affected as others by the decline in traditional office products, as so many of our members

OPI Magazine | February 2014

have never been solely reliant on that category. That said, we also have some traditional stationery dealers, some with a retail presence, but our core business and the classic Büroring dealer is the B2B full-range supplier. By full range, I mean office technology, office supplies and office furniture.

Büroring | Big Interview

OPI: How big is your typical dealer? ID: It’s wide-ranging. It’s essentially anything from ˆ 1 million to ˆ 12 million in revenues and between three and 120 staff, 15 employees perhaps being the average. What’s important to note is that all our members work regionally. We don’t have any Plates or Kaut-Bullingers. We do have some large members, yes, but they all operate on a regional basis. All members combined – we have 343 at the moment – total revenues of ˆ 700 million ($957 million). OPI: Can anybody join you? ID: A potential member must offer financial stability and future potential from a commercial point of view, that’s really the only obstacle. OPI: German cooperatives often have a complex set-up. How is Büroring structured? ID: Büroring is owned by its members, with each member having one vote, irrespective of the size of the dealer. The Büroring supervisory board is made up of five of our members and this board essentially determines how we’re run and what we do. We are a ‘pure’ cooperative, but we’re also a for-profit organisation, whereby all the profit is reinvested into the group, either through dividends or services. My job is to find out what our members need and give added value to them so that they can pool their interests wherever possible. Another part of Büroring is Büro Forum 2000 which we took over in 2006. That’s another group of 180 specialist B2B dealers and retailers. These companies can use the services we offer, but they don’t own any part of either Büroring or Büro Forum 2000. Lastly, we share our facilities here in Haan with a group called Prisma. The members of Prisma are the very traditional OP stationery retailers. Prisma retailers are not affiliated with Büroring, but we do share the central billing function that is part of what we do, essentially a centralised credit insurance for all these members. Legally, however, Prisma is not part of Büroring. In addition to all that, we have the diverse marketing groups, such as OfficeStar and Redoffice. They basically comprise like-minded dealers that work together on certain projects and Büroring supports them with various services as and when needed.

OPI: You say you don’t have any really large members – but do your members also do business with the public sector? ID: Some do, but only on a regional basis, for example tenders for city, borough, district or regional councils – but that’s mostly where it stops. There are a lot of B2B customers that don’t want to work with the big box players anymore. It’s not just about the price. We definitely don’t buy as effectively as the globals, I realise that, but we do have a certain margin that we can pass onto our members. And especially with tenders for councils etc, local criteria increasingly play an important part. It matters whether you’re a member of the town’s golf or tennis club, whether you live in and pay taxes in the area or simply show an interest in the locality – engagement and these roots are important to many of our dealers’ customers. Also, in particular as far as C-article management is concerned, there’s a move back to specialist dealers.

“I don’t view [the globals] as a threat anymore. In fact I’d go as far as to say that they are in bigger trouble than many of the country’s independent dealers”

OPI: Years ago the arrival of the globals decimated the country’s dealer community. Is that threat gone now then? ID: I don’t view them as a threat anymore. In fact I’d go as far as to say that the globals are in bigger trouble than many of the country’s independent dealers. They took away the big B2B business 10-15 years ago and dealers faced that challenge and adapted accordingly, except for European or global enterprise business. OPI: So what would you say is Büroring’s core remit? ID: Everything we do is aimed at helping our members improve their processes, be that in terms of IT, logistics, sales or marketing. Some people see us as a wholesaler or a central regulator. That’s a long way from what we do. Yes, we have a warehouse, but we don’t see ourselves as a wholesaler. OPI: This integrated dealer group/ warehouse approach is much more common in continental Europe than it is in, say, the UK or the US. Why is that in your opinion? ID: It’s quite simple. Many of our dealers say, “I don’t want to have my own warehouse and I want my dealer group to do that for me”. As such, over time it’s become our job to stock products on our dealers’ behalf. The stockless concept is also finally becoming more widespread in Germany. Two years ago, we shipped 48% of goods directly to the end consumer; now that figure stands at over 60%.

At a glance Founded: 1976 Business model: Dealer cooperative Members: 343 in Büroring, 180 in Büro Forum 2000 Combined revenues: ˆ 700 million ($957 million) Staff: 100 HQ: Haan, near Düsseldorf, Germany Logistics: Own warehouse, primary partner ADVEO

w w w.opi.net | OPI Magazine

Big Interview | Ingo Dewitz We didn’t actually used to have a warehouse. It started when Klaus Kemper (Büroring’s MD in the past) started negotiating with Spicers in 2001 that the idea came about. We began with a very small warehouse then, but now obviously have the new large distribution centre. OPI: But ADVEO is still your primary wholesale partner, isn’t it? ID: Yes. When Spicers came over from the UK (and France), they had no customers in Germany at all. Today, Büroring members account for about a third of ADVEO Germany’s sales; that’s about ˆ 23 million. Of course, we are also in competition with each other in a way, but ADVEO has a very wide range that our members can draw from and the wholesaler is also part of Büroring’s central billing arrangement with our supplier partners. OPI: Have your volumes with ADVEO changed because of the new warehouse? ID: No, they’ve remained constant. The 26 dealers in the OfficeStar marketing group for example are completely served by ADVEO, not by Büroring at all. What has changed, and that’s the same for everybody, is the market situation in Germany where we had some significant setbacks as I explained in the previous article. OPI: There’s currently plenty of debate about the viability of dealer groups going forward, particularly in the UK where there are so many of them. Do you believe having a warehouse provides some kind of safety net, as members are tied to it? ID: No, I don’t, but even if it is, it’s a very insecure one. Yes, our members are dependent on the warehouse to a degree, but we don’t really make any money from it; it’s incredibly hard to earn money in the wholesale business. For us, it’s feasible to maintain it because we have other sources of income, but the warehouse doesn’t add any real value in my opinion. And, of course, we also found out first-hand in 2012 how difficult it is when things go wrong. Why do we have one then? It’s because our dealer members say: “This is my customer, and I don’t want a company to deliver to that customer that tomorrow might turn out to be a competitor and directly approach that client. As such, I want my dealer group to supply that client for me.” That’s often the thought-process behind it – an inherent distrust towards outsiders – and the reason why some dealer groups have such large warehouse businesses. We have 11,000 SKUs in our warehouse and we talked about our planned virtual warehouse before, but it’s the end consumer marketing, the

OPI Magazine | February 2014

flyers, promotions etc that we work on in our marketing groups, that is our real differentiating factor, not the warehouse. OPI: Does Büroring have its own brand? ID: Yes. We first introduced the Büroring brand two years ago. Before that, we had Büroline where we worked with Claude Ackermann and PEG, but that line will be completely wound down this year. Our own brand range is becoming more and more important. We now have 2,000 SKUs – 1,200 ink and toner products and 800 office stationery supplies. Our members increasingly identify with this range and it also offers a fairly high and secure margin, certainly higher than the brand equivalents. OPI: I thought that own brand products still aren’t all that popular in Germany. Wasn’t that part of the problem with Georg Kugelmann (bought by PBS Deutschland)? ID: The own brand situation at Kugelmann was quite different because the product range was mainly in stationery supplies. You have to move certain volumes with own brands to make it work and presumably Kugelmann didn’t have that volume. We also have most of our production here in Europe and not in Asia, providing what we believe is an extremely high standard of quality. Furthermore, we have a very established customer base and you can only sell our products as a Büroring member – that guarantees a certain exclusivity. So for us, our own brand is a very stable and, most importantly, fast-growing business with double-digit growth figures. OPI: How would you describe your relationship with manufacturers? ID: We work with 560 suppliers that make use of the central billing business, ie they get paid by us rather than our dealer members. What’s really important in my opinion is that in cooperatives like Büroring, there is a very close working relationship between members and plenty of best practice sharing.

“It’s incredibly hard to earn money in the wholesale business”

Big Interview | Ingo Dewitz

Manufacturers – and wholesalers too for that matter – can very easily get a big thumbs-up from dealer group members with a transparent and well-executed channel sales concept. By that I mean a respect for and adherence to the various supply channels. Let me give you an example. There are several large global OP manufacturers that think they don’t need a sales force in Germany anymore; that think they don’t need to give dealers any support, offer product and brand awareness training – in other words don’t see the necessity for any real face-to-face relationships. With such an attitude, manufacturers can easily get pushed out. The portfolio we offer in our catalogues, in our warehouse etc, is determined by our members, through a committee to be precise. Manufacturers that don’t support independents are therefore not going to last very long in that channel and if the likes of Büroring, Büro Forum 2000, Prisma and Soennecken withdrew their support with their combined membership, then 1,000 dealers would be lost to manufacturers. That’s about one-third of all dealers in Germany, so quite significant. I always warn manufacturers about leaving traditional independents behind and simply moving on to e-commerce platforms. Those that do that lose brand awareness, loyalty and valuable relationships. It’s also important to note that branded products still make a market ‘real’ and that in Germany more than 50% of all business in our sector is still done through independent dealers. And if vendors think that they can withdraw support from those dealers, then they’ll soon pay the price. The global players only have about 20% of the market – the strength is still with the dealers. OPI: What’s your view on consolidation? ID: In terms of the manufacturing sector I believe we’ve pretty much exhausted the

OPI Magazine | February 2014

potential in rationalising and consolidating production. There’s not much cost and efficiency left to take out and we’re seeing with the double-digit revenue declines that not everybody will be able to survive, not even the large global operators. As far as the wholesale market is concerned, especially the smaller players will suffer. Wholesalers are also particularly vulnerable because products are increasingly sold at trade prices, especially on online platforms such as Amazon and Mercateo. So where is the margin for the wholesalers? I spoke about this in the first part of the interview and the fact that the supply chain keeps getting shorter and shorter. OPI: What about the dealer community itself? Is it doom and gloom or in fact quite positive? ID: I see good opportunities for the independent channel if dealers have a good attitude towards a multichannel approach, market it properly, have a good and evolving product range – and that, by its very nature, involves a non-reliance on pure office products – and, above all, use the specific skills of independents which is comprehensive advice and services. OPI: And dealer groups – do they have a future? ID: That’s a good question. In France, for example, there have been dramatic developments and nearly all of the dealer groups have disappeared. These groups are very dependent on the individual players in the market and their job has more and more to do with advice and training, especially in the area of IT. They also often provide some much needed stability for their members. Ideology aside, however, you have to consider how dealer groups and cooperatives can make money. Büroring is also a logistics provider, which gives us a certain value-add, but the distribution of goods is a difficult thing to get right. Everywhere in Germany, there is overcapacity at the moment – take a look at

“If vendors think that they can withdraw support from the dealers, then they’ll soon pay the price”

Büroring | Big Interview Alka, ADVEO and Soennecken. All these players have invested millions and some warehouses are half empty which is incredibly worrying. Büroring is lucky to have other areas to focus on, rather than just the warehouse. That said, we obviously had a rather painful experience ourselves and learned the hard way what it means to be dependent on a warehouse. As I said before, we don’t necessarily need a warehouse from a Büroring perspective – it’s possible to be set up completely virtually – but our members don’t want to purely source from a wholesaler that might be bought the next day by a global. OPI: How would you describe your relationship with the other big German OP cooperative, Soennecken? ID: Firstly, I think it’s fantastic that we have two large dealer groups in Germany’s OP market because our existence helps dealers. There’s no particular partnership between the two organisations, but there’s no real competition either. Quite often, it’s just a fundamental and simple question of where the individual dealer feels more comfortable and best looked after. Soennecken has some large members and probably more combined purchasing power because of that, but we both have the same right to exist and it’s good for the German market that there are two because in a way that regulates the sector a little. The wholesalers – or the manufacturers for that matter as I mentioned before – can’t just do what they want, because if both groups throw the might of their combined dealers behind it, it’s quite a powerful entity. OPI: With that strength in numbers in mind, Büroring isn’t a member of BPGI – is there a specific reason for that? ID: Not in principle, no. We’ve had some discussions with Claude Ackermann and it’s partly a question of resources. My viewpoint is basically that, if we join, we want to do it wholeheartedly and bring something to the table. So far we haven’t been able to do that and in the last 18 months, had our own problems that had to be resolved first without taking resources away to concentrate on something else that’s not core. OPI: How, overall, did 2013 shape up for Büroring? ID: In our logistics operation, we’re anticipating a small growth of 3.5%. Our central billing business is in slight decline. However, that’s not due to a general downturn, but because two of our larger dealers were acquired last year, so we lost that revenue.

In general, we experienced growth from our members last year, mostly from new partnerships, some of which have existed for a while, but haven’t developed to their full potential yet. OPI: What’s your forecast for this year? ID: As often discussed, the traditional OP market is moving downwards and we expect further losses in this area, but we’ll grow through offering new ranges. Also on our agenda is the creation and development of a telemarketing team for the canvassing of new end consumers. Other focus areas include succession planning, the development of new ERP systems and more training in the area of professional development. What it’s all about for us is to further optimise the process of getting office supplies to the end consumer and that, as mentioned before, includes C-article management. We’re going in a certain direction with that and already have a lot of support from dealers that want to be part of that journey.

“Wholesalers are vulnerable because products are increasingly sold at trade prices, so where is the margin?”

Ingo Dewitz résumé 1987: Began career working for copier dealer Kopierpartner 1992: Joined Soennecken member Saueracker; set up sales force for its technology segment 1995: Left to join Oki Systems when it entered the German market; helped launch its fax machine business in the country 2001: Joined Kyocera Mita with the remit to integrate Mita into Kyocera Germany; built up Kyocera Mita’s copier business in the country 2008: Started at Samsung with responsibility for setting up and growing the company’s B2B business in Germany for printers and MFDs 2010: Joined Büroring as Managing Director, replacing Carsten Marckmann who left six months prior

Ingo Dewitz with fellow Managing Director Jörg Schaefers

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Hot Topic | Office Depot/’Max

Making it all fit by Andy Braithwaite andy.braithwaite@opi.net

didn’t come as a surprise following an extremely long ten-month approval process – which also included a seven-month Federal Trade Commission (FTC) investigation (see box FTC comes up to date) – but the closing of the Office Depot/ OfficeMax merger was a swift affair from the moment FTC approval was given at the beginning of last November. Following a brief spell which saw Neil Austrian and Ravi Saligram serve as joint CEOs of the ‘new’ Office Depot, former Delhaize Americas CEO Roland Smith was installed as permanent CEO and the integration process could begin. The items at the top of the agenda were making a decision on the headquarters location

OPI Magazine | February 2014

New Office Depot CEO Roland Smith probably wishes that integrating OfficeMax is as easy as slotting the last piece into a gigantic jigsaw puzzle. That, though, just isn’t going to happen. OPI takes a look at some of the challenges facing Smith and his team. (see OPI #235 ‘Now the hard work begins’) and putting together a senior leadership structure (see box ‘A dream team? Not yet, at least’). Smith has something of a reputation as a man in a hurry, and those two items were ticked off before 2013 was out. Now he can focus on getting to the projected figure of $600 million in annual synergies as fast as he can. One challenge that he will face, according to M&A specialist Tom Schinkel, is trying to

Office Depot/’Max | Hot Topic

FTC comes up to date The Federal Trade Commission (FTC) viewed the Office Depot/OfficeMax merger in a very different light to its scuppering of the proposed Office Depot/Staples merger back in 1997. Even as late as 2012, former Depot CEO Neil Austrian had expressed fears that big-box consolidation may not have been given the green light by the FTC due to its 1997 decision. Those fears proved to be unfounded as the FTC voted unanimously to approve the Depot/’Max merger – it’s just surprising that it took seven months to come to that decision. “The current competitive dynamics are very different […] due mainly to two significant developments,” the FTC concluded, regarding the retail channel. “One is that customers now look beyond office supply superstores (OSS) for office supply products and rely more heavily on non-OSS brick-and-mortar retailers. […]The other is the explosive growth of online commerce, which has had a major impact on this market.” For the contract channel, the FTC report revealed: “The merging parties’ documents show that they are rarely each other’s closest competitor for most large customers and that non-OSS competitors take business from the parties in a substantial number of contracting opportunities. […] Non-OSS competitors are growing in number and strength and have demonstrated the ability to win large multiregional and national customer contracts.”

“Non-OSS competitors are growing in number and strength and have demonstrated the ability to win large multiregional and national customer contracts”

drive the integration process while keeping his eye on the strategic direction of the company. “This is a major merger and it is complicated to lead a post-acquisition integration process even when business is going well,” says Schinkel. “However, here we have a situation where Office Depot has to adapt to the digital age, as we have seen Staples doing over the past two years. My sense is that these are two major and

‘quick wins’ in terms of the synergy target; furthermore, no-one likes uncertainty and an uncertain employee is unlikely to be at their most productive. We had hoped to feature an interview with Roland Smith for this Hot Topic. Unfortunately, that wasn’t possible, but here are some of the areas that we’d have liked to have discussed with the new Depot CEO. 1. Retail network integration No decision on closures or store numbers has been taken, OPI understands, but sources have suggested anywhere between 300 and 500 stores – out of a current total of about 1,900 – could eventually go. That would represent a significant drop in revenue, both for Office Depot and its suppliers. We have already seen ACCO cite predicted lower sales due to the merger as one reason for reducing its own US headcount. Retail network integration, though, is likely to be challenged by different re-stocking and ordering systems and processes. 2. The OfficeMax brand It would seem unnecessary to have two corporate brands and it would not be a surprise to see the OfficeMax brand name dropped before too long in the US – after the first wave of staff integration has occurred, for example – and all marketing efforts to focus on Office Depot. Internationally, it’s a different story, of course, with OfficeMax the dominant (indeed, only) name in Australia, New Zealand and Canada. 3. Choice of main wholesaler This is a key decision as it will have a knock-on effect for all subsequent catalogues and merchandising, and play an important part in purchasing synergies. A request for proposals is expected to be

How would the independent dealer community react if United had both big-box accounts? different issues that could compete for management’s attention.” Industry sources have suggested that Smith is certainly not hanging around when it comes to kicking off the integration process and that jobs are going thick and fast already. That’s probably not a bad thing all round: headcount reduction is one of the

issued soon, OPI understands, and a decision could be made as early as May or June. The outcome of this bidding process is being keenly anticipated by many in the industry. SP w w w.opi.net | OPI Magazine

Hot Topic | Office Depot/’Max Richards currently is first call with Office Depot, while United Stationers holds the OfficeMax account. United also has a strong relationship with Staples, so if it picked up Office Depot too, that would be a blow to SP Richards. SP Richards is the incumbent, but the new person in charge of merchandising is a former ‘Max exec, although nothing can necessarily be read into that. Does United’s wider product range give it an advantage? There are other questions too. How would Staples react if its main wholesaler partner began servicing its sole remaining big-box competitor? And how would the independent dealer community react if United had both big-box accounts? Questions which, one way or the other, will hopefully be answered in an OPI article in the not-too-distant future.

A dream team? Not yet, at least

4. International strategy Even before the Office Depot/OfficeMax merger was announced, there were suggestions that both resellers might be better off selling their international operations. Depot got a good price for its Mexican operations last year, but is already back in that market via the legacy OfficeMax joint venture there. On page 45 of this issue, Tom Schinkel refers to the ‘de-globalisation’ of the OP industry and he believes both Depot and ‘Max missed an opportunity to divest their international units. However, he warns that while Office Depot’s main focus will surely be on the US, it can’t afford to just leave its international division ‘as is’.

The Executive Management team comprises the following roles: President North America: unfilled President International: Steve Schmidt. Schmidt will stay on as President

CEO Roland Smith wasted no time in providing details of Office Depot’s management structure, but the make-up of the executive management team is far from finalised The first key appointment was that of Steve O’Hare as CFO. That in itself was something of a surprise, with CEO Roland Smith many analysts and observers expecting incumbent Depot CFO Mike Newman – who had co-led the pre-closing integration effort – to remain in the role. “The news comes as a surprise to us,” said Janney analyst David Strasser in a client note. “We viewed Mr Newman as highly qualified and the most important executive at the company during the transition period. We have known him for years and have always thought of him as a strong CFO with strong operational and financial skills.” Hare is a former colleague of Smith’s from Wendy’s, Arby’s and AMF Bowling Worldwide, where much of the work involved integration and/or financial turnaround, so clearly the Depot CEO wanted his ‘own man’ in place for this role. Depot’s senior management has been organised into a six-person Executive Committee reporting directly to Smith and a nine-person Leadership Team.

International for up to 12 months, but the search is on for a Europe-based successor for this role. CFO: Steve Hare (see above) Chief People Officer: Michael Allison. Allison joined Office Depot in 2006 as VP of Human Resources. Chief Legal Officer: Elisa Garcia. Garcia joined Office Depot in 2007 as its General Counsel and Secretary. Chief Strategy and Innovation Officer: unfilled

It would seem natural for a jobs balance in favour of Depot staff to filter down to regional and district roles Interestingly, no former OfficeMax executives made it onto the Executive Committee and no-one has yet been appointed to the key position of President North America, for which Depot said it was looking for a “seasoned executive”. Former ‘Max execs have also been overlooked for arguably the two main roles on the Leadership Team, EVP of Retail and EVP of Contract Sales, the latter going to Steve Calkins while Juan Guerrero, formerly SVP of Retail for legacy Office Depot, will act as interim Head of Retail during an external search process (although he will be a candidate for this role). In fact, only three out of the nine Leadership Team roles have been allocated to former ‘Max executives: VP of Merchandising (Ron Lalla), SVP of Supply Chain (Larry Hartley) and SVP of Integration (Deb O’Connor). That certainly doesn’t look in keeping with the “merger of equals” spirit that surrounded the transaction documents. And with Boca Raton selected as the company headquarters, and with former Depot people occupying many of the most senior roles, it would seem natural for a jobs balance in favour of Depot staff to filter down to regional and district roles too.

OPI Magazine | February 2014

Hot Topic | Office Depot/’Max “Large end users will want and insist that there are more than two choices”

Wall Street blues

The financial markets have been underwhelmed by Office Depot since the OfficeMax transaction closed at the beginning of November. Office Depot’s share price has fallen about 9% since then. Staples’ has fallen by approximately the same percentage, incidentally, but one might have expected a ‘merger uptick’ from Depot. In the same timeframe (early November to mid-January), the S&P 500 has gained about 4%, while investors’ darling Amazon is up more than 10%. 5.60

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The biggest ever opportunity for independents? At last year’s joint Independent Stationers (IS)/TriMega EPIC trade show, it was suggested by one speaker that the Depot/’Max merger could lead to about $2 billion in displaced sales due to a combination of retail store closures, delivery customer attrition and sales force layoffs. The merger was called the “biggest ever” opportunity for the independent dealer community to take market share, easily surpassing the approximately $200 million in sales that were estimated to be up for grabs when Staples acquired Corporate Express in 2008. Whether that $2 billion figure proves to be accurate or not, we will probably never know, but independent dealers have been advised to target Depot and ‘Max accounts that might be vulnerable. TriMega EVP Grady Taylor also believes there is an opportunity for enterprise business that was not there before, given the fact that three national players have now become two. “Large end users will want and insist that there are more than two choices and the independent dealer channel is prepared to fill that void,” he says.

Redundancies Hand in hand with this sales growth potential is the opportunity to recruit from the likely thousands of employees who sadly stand to lose their jobs during the integration process. Estimates have put the number of redundancies as high as 20,000 if the new Office Depot were to align its revenue/staff numbers with that of Staples – many of those in non-customer-facing roles, but possibly up to 800 sales reps too. The two main US dealer groups certainly haven’t been sitting on their hands over this. “The office products grapevine has been working overtime,” notes Taylor. “We

OPI Magazine | February 2014

have people making contacts to our members already, with many coming with a book of business to convert. We believe that once these initial individuals are placed within the independent dealer community, they will communicate back to their former co-workers that the experience of working for a smaller and more Grady Taylor entrepreneurial entity has tremendous benefits.” IS has been proactive in its efforts to attract this talent. “With the Office Depot/OfficeMax merger, there will be some displaced employees in sales, marketing, purchasing, etc. If this describes your situation, you are located in the US and want to stay in the office products industry, send Independent Stationers your resumé with desired location and position,” wrote the dealer group on its LinkedIn page. Of course, it’s not just the independents that stand to gain from the merger. Staples has been readying itself for the merger since early last year by investing heavily in its B2B sales force. That was one advantage it had from the ten-month ‘limbo’ period between the moment the merger was announced and when it finally closed: being able to recruit and train up account managers in readiness for a big push when the combined entity started letting people go and the crunch time came when customers began moving onto a different – and potentially disruptive – e-commerce platform. That is something to look out for in forthcoming quarterly earnings releases.

Mobilegear | Dealer Spotlight

Mobile trendsetter ‘Mobile’ is the word of the moment and Chicago-based operator Mobilegear the company of the hour by Heike Dieckmann

Douglas Nash on NBC 5 in Chicago last month

heike.dieckmann@opi.net

CERTAIN

eras – often even fairly short-term – conjure up associations with certain topics and trends. The OP industry is no stranger to these – think MPS a few years ago when it first became a hot topic or numerous product-related silver bullets like jan/san and, more recently, ‘facilities’. The term of the moment revolves around all things mobile – mobile marketing, mobile shopping, mobile working… All these derivatives create opportunities and Chicago-based entrepreneur Douglas Nash – known to many in the OP industry from his years at United Stationers as well as GBC – has taken the specific mobile working trend and created Mobilegear from it.

Mobile target A front-facing online office products website is nothing unusual, of course, but mobilegear.com is different in that it specifically targets the mobile workforce. And that’s quite a workforce, according to President/CEO Nash. He is backed up by numerous research reports, including one from IDC which predicts that by 2015 – just a year away – over 1.3 billion employees will be working in “mobile ways”. That is a staggering 37.2% of what is anticipated to be the world’s entire workforce and the US is likely to have a sizeable share of that percentage. Nash says: “Mobilegear identified its target group as the workforce which no longer works in a traditional office environment. Yesterday’s ‘road warriors’ have evolved into a much

broader segment of SMBs and Fortune 500 workers who are motivated by flexibility in their work environments and have budgets to spend on office supplies and tech accessories.” Very much a fledgling still, Mobilegear is in its first year of full operation. It’s owned by LaunchFX, a company first established two years ago and focused on building innovative e-commerce solutions. Mobilegear was acquired by LaunchFX and then redesigned and relaunched last April. In terms of the website’s look and feel, Nash partnered with San Francisco-based Lunar Design to create an intuitive and visual shopping experience. The overall design is broadly based on e-tailers with similar models such as Zappos and Crate & Barrel, and Mobilegear recently won two major US design awards, the Good Design and Spark awards. The result, says Nash, is an e-procurement platform that aims to become “the trusted source for products and services that empower mobile workers to work anywhere”. He adds: “Mobilegear.com creates value on three major levels: It offers a curated product assortment targeted at today’s mobile work environments; it’s organised into eight intuitive and easy-to-shop categories; and it’s presented visually so the products and their stories are the ‘heroes’.” Indeed, Nash points to the importance of his relationship with suppliers with regards to these so-called heroes. He adds: “Manufacturers spend so much time creating unique and innovative products, and their

“Yesterday’s ‘road warriors’ have evolved into a broader segment of SMBs and Fortune 500 workers”

w w w.opi.net | OPI Magazine

Dealer Spotlight | Mobilegear stories often aren’t being told. When you go to Mobilegear, you’re browsing and seeing what’s out there.” Nash has appeared on a number of US television stations, illustrating first-hand how some of the products on the website work. Not only is this clever marketing and personalised product endorsement, it also enhances Mobilegear’s first-to-market advantage in its niche sector. Nash says: “There are over 47,000 items that are available to the average worker. The secret is finding those with the right ‘stories to tell’, and the right features and functions that can help people who work in multiple locations. The ongoing quest to find these products, understand the unique needs of today’s mobile workers and ultimately create an innovative ecosystem is what makes Mobilegear.com very different.” From a competitive point of view, Mobilegear is chiefly up against the two major OP resellers Office Depot and Staples, Amazon and some smaller, more niche, sites like Poppin.com. The majority of independents simply haven’t got the level of mobile-oriented products, nor indeed such an outward-facing web presence.

Deep and focused Nash is fully aware that, for the major OP resellers, the focus is increasingly on getting larger and broader in their offering, while Mobilegear’s expertise and competitive advantage comes from being narrow, deep and focused. “Yes, there is a strong movement by many OP resellers to broaden their portfolio of products, not wanting to miss any sales opportunities and creating value by offering a single order/invoice/delivery for many products,” he says. “Given the rise of the ‘millennials’ in the workforce – men and women between 25 and 35 – the empowerment of the employee and the continued growth of e-commerce shopping, however, we believe focused expertise and knowledge is a viable alternative business model. Connecting targeted consumers with innovative product manufacturers can create a win/win scenario for all parts of the channel. I would also add that every time large industries move towards mass commoditisation, the pendulum

OPI Magazine | February 2014

swings back towards niche value-added businesses. In my opinion, both models create value and both have a place in the industry.” The fact that technology accessories, particularly those that work well with tablets and smartphones, and office supplies which enable people to work more effectively in multiple locations, are Mobilegear’s strongest growth categories also illustrates that more is not necessarily better. Another feature that’s become more common across the OP reseller channel – and distribution for that matter – is the trend towards offering add-on services, be that MPS, copy and print products and services, sales training, etc. Mobilegear, partly due to its relative newness in the market, is different. It is purely a product-based e-commerce platform at the moment. Nash doesn’t rule out more of a service offering at some stage, but says it’s currently an ‘evaluation’ in progress. As a privately-held start-up, specific financial information about Mobilegear remains confidential, but Nash points to strong quarter over quarter growth and increasing new visitors to the site. From a logistics point of view, Nash has rekindled his long-standing relationship with United Stationers where he worked for over eight years prior to leaving to set up Mobilegear. United is now the e-tailer’s first-call wholesale partner. Generally speaking, and in line with a low-cost overhead model, orders are drop-shipped either from wholesalers or, in some cases, directly from niche manufacturers. Mobilegear is riding the wave and is definitely a company of the moment, but it’s early days yet as Nash is the first to admit. “Mobilegear is looking to create a new model and will use very different marketing routes to reach this important business consumer. The journey will take some time, but it should be an exciting and valuable ride.”

Mobilegear.com fact box: Founded: April 2013 HQ: Chicago, US Owner: LaunchFX President/CEO: Douglas Nash First-call wholesaler: United Stationers Business model: E-commerce platform SKUs: 4,000

“Every time large industries move towards mass commoditisation, the pendulum swings back towards niche value-added businesses”

Vendor Focus | Pilot

The importance of personalisation, self-expression and

making writing fashionable, again WHEN

you look around your workspace, do you see items that personalise that space – pictures on the wall, family photos, decorative folders, or appealing looking writing instruments? If you do, you’re not alone! In fact, between 70-90% of the American workforce personalises where they work for reasons ranging from expressing their individuality, to coping with stress, to marking their territory. Research has shown companies that allow personalisation enjoy higher levels of employee morale and reduced turnover, which positively affects the bottom line. Therefore, it is not surprising that we have seen a significant growth in the range and sales of office supplies that tie in with the personalisation trend. These include a wide array of items ranging from tape dispensers and folders, to paperclips and pens. The selection of items that express individuality and personal style is also clearly important outside of the workplace, and is a core driver of consumer purchase behaviour. The self-expressive style choices which men and women make play an important role in giving them control over how they choose to portray themselves to others. Self-expression is brought to life through what individuals choose to wear, carry and write with. Presenting ourselves well through

OPI Magazine | February 2014

all of these mediums communicates not only insight into who we are, but also that we are in control of our personal environments. That’s one key reason why self-expression is invaluable in both the social and the business worlds.

Consumer insights With the important business and consumer driver of personalisation and self-expression in mind, and combined with compelling consumer insights, Pilot Corporation of America (‘Pilot Pen’) began its ‘Making Writing Fashionable, Again’ initiatives in 2012. Based on market data, and the company’s segmentation study (n=2,826), Pilot’s marketing team knew that women buy more than 60% of the pens in the US consumer market, and these women are highly engaged in the act of writing and the selection of writing instruments. The women in Pilot’s core target audience put a great deal of effort into how they present themselves, and know that even the smallest details matter. When they go to write, they want a high quality pen that writes smoothly and lets them effortlessly express their words and style. It is important to note that the individuals in our target audience also play a significant role in the selection of pen purchases at their place of work. Based on Pilot’s B2B segmentation study (n=954), 82% of individuals

We have seen a significant growth in the range and sales of office supplies that tie in with the personalisation trend

Pilot | Vendor Focus

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“Why wouldn’t you use a pen that looks as good as you do?”

responsible for purchasing office supplies for their place of work are “allowed to buy pens I prefer for work”. Also, among 25-44 year-old Pilot purchasers 75% agree that “When I write with my favourite pen I feel more confident and productive”, and 69% agree that “My own personal pen preferences drive my purchase decisions for work”. Pilot Pen has built strong consumer loyalty by fulfilling unmet writing needs with innovative writing instruments. Recognising the need in the marketplace for pens that “look great and write great”, Pilot launched a range of fashion-centric writing instruments. The positioning for these pens was that they “express your words and personal style effortlessly”. The pens launched under this positioning include G2 Fashion, Acroball PureWhite, FriXion Ball Clicker and the Pilot MR Metropolitan Collection. (It is important to note that key products like FriXion Clicker and the Pilot MR Metropolitan Collection were also supported with male-targeted marketing initiatives that tied to self-expressive benefits, but did not fall under the more fashion-centric positioning.)

New York Fashion Week To showcase these writing instruments to consumers, Pilot literally ‘made writing fashionable again’. In 2012, Pilot tested the idea with celebrities and media by featuring these fashionable pens at the New York Fashion Week GBK Productions Gifting Lounge. When asked why Pilot was partnering with Fashion Week, Ariann Langsam, Director of Consumer Marketing said: “Fashion and writing are all about self-expression. The right accessories are the perfect way to personalise your style. When you reach for a pen it should express your style and your words effortlessly. From the colour-blocked Acroball PureWhite, to the striking flourishes of G2 Fashion, to the bold pantone colors of the erasable and retractable FriXion Clicker, Pilot’s new pens deliver style and substance. Why wouldn’t you use a pen that looks as good as you do?” The core item featured at the New York Fashion Week, which brought ‘Making w w w.opi.net | OPI Magazine

Vendor Focus | Pilot Consumer response to these products has been extremely positive

Writing Fashionable’ into the physical world, was a striking ombre design pen skirt adorned with more than 500 FriXion Ball pens. This initiative was embraced by celebrities, the media and most importantly by consumers, and resulted in more than 83 million consumer impressions for Pilot! Given the positive reception to Pilot’s first foray into this arena, Pilot continued to tie to self-expressive benefits in its 2013 marketing initiatives. Pilot began 2013 by partnering with the prime time NBC television show Fashion Star to launch Acroball PureWhite. An Acroball video and sweepstakes were featured on the Fashion Star website, and the launch was further supported by print ads in Marie Claire, Allure, Elle and InStyle magazines. In total, the 2013 spring media initiatives helped position Acroball PureWhite as a stylish new accessory for self-expression and delivered more than 220 million impressions across online, TV, and print channels with 18,500 sweepstake entries. During September 2013, Pilot Pen returned to New York Fashion Week in a celebration of self-expression and style by again teaming up with fashion-centric events. These events included the celebrity-focused New York Fashion Week Gifting Lounge, and the Falguni and Shane Peacock fashion show at Lincoln Center. The initiatives supported Acroball Pure White, G2 Fashion, FriXion Clicker and MR Metropolitan Collection pens. Pilot featured one-of-a-kind handbags, inspired by on trend colours and styles that were embellished with more than 650 of Pilot’s striking, smooth writing pens at the Gifting Lounge. The striking patterns featured on Pilot’s G2 Fashion line of pens adorned the nails of the models walking in the Falguni and Shane Peacock

OPI Magazine | February 2014

fashion show during NYFW at Lincoln Center. VIP attendees were gifted the G2 Fashion Collection – the perfect pen to keep them organised and stylish.

Positive consumer response Pilot’s New York Fashion Week 2013 initiatives garnered more than 147 million impressions, with prestigious mentions including Vogue.com, The Huffington Post, US Weekly and numerous articles and mentions by bloggers. Consumer response to these products has been extremely positive. Sales have been robust for the new launches with sales results exceeding forecast overall, and G2 Fashion sales proving to be completely incremental to the G2 business in its first year in the market. The response to these pens, which tie to self-expression and fashion, has also been extremely positive in the B2B realm. Established in the US in 1972, Pilot Pen’s production and operations have been located in Jacksonville since 1995. A market leader in both the gel and rolling ball categories, Pilot’s state-of-the-art manufacturing facilities in the US, Japan and around the world operate under strict quality control standards, ensuring the superior quality of all Pilot products. To what can the company attribute its success in the US Market? “Pilot prides itself on an unwavering commitment to product innovation,” said Dennis Burleigh, President and CEO of Pilot Corporation of America. “Our philosophy is to create superior writing instruments, providing an exceptional writing experience that ultimately encourages self-expression.” At Pilot, ‘Power to the Pen’ is not merely a tagline, it embodies the vision for Pilot’s future. In this digital age, the pen you choose, when you choose to write, is even more important. Pilot’s goal is to bring pens to consumers that will delight them with their writing quality and self-expressive benefits. Thus far, the response from Pilot’s purchasers across the B2B and consumer markets has been overwhelmingly positive. On the B2B front, the annual growth in Pilot’s pen sales is exceeding the category. From a consumer perspective, the company frequently receives emails thanking it for moving in the right direction and for making “relevant” and “innovative” products available. Loyal fans on Pilot’s Facebook page comment regularly that they have to hide their coveted Pilot pens. Other fans say that Pilot has truly ‘Made Writing Fashionable’ for them again. It’s not just a pen, it’s a Pilot pen.

De-globalisation | Special Feature

De-globalisation

of the office products

industry?

De-globalisation is changing the face of the OP industry, says Tom Schinkel

EvEryonE

knows that the digital age is having a profound impact on everything we do, whether it is in business or in our personal lives. The issues for the office products industry have been spelled out by many, including this author. So, when Office Depot and OfficeMax announced – almost a year ago – that they were planning to merge, the first thought that came to mind among more than a handful of industry veterans was whether this was an appropriate response to the market circumstances of the day. By early 2009, it had become obvious that nimble and smaller entities – manufacturers and resellers alike – had discovered and introduced new capabilities that allowed them to survive and prosper regardless of the growth and perceived power of what had become known as the global players.

Different fundamentals While these players were building increasingly complex value chains, and labour costs between high and low-cost countries (ie China vs the USA) started to rebalance at a rapid rate, some regional and local players managed to thrive in the pursuit of very different business models. Importantly, today’s market fundamentals are very different from those prior to 2008. Energy costs in the US are lower than they have been in years and the country is well on its

way to becoming energy-independent by 2020, a goal that had eluded this country for decades. Total costs of labour have already swung in favour of the US, and business models with short value chains are on the upswing. On the heels of these changing fundamentals, we are witnessing a phenomenon that seems to be pointing in the direction, not of globalisation, but of de-globalisation. Several companies in our industry appear to

may see incredible new opportunities and growth through acquisition in international markets. In this context, the OP industry can be seen as a microcosm of a wider trend that is noticeable in more than a handful of industries. In fact, hundreds of internationally active companies are rethinking their globalisation strategies with reshoring/onshoring a key component in their considerations.

We are witnessing a phenomenon that seems to be pointing in the direction of de-globalisation be pursuing a strategy of decoupling their international operations. There is no doubt in my mind that these new market conditions pose challenges, but also offer unique new opportunities for business models of all shapes and sizes. While talk of full-throat de-globalisation may be premature, the move of globalisation as it was cultivated from the 1990s onwards appears to be at a crossroads. Some players benefit from simplifying and retrenching from their global footprint, while others

Tom Schinkel is a certified M&A advisor who works with owners and senior executives of mid-market businesses on issues such as adapting to the digital age and acquiring or divesting businesses. He does this through coaching, individual consulting, writing, training, meeting facilitation and conference speaking.

The impact of this u-turn is felt acutely in the automotive, electronics, appliances and other industries.

Rethinking strategies In the OP industry, the most recent example of course is Esselte, which just announced the sale of its US operations to RR Donnelley. Also, over the past 18 months, Office Depot has announced a number of steps suggesting that it too is looking at simplifying its business model around the globe, with retrenchments in Eastern Europe, Israel and Mexico. 2014 may very well turn out to be a busy and successful year, with mergers, acquisitions and divestitures around the industry and across borders. These will provide the building blocks for a restructuring of the industry and lay the groundwork for new business models, new players and a fresh new look at opportunities for growth and prosperity around the world. w w w.opi.net | OPI Magazine

Writing Instruments | Category Analysis

Is the stylus mightier than the pen?

The squeeze on traditional office products has hit writing instruments more than most, but digitisation and consolidation could herald a new era

by Bruce Ackland bruce.ackland@opi.net

WITH

the pinch being so keenly felt, it continues to be rather surprising that there has been so little consolidation in the writing instruments market, especially in the US where Newell has a strong hold. The reason for this apparent lack of rationalisation in the marketplace could be attributed to any number of factors, such as old traditional companies not wanting to sell off their heritage or the merger and acquisition stars just not aligning properly.

Wrong timing Jill O’Neill, Senior Category Product Manager for writing instruments at United Stationers certainly sees it as the circumstances just not being quite right – yet. She says: “As a participant and observer in the market, it appears that the right set of motivations have not been present to drive consolidation. As demand continues to decline over time, the sense of urgency may increase for manufacturers to rationalise brands and capacity, as has happened in other product categories. Also, many of the writing instrument vendors have parent companies with headquarters in other countries and do well overseas.”

Certainly the overseas market and particularly Asia seems to be more robust for writing instruments, with Indian manufacturer Luxor Group one company that has enjoyed a solid 12 months despite issues with currency fluctuations. Executive Director Pooja Jain explains: “The last year has been positive for the company in terms of volume and value growth, although overall the currency fluctuation with the dollar getting stronger against the rupee effected the cost of production to some extent. Nevertheless, exporting to international markets and growth opportunities covered our import values well.” Interestingly, the M&A activity in India has also been more pronounced, most notably with BIC’s protracted acquisition of Cello. One issue affecting many OP categories, regardless of geography, is digitisation. The key issue here for writing instruments is the sheer momentum of technological progress. Touch screen tablets have only exacerbated the move away from writing instruments that began with the proliferation of the home computer, laptops and notebooks. If you want to see just how serious this migration is, take a look inside any school where pure handwriting classes have dwindled and may even become a thing of the past over time. O’Neill says: “Classroom usage is, of course, a large portion of the writing instrument market. Educational

science will play a big role in understanding learning styles and what methods generate the best long-term results. We continue to see people writing less in general with a pen or pencil, but when they do write, they will want something of quality and value. This may not apply to schools today, but it is definitely present in the workplace overall and could spill over into school use over time.”

Digital/traditional co-existence Right now, there is still a desire for digital and traditional writing instruments to co-exist in schools and in workplaces, but are vendors embracing this movement enough? BIC is certainly one company that has grabbed the scenario and opportunity with both hands with its BIC Education solution for primary schools that combines handwriting and digital technology. The solution is equipped

“When people do write, they want something of quality and value”

w w w.opi.net | OPI Magazine

Category Analysis | Writing Instruments

Category/Channel Breakout

Dollars

Change (%)

Dec 2011-Dec 2012

Dec 2012-Nov 2013

$1,961,601,015

$1,941,537,101

Pens

$671,161,790

Pencils

$423,105,291

Total

Units

Change (%)

Dec 2011-Dec 2012

Dec 2012-Nov 2013

-1.0%

748,054,324

705,566,571

-5.7%

$643,883,432

-4.1%

214,810,903

195,785,191

-8.9%

$423,450,374

0.1%

213,061,708

198,009,138

-7.1%

Category

Fine Writing

$31,035,862

$33,096,786

6.6%

1,911,316

2,538,478

32.8%

Markers

$490,989,345

$505,325,066

2.9%

158,828,132

162,078,129

2.0%

Other*

$345,308,727

$335,781,444

-2.8%

159,442,265

147,155,635

-7.7%

$1,840,993,409

$1,805,894,738

-1.9%

732,657,869

688,488,152

-6.0%

$120,607,606

$135,642,363

12.5%

15,396,455

17,078,419

10.9%

Channel Breakout Total Brick & Mortar Retail Total E-commerce

*Other categories include highlighters, correction, refills and pencil sharpeners.

with digital tablets and educational software, designed with the collaboration of teachers, that makes it simple for teachers to create and share educational materials with students on tablets in real time. Not surprisingly, in its promotional material the company is still keen to point out that “according to many experts, handwriting contributes to the structuring of thought and must remain a fundamental skill that children enjoy mastering”. Billy Salha, Director of BIC Europe, adds: “For more than 60 years, BIC has assisted pupils around the world as they learn to write by trying to make simple and reliable products available to them. It is this philosophy that has guided our group in the development of the BIC Education solution to effectively support teachers and pupils through the transition to an increasingly digitised environment.”

Transition Pentel has also embraced the digital potential with its popular Airpen design, which it continues to refine and accessorise. Time will tell if this hand-in-hand approach with digital and traditional is the future or just the vessel from which we all migrate over to pure digital writing. In the meantime, manufacturers are looking at innovation in all areas of their expertise.

OPI Magazine | February 2014

United’s O’Neill explains: “We are watching end-user behaviour trends to see how much the digital and hard-copy worlds intersect. Writing instruments that incorporate styluses have been around for many years, back to when PDAs started to

O’Neill adds: “The innovation that drives a positive writing experience coupled with the ability to project style and professionalism seems to be paying off.” Again in India, there is something of a bucking of the trend as

“For writing instruments, some products have emerged that reflect the intersection of the hard-copy and digital worlds” emerge as a work essential. We would expect continued development of new tools to help people increase their productivity and get the most out of their new digital devices and processes. “For writing instruments, some products have emerged that reflect the intersection of the hard-copy and digital worlds, but it is a little too early to tell how widely those will be adopted.” There continues to be a trend towards more style and function-based selection over strictly cost in writing instruments. Recent innovation is focused on the inks and delivery systems to complement the barrel design and colour work going on to improve the overall writing experience. As work and purchasing become more democratic, choices reflect personal preferences more than fiscal decisions.

witnessed by Luxor, with traditional writing instruments still proving to be good value. Jain explains: “At Luxor we are seriously looking at a digital offering and evaluating the time for entry. However, while we believe there is a growth opportunity here, it will not be as significant as it still is in the traditional writing instruments area where we see continued growth at an average of 10%.” In terms of product offering in the category, we seem to be in something of a mid-game scenario between the old and the new. As stated previously, whether this is a case of hedging bets, gradual migration or a belief that traditional and digital writing instruments can co-exist remains to be seen.

Source: The NPD Group/Weekly Retail Tracking Service, Dec 2012-Nov 2013 vs. prior year.

Writing Instruments Development

Arts and Crafts | Category Analysis

aFty

Cbusiness r

Arts and crafts is another adjacent category that the OP industry has had high hopes for, but how much of an opportunity does it still represent?

by Bruce Ackland bruce.ackland@opi.net

THERE’S

nothing new about the adjacent arts and crafts category, but it has had notable peaks in the OP channel, in particular during the US-led scrapbooking craze over a decade ago. As an industry itself, arts and crafts is still in pretty good shape, with a packed magazine market for enthusiasts as well as dedicated shopping channels. Mainstream TV is also helping the sector with the increasing trend for ‘upcycling’ and recycling being popularised by UK shows such as Kirsty Alsopp’s Fill Your House For Free, Handmade Home and the most recent, Vintage Gems, where she explores how different crafting techniques can transform the home. One excellent indicator of how well the sector is performing is the Craft and Hobby Association’s (CHA) Mega Show – the world’s largest craft trade show – which showed robust form last month, with more buyers attending than the last couple of years from over 60 countries. Andrej Suskavcevic, CEO of the CHA, says: “Overall the last 12

months have been positive. As the economy gets better we are seeing retailers enjoying the benefits of that. It’s still tough out there but improving. Also the internet is helping many creative professionals get into the business, and the DIY movement is alive and well and definitely growing.”

Growth And as if to further thumb a nose at the digital revolution, enthusiasts young and old are finding particularly old-fashioned ways to fill their hobby time. “Anything to do with yarn is big,” Suskavcevic says. “Younger generations are getting into knitting and crocheting.” For United Stationers it’s been a pleasing year for its arts and crafts business, with it growing nicely

Andrej Suskavcevic, CEO of the CHA

while traditional office products have declined. Katy Psihogios, Category Product Manager Arts and Crafts for United, explains: “We have seen a more diverse and broader set of channels selling arts and crafts, which reflects purchasing trends in general and we see this positivity continuing. A recent study done by a top supplier in the category found that almost half of US classroom teachers (kindergarten through fifth grade) who use a back-to-school list indicate that the use of hands-on art supplies in their classroom has increased over the past two years. We think this bodes well for continued growth in arts and crafts.” Indeed, there certainly seem to be longer-term growth possibilities in the arts and crafts categories than in traditional office products. While OP usage is linked to employment and behavioural trends, arts and crafts tend to continue to be hands-on materials that are consumed steadily. In addition, learning environments are continuing to offer a mix of digital and dimensional experiences, which bodes well for continued use of arts and crafts consumables. Psihogios adds: “The best OP resellers create a positive experience in serving w w w.opi.net | OPI Magazine

Arts and Crafts | Category Analysis their local/regional school districts, which makes this an attractive category to continue with in the future. As they also get into cleaning and facilities management supplies, arts and crafts becomes a nice part of the overall bundle.”

Resurgence In general, the last 12 months have seen resurgent areas in arts and crafts such as paper crafts, where there has been double-digit growth fuelled by the trend for retro appeal games and pursuits from the youth to middle-aged markets. Manufacturer Decopatch, for example, is releasing new papers which focus on the upcoming and continuing trends of pop, kitsch, country chic and oriental elegance as well as on new maché products to assist a coordinated home design, including decorative bowls and kitchen containers. It certainly seems as if the arts and crafts world is rising to the challenge of innovation and monitoring trends for the next big thing.

Archiver’s - A cautionary tale It isn’t all good news for the arts and crafts sector as witnessed by the closing down of the US arts and crafts retail chain Archiver’s. Archiver’s recently announced that after 14 years in business it will cease operations and close all its 33 stores by mid-February. In many ways Archiver’s’ is the ultimate cautionary tale for the sector as it was born out of the scrapbooking trend of years ago and has suffered as that craze plateaued. In a statement the company said: “The economy has changed, our industry has changed and our customers’ needs have changed. When Archiver’s began, scrapbooking and papercrafting were growing rapidly, becoming the largest segments in the craft industry. However, over the past four to five years, the combination of a weak economy and new technology resulted in steady declines in the memory craft business, significantly impacting Archiver’s and many of the retailers and vendors in the craft industry.”

with the market to service their customers’ needs.” Fortunately for suppliers and OP resellers keen to capitalise on this category, there are many platforms on which to monitor trends. For example, there is a vast range of crafting blogs which are a good way to get a feel for what is being said by the most ardent of crafters. Pinterest pages are also an ideal place for

“The best OP resellers create a positive experience in serving their local/regional school districts, which makes this an attractive category to continue with in the future” Nick Parry, Head of Arts and Crafts at ExaClair, the UK supplier of brands such as Decopatch, Maildor, Avenue Mandarine and Clairefontaine, explains: “Innovation in the arts and crafts industry centres around the ability to monitor trends and the application of imagination into how these trends can be serviced and how they will develop. Many crafters pursue more than one crafting activity – generally three or four – and so suppliers need to Nick Parry be flexible and move

crafters to show off what they think looks good and what works for them. Commercial opportunities can also be explored by keeping track of what market leaders like Hobbycraft are doing, selling and saying, as its constant contact with the craft customer base gives it a highly informed view. The UK arts and crafts sector also received a huge boost with the emergence of a UK trade association, the CHA UK, which has been established as a response to the success of the US model, and now has a strong identity in the UK.

Parry adds: “The CHA UK is a useful tool for new and established craft retailers alike. Its purpose is to help the industry by providing much needed research and by offering services, support, advice and benefits to help the profitability of the industry.” One effect of this monitoring of trends is numerous arts and crafts companies moving into the digital space by providing their customers with images, designs and patterns that can be downloaded for card-making, scrapbooking and other activities like decoupage. It’s a cost-effective way of providing customers with design ideas to fuel their inspiration and enthusiasm.

Best days gone? So is arts and crafts another adjacent category that has seen its best days already in terms of the OP industry? Well, while it seems as if the time to fully capitalise was probably at the beginning of the modern craft craze when Bill Clinton was still in the White House, there is no question that the segment has an admirable resilience. However, as with many categories that are not instinctively known to the OP sector, it’s important to do your homework and keep up with the latest crazes. w w w.opi.net | OPI Magazine

Your OPI

On the move

OP personnel changes from around the globe We would love to hear from you. Email editorial@opi.net, Tweet us @OPInews or you can write to us at OPI, Diamond House, 36-38 Hatton Garden, London, EC1N 8EB, UK

Europe

Spicers has announced a raft of appointments to bolster support for its reseller partners in 2014. Former Halfords man and e-commerce expert Jason Bridgewater has joined the UK wholesaler as Director of E-Commerce, in charge of the lead-generating MemoEtc web platform. On the product category side, and following on from the appointment in December of Mike Holme as Category Sales Director for Paper, Rebecca Stallard has joined from Newell Rubbermaid as a Category Director, while David Orr is rejoining Spicers as Category Sales Director – Furniture. Orr was previously Sales and Marketing Director for Furniture at Spicers and most recently worked for new OP wholesaler Exertis Gem.

Spicers also confirmed to OPI that Merchandising Director Greg Pritchett left the wholesaler in December and that a direct replacement is not immediately being sought. Peter Damman has joined the board of business supplies wholesaler soft-carrier as independent Non-executive Director and will also join the wholesaler’s strategy team. Dutch national Damman has been a prominent figure in the European office supplies market for the last 25 years, helping to set up Viking in Europe and occupying a series of senior roles at players such as Office Depot, Corporate Express, Staples and Spicers.

Europe Simon Larard has joined Floortex as European Sales and Marketing Director. Larard was most recently VP Sales and Marketing for Bi-silque. He also spent more than 20 years at ACCO during his 25-year career in the OP sector. Larard’s appointment comes just a few months after Floortex appointed Peter Stubberfield to run its operations in North America. Now the company is looking to achieve further geographical and channel expansion in continental Europe.

Teresa Presas is to leave her leadership role at the Confederation of European Paper Industries (CEPI) after ten years in charge. Her replacement will be Marco Mensink who has been CEPI’s Deputy Director General for the last two years. “Teresa has turned CEPI into a highly credible and constructive partner to EU institutions that lives up to its members’ expectations of bringing added value to the European pulp and paper industry,” said new CEPI Chairman Gary McGann. Jalema’s Marketing Director Kai Holtkamp left the Netherlands-based vendor in December. The firm said

Innovations

www.opi.net/innovations The latest products by the leading vendors in the OP industry in one place For information on how to advertise your product contact fergus.cox@opi.net

OPI Magazine | February 2014

that it was an amicable separation that had occurred due to a “difference of opinion on the strategic direction of the company”. As well as group marketing, Holtkamp was responsible for the sales effort into the independent channel in Germany. His duties will be carried out by Sales Director Frank Demarteau until a replacement is found.

USA

Esselte’s VP Sales and Marketing North America Ron McCormack has retired from the company. McCormack had been with Esselte for 28 years, starting in 1985 as a Product Manager and quickly progressing to various leadership roles, including Country Manager Canada, VP Sales US and ending with his final position of VP Sales and Marketing North America.

Your OPI

5 minutes with... Charles Forman, Executive Vice President, Independent Stationers

Describe what you do in about 20 words. Bring sales and profit opportunities to the independent dealer channel and manufacturers within the office products, office furniture and related industries. If you weren’t doing your present job, what job would you like to be doing? Something of a humanitarian nature, perhaps something that assisted people with acquiring fresh drinking water. There are so many people in other parts of the world who have little or no access to clean water. The best moment in your career? There have been many, but buying and running an independent dealership is high on the list. The experience of working with independent dealers and manufacturers over the past 12 years while fulfilling various roles at Independent Stationers is up there as well. Your best piece of advice to someone who has just joined the OP industry? Settle in and become a student of the industry, as many people who enter the industry stay in it for a career. Also, read business books and industry publications, as so much business writing today applies to the OP industry. What do you think will be the biggest single issue affecting the OP industry over the next five years? A willingness to adapt to a changing environment. This change could be in terms of business model(s), a re-think of product offering and/or of the way you are looking at succession planning. What business book would you recommend as essential reading? There are so many, but the one that I recently read that applies to the world economic stage is The Coming Jobs War by Jim Clifton, Chairman of Gallup. This book should be essential reading for all who lead in business, government and education, because it points to how so many current leaders are focused on the wrong things. It is packed with data supporting his case, with a historic framework validating what can be done.

“The OP industry is a great place to be if you’re willing to work hard and face the challenges head-on”

Your greatest strength? Persistence and perseverance. What do you like best about the OP industry? It is a great industry with so much opportunity! Sure, there are many challenges currently facing the industry, but it is a great place to be if you are willing to work hard and face those challenges head-on. Your ideal night out? Anywhere with my wife, Holly! If you could invite two famous people for dinner, who would they be and why? Thomas Jefferson, because of his undeniable wisdom and foresight; and Ben Franklin, because of his innovativeness and entrepreneurialism. Your favourite holiday destination? The Hawaiian Islands are a lot of fun and are a breathtaking combination of beauty, relaxation and cultural history. Things you don’t like spending money on? Unnecessary fees with no ROI.

Any pets? Two dogs that are Labrador retrievers (one black and one yellow),two birds (a cockatiel and a parakeet) and one cat that is rarely seen.

www.opi.net | OPI Magazine

Your OPI

Calendar Key dates in your industry If we are missing an event please let us know. Contact editorial@opi.net

Do you have an event that you would like to promote in the OPI Calendar? Please contact Fergus Cox for further information about having an extended entry and pricing. Email: fergus.cox@opi.net Web: www.opi.net/calendar

MAR 02-06 AOPD Annual Meeting Biltmore Hotel, Coral Gables (FL), USA MAR 04-06 Paperworld Middle East Dubai International Convention and Exhibition Centre, Dubai, UAE

MAR 06-07 DPCG Annual Catalogue Meeting Biltmore Hotel, Coral Gables (FL), USA

MAR 08-11 Ed Expo and CAMEX Dallas Convention Center, Dallas (TX), USA The world’s largest trade exhibition for the educational supplies market – from pre-school to college – with over 1,000 exhibitors.

MAR 11-14 CeBIT 2014 Deutsche Messe, Hanover, Germany

MAR 04-06 OPI Partnership 2014 Hotel Okura, Amsterdam, the Netherlands

APR 09-13 Istanbul Stationery Office 2014 CNR Expo, Istanbul, Turkey

Contact: Steve Hilleard Email: steve.hilleard@opi.net Event to assist European vendors and resellers in building long-term strategic relationships.

APR 29 The Society of Old Friends – Members Dinner and AGM RAF Club, London, UK

APR 01-02 London Stationery Show 2014

Business Design Centre, London, UK Contact: Chris Leonard-Morgan Email: clm@firstevents.com Tel: +44 20 8462 0721; Web: www.stationeryshow.co.uk The only UK exhibition dedicated to stationery products, writing instruments and accessories for the home, school and office. Organiser of National Stationery Week.

MAY 06-09 ISSA/Interclean Amsterdam RAI Convention Centre, Amsterdam, the Netherlands MAY 13-14 Recycling Times Conference Chicago (IL), USA MAY 21-23 Corwell Expo Corwell HQ, Budapest, Hungary JUN 06-08 Office Club Annual Conference The Belfry Hotel, Birmingham, UK JUN 11-15 SP Richards Advantage Business Conference Gaylord Opryland Resort Hotel, Nashville (TN), USA JUN 12-13 UFIPA Annual Conference JW Marriott, Cannes, France

JUN 16 BOSS Federation BenGolf Day Wyboston Lakes Golf Centre, Bedfordshire, UK JUL 09-11 ISOT 2014 Tokyo Big Sight, Tokyo, Japan JUL 15-16 Bob Parker Memorial Golf Outing Kiawah Island Resort, Ocean Course, Kiawah Island (SC), USA SEPT 17-19 EPIC 2014 Joint Independent Stationers/TriMega Convention Westin Diplomat, Hollywood (FL), USA OCT 08 Howard Wolf Golf Classic Cantigny Golf Club, Wheaton (IL), USA OCT 09 Spirit of Life Gala Navy Pier, Chicago (IL), USA

MAR 05 European Office Products Awards 2014

JUN 13 North American Office Products Awards 2014

Contact: Lisa Haywood Email: lisa.haywood@opi.net Tickets are now available for the 13th annual EOPA presentation dinner. Book online at www.opi.net/EOPA2014 or email awards@opi.net to request further information.

Contact: Janet Bell Email: janet.bell@opi.net Web: www.opi.net/NAOPA2014 The fifth annual awards programme for North American manufacturers and dealers. Encouraging innovation and giving recognition to those working to deliver real value.

Hotel Okura, Amsterdam, the Netherlands

OPI Magazine | February 2014

Gaylord Opryland Resort Hotel, Nashville, TN, USA

Your OPI

Final word Your industry, your opinions Be Remarkable

Diane Hund, VP of Marketing, United Stationers

United Stationers’ Diane Hund says dealers need to make their brand stand out

SETH

Godin is sort of a czar in the world of marketing. What I like about his approach is his ability to be forward-thinking, yet grounded in the ‘here and now’. I had an opportunity to hear him speak two years ago and he said something that has stuck with me: “Stop being the last step in delivering average products and start being the first step in delivering something remarkable.” What I love about this quote is that it is perfect for our industry. I wasn’t even working at United when I heard this, but it pertains so well to what we do. At the end of the day, we deliver products – many of them average (meaning not differentiated from the products that someone else can deliver). But what we need to focus on is being remarkable. To truly digest this, let’s break down what the word means. To be ‘remarkable’ is to simply be/do something on which people want to ‘remark’. Simply put, people want to talk about you. And that’s huge in today’s marketing environment. So much of our marketing message is no longer controlled by what we say (the ‘we’ means us marketing folks – those of us schooled in the college of life on creating wonderful marketing messages and being responsible for communicating the value of the product or brand) but by what they say. And who are ‘they’? Our customers, our prospects, our employees. And they are vocal – at least they can be vocal – if your brand is remarkable. I often talk about one of the biggest concerns I have with our local resellers: their lack of brand awareness. I don’t mean brand awareness within a geography (although that, too, is worthy of attention), but brand awareness within the office – the office with which they have a contract to be the supplier. Let’s face it, the order aggregator no longer controls the transaction. The internet has made it possible for just about every office associate to find and purchase what they need, when they need it. And if that associate (let’s call them a ‘chooser’ of their own office products) doesn’t know who the OP provider is, they are more likely to simply purchase from a company that they do know. It’s not that this chooser doesn’t WANT to buy from the local reseller – it is simply that they are unaware this option exists. So the goal for the reseller is to develop brand

awareness throughout the office – to all of those choosers. And the easiest way to do this? Be remarkable. In my spare time, I am a runner. It is a fairly inexpensive hobby, but I do invest in good shoes which I go through about every three months. And I buy these shoes from my local independent in my town. They cost more there. I think most people would agree that this service/price is worth it for that initial purchase, when you are trying on various shoes, getting advice from the pros, taking test runs. But now, I could simply repurchase my brand/model online and save money. But I don’t. That’s because I find my small local store to be remarkable and I mean this literally, as I talk about it to all of my running friends. And for good reason. Whenever I visit, there is some sort of value-add awaiting me. It might be something small (like the store’s database that helps me truly track the timing of my purchases) or an unexpected 10% discount, because I have just become an ‘ultra’ runner – meaning I spent more than $1,000 (yikes!). Or maybe it is simply that they greeted me by name or enquired about a recent race I was in. Whatever it is, they consistently deliver – and I, in turn, remark about them, in person or on Facebook. That’s golden. So take a few minutes to think about what truly makes you remarkable. How do you demonstrate this? And more importantly, how do you get this message to penetrate to all of those ‘choosers’ throughout the office? Chances are you are already doing this, but have you harnessed the power of that message? Give your order aggregators a remarkable experience and they will tell others. And then the choosers will choose you.

“The internet has made it possible for just about every office associate to find and purchase what they need, when they need it”

OPI Magazine | February 2014

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IN THE NEXT ISSUE • Spicers’ European ambitions • The low-down on Paperworld Frankfurt 2014 • 3D printing – are OP resellers jumping on board?