BIG INTERVIEW
Peter Kelly, Winc January/February 2022
INSIDE THIS ISSUE l Twist in the ODP/Staples tale l US M&A on the rise l EOPA shortlist out l Last-mile US dealer solution l Shaping Europe’s future
l Reckitt in the spotlight l Education bounces back l 5G – game changer? l OPI webinar: inflation insights l State of the Industry
CONTENTS 14 Big Interview Peter Kelly on wiping the board clean and starting afresh at Australian reseller Winc with a new approach, attitude and outlook 22 Focus OPI takes a look at some of the key themes and takeaways from the recent European Forum Online 28 Spotlight Consumer giant Reckitt takes aim at the B2B space with the launch of its Pro Solutions business
Big Interview: Peter Kelly, Winc
When Winc in Australia appointed Peter Kelly as its new CEO in March 2020, the workplace products reseller was facing a number of serious challenges. Despite the fact it was the largest operator by some margin in the B2B space, operational improvements were urgently required to re-engineer the customer experience. Investment in staff engagement was also necessary to bring Winc’s people along for the ride. Last but by no means least, financially, it had become a race to the bottom for the operator, with the top line seemingly more important than profit figures. Coinciding with the onset of the COVID-19 crisis, Kelly set to work under less than ideal circumstances. FOCUS: SHAPING THE FUTURE
34 Opinion Kalunga’s Paulo Garcia explains education shifts in the Brazilian market 36 Category Update Despite a topsy-turvy year, the writing instruments category is again proving its resilience 40 Advertorial Fellowes Brands: expanding product range and global reach with four generations of family leadership 44 Research The fifth generation global wireless standard is nigh. Will 5G be a game changer for our industry? 46 Research Research is underway for the ninth State of the Industry report
REGULARS 5 Comment 6 News 48 5 minutes with... Jill O’Neill 50 Final Word OPI Insights: Dealing with inflationary cost pressures
January/February 2022
Now is the time to lift our heads above the parapet. “Start thinking about the business you want to be and look at the building blocks that are going to take you there,” [Phil Jones, Managing Director of Brother UK] said. One vital aspect is to look at the systems and processes used to operate a business. The majority of companies are using more digital systems than ever on a daily basis; it is time to ensure they are fit for purpose if they are to support future strategies and vision. In particular, cybersecurity must become top of mind as more digitally orientated organisations and supply chains are built.
31 Category Update As pupils and students return to face-to-face learning, the education sector starts to bounce back
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COMMENT The OPI team EDITORIAL Editor Heike Dieckmann +44 1462 422 143 heike.dieckmann@opi.net Deputy Editor Michelle Sturman michelle.sturman@opi.net News Editor Andy Braithwaite +33 4 32 62 71 07 andy.braithwaite@opi.net Freelance Contributor David Holes david.holes@opi.net
SALES & MARKETING Chief Commercial Officer Chris Exner +44 7973 186801 chris.exner@opi.net Head of Media Sales Chris Turness +44 7872 684746 chris.turness@opi.net Digital Marketing Manager Aurora Enghis aurora.enghis@opi.net
EVENTS Events Manager Lisa Haywood events@opi.net Event Programmer Sophie Carus sophie.carus@opi.net
PRODUCTION & FINANCE Studio Joel Mitchell joel.mitchell@opi.net Finance & Operations Kelly Hilleard kelly.hilleard@opi.net
PUBLISHERS CEO Steve Hilleard +44 7799 891000 steve.hilleard@opi.net Director Janet Bell +44 7771 658130 janet.bell@opi.net Executive Assistant Debbie Garrand +44 7718 660249 debbie.garrand@opi.net
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Hope springs eternal for a great 2022
licking through the past few editions of OPI and reminding myself of the 12 months just gone, it’s probably fair to say 2021 hasn’t been the year of recovery and resurgence many had envisaged. COVID and its variants saw to that. But it’s evident green shoots are now appearing everywhere, suggesting that 2022 really will be better. Several features in this issue substantiate that notion. Having been dealt a tough hand almost two years ago when serious operational issues at Winc Australia collided with the force of a global pandemic, new CEO Peter Kelly had his work cut out. Read how this unflappable Aussie confronted the core challenges and succeeded in turning this mighty B2B operator around in our Big Interview (page 14). In terms of product categories, the education vertical has been hard-hit for several, well-documented reasons. Here too, we’re seeing green shoots (pages 31 to 34). And while the initial COVID-induced PPE craze has subsided, jan/san as a segment remains top of mind, so much so that consumer giant Reckitt is making a concerted effort to address the B2B space and its many opportunities (page 28).
It’s evident green shoots are now appearing everywhere, suggesting that 2022 really will be better In early December last year, executives from across Europe – and beyond – came together at the European Forum Online to assess the state of our industry. Far from adopting a self-pitying doom and gloom approach, discussions were positive – if realistic – as well as constructive. Take a look at the key themes and takeaways (page 22). When I say realistic, I refer, in part at least, to the ongoing supply chain issues and inflationary pressures which are largely out of the control of many operators in our sector. Nevertheless, they are hugely important, affect pretty much everyone and need to be addressed. This is exactly what OPI did in its first-ever Insights webinar which took place in mid-January, shortly before the magazine went to press. Read all about it in our Final Word (page 50). So here’s hoping for a happy, healthy and prosperous 2022. Finally, we may get the chance to come together again for much-missed, in-person events. Look out for more details about OPI Partnership, the European Office Products Awards (the shortlist is out, see page 9) and the OPI HEIKE DIECKMANN, EDITOR Global Forum (page 43).
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January/February 2022
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“The company’s board of directors is carefully reviewing both proposals with the assistance of its financial and legal advisors to determine the course of action that it believes is in the best interests of the company and its shareholders,” ODP said in a press release. The reseller further announced it had halted work on its proposed split “in order to avoid incurring potentially unnecessary separation costs while it focuses on a potential sale of the consumer business”.
Analysis: ODP/Staples saga takes a new twist
The predicted merger of the US retail networks of Office Depot and Staples hits roadblock as third party appears After 2021’s market consolidation in Europe, many – OPI included – were expecting the US to be the focus of M&A activity in 2022. At the top of the list was a combination of the retail operations of Office Depot and Staples. Last November, Staples US Retail owner Sycamore Partners had reaffirmed its $1 billion offer for the consumer business of The ODP Corporation (ODP). This comprises around 1,100 Office Depot and OfficeMax stores, plus the officedepot.com e-commerce site. At the same time, ODP was in the middle of a process to split itself into two separate, publicly traded entities, one consisting of its consumer division and the others its B2B-focused operations. This was on track to be completed during the second quarter of 2022. Once finalised, it could have paved the way for a transaction to combine the Office Depot and Staples retail networks. Now, all this is up in the air after ODP revealed on 14 January that, last December, it had received a non-binding proposal (the terms of which are confidential) from another third party to acquire its consumer operations. It also confirmed it is still talking to Sycamore as it “further evaluates the potential value and regulatory risk of [its] proposed transaction”.
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THE SUPPLY ROOM GOES WEST
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SYNERGIES Previously, it had been difficult to imagine a scenario which did not involve a merger of the Staples and Office Depot stores in the US. But the arrival of another interested party certainly changes things. As to who this might be, OPI sources have pointed to a transaction that involves synergies, essentially ruling out a financial buyer. Who could be interested in Office Depot’s customer base of millions of small businesses across the US? Names to throw into the hat could include warehouse clubs such as Walmart-owned Sam’s Club as well as Costco. And then there is Amazon, which has been growing its retail presence over the past few years, through its Whole Foods acquisition, and pick-up and returns partnerships with the likes of Kohl’s.
Having more than 1,000 locations throughout the country would boost [Amazon’s] last-mile delivery efforts
Leading US independent dealer The Supply Room (TSR) confirmed the acquisition of Colorado-based reseller Source Office & Technology, effective 9 December 2021. The deal marks the expansion of TSR outside of its mid-Atlantic stronghold, where it has successfully grown since 1951 to become the second-largest family-owned OP dealer in the US. Source will continue to operate under its own name as a division of TSR, led by current President David Sass. Former shareholder John Givens will stay on for an indefinite period in a strategy role as TSR looks to grow its newest addition.
Consumers are definitely growing accustomed to retail-oriented services such as kerbside pick-up and click-and-collect. In its most recent quarterly results, for example, Best Buy said more than 40% of its total online sales were through click-and-collect and it is transforming some of its stores into local fulfilment centres. It’s a model that could suit Amazon, and having more than 1,000 locations throughout the country would boost its last-mile delivery efforts. Now it will be interesting to see how much appetite Sycamore has for a bidding war. Though the question remains: if it wanted the Office Depot stores so badly, why has it not acted more swiftly since first publicly showing an interest in ODP more than a year ago?
TSR now has revenues of approximately $200 million, with COO Yancey Jones Jr confirming to OPI that the goal is to double this over the next few years. It may include looking at businesses in other regions of the US, with Jones pointing to a successful and stable existing management team at Source as being an important factor. The Virginia-based mega dealer certainly seems to have the appetite and resources to take advantage of the current acquisition opportunities in the US independent channel as it appears to be a buyers’ market at the moment.
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US dealers tackle last-mile issue
Independent dealer consortium, the Supply Chain Investment Group (SCIG), has created an entity to develop a software platform aimed at facilitating last-mile deliveries to customers. SCIG comprises 15 of the largest independent dealers in the US – excluding WB Mason – and was established last year. One of its stated goals is to “explore initiatives that would further enhance each member’s ability to compete successfully in the post-pandemic period”. At the end of 2021, SCIG announced the formation of DDN Hub, a software company with the sole purpose to develop an automated last-mile delivery platform that will “tie together” dealers using disparate ERP systems. “The design […] is expected to provide an improvement over existing approaches to connecting dealers serving multilocation, national or regional accounts,” the consortium wrote, adding: “Of note, the design assigns sourcing responsibility to the contracting dealer, with the servicing dealer providing the last-mile delivery. By offering this option, the DDN Hub complements current approaches where the servicing dealer is responsible for sourcing.” The investment required – which runs into the hundreds of thousands of dollars – is oversubscribed, with the project being led by a loaned IT executive from an SCIG member. The platform is expected to launch early in the second quarter of 2022, and SCIG said it would work with dealer organisation Independent Suppliers Group as the initiative is built out. “The Hub, with its fully automated and unique design, will lower last-mile delivery cost, effect a better customer experience and improve communications between contracting and servicing dealers,” noted SCIG spokesperson David Guernsey. Speaking to OPI, Guernsey said the initiative came against a backdrop of escalating delivery costs he doesn’t see abating any time soon. He also pointed to the need to have a solution that worked regardless of wholesaler affiliation, and which cut out manual intervention such as inputting invoices. Guernsey added he expects the investing dealers to achieve a return on their investments in a matter of months, and that the Hub would be offered to the wider dealer community, not just SCIG members.
Staples axes project furniture unit
Staples Inc dissolved its contract furniture business at the end of 2021 to focus on online furniture sales. The internal announcement of the decision came without warning, with hundreds of employees given little or no notice before finding themselves without a job. A skeleton staff will stay on for a few more weeks to oversee projects in progress, with most of that work being outsourced. Business Interiors by Staples – which the reseller inherited when it acquired Corporate Express in 2008 – was one of the largest contract furniture dealers in North America. Clearly, project furniture is a segment that was heavily disrupted by pandemic-related office closures, but is now set for growth as companies begin to refit their workplaces post-COVID. Staples did not respond to OPI’s request for more details regarding this development.
Lockdowns hit Ryman results
UK office supplies retailer Ryman has posted its first annual loss in 25 years after it was significantly impacted by store closures and COVID-related lockdowns. The Ryman Limited entity, which includes the 200-store network, reported a 40% year-on-year drop in sales, from £123.4 million ($166 million) to £73 million in the 12 months to the end of March 2021. Despite cost management and government support schemes, Ryman slipped to an EBITDA loss of £8.5 million (compared with a profit of £7.8 million 12 months earlier), although it said it is on track to return to profitability in the current financial year. Located in city centres and predominantly serving small businesses and students, Ryman was hit harder by the pandemic than other brands in the Theo Paphitis Retail Group. The move to remote working also resulted in challenges for Ryman’s B2B channel, with this unit being relocated to London, where many of its existing and potential future customers are based. One bright spot was Ryman’s revenues via e-commerce. These increased by 111% versus the previous financial year. This momentum has carried over into the current trading year, despite its stores having reopened: in the six weeks to 24 December 2021, Ryman’s online sales were up by more than 56% compared with the same period in 2019 and before the pandemic.
In mid-January, a group of senior executives from all channels in the business supplies industry came together – virtually for the second time given ongoing COVID-19 travel restrictions – for this year’s European Office Products Awards (EOPA) judging meeting. Now in their 21st year, the EOPA are firmly established as the ultimate accolade for business products companies operating in Europe. Bouncing back from last year’s somewhat restricted number of awards, this time a total of ten categories were judged. Two of these stood out for the sheer amount of entries received – Business Product of the Year and Sustainability Excellence. These record levels are testament to the remarkable resilience and innovation displayed by our sector in the face of adversity as well as to a resurgence and emphasis
on the renewed hot topic of sustainability. As ever, the discussions among the judges were lively and highly informative, with categories, nominations and entries fiercely debated and passionately judged. The winners of the ten categories will be announced at a Gala Dinner on 22 March 2022 at the Hotel Okura in Amsterdam, Netherlands, during OPI Partnership.
EOPA 2022 SHORTLIST:
Initiative of the Year • Fellowes Brands – AeraMax Pro Air Purifiers Digital Lead Generation • JGBM – Supercharge Partner Programme • Lyreco – Lyreco Goodness Microbusiness Support Programme • Nemo Office Club – Keep it Local • Newell Brands – Display Concept
Marketing Campaign of the Year • Avery UK – Avery Power-up Small Business • Avery Zweckform – My Home is My Office • BIC – Sustainable Development • Essity UK – Tork Secure the New Hygiene Standard • Fellowes Brands – That’s Workspace Satisfaction Sustainability Excellence • ACCO Brands EMEA • Essity • Lyreco • Pilot Corporation of Europe • Staples Benelux • tesa Vendor of the Year • ACCO Brands EMEA • Dams Furniture • Essity • Exacompta • Fellowes Brands • Nestlé Professional
Reseller of the Year • Amazon • Böttcher • Bruneau • Bureau Vallée • RAJA Group
NEWS
EOPA 2022 shortlist revealed
Business Product of the Year • ACCO Brands EMEA – Kensington StudioCaddy with Qi Wireless Charging for Apple Devices • Avery Zweckform – Antimicrobial Labels • Exacompta – ETERNECO • Greenspeed – Re-belle • Pilot Corporation of Europe – B2P Ecoball • Renz – AIR2COLOR PRO Wholesaler of the Year • JGBM • Makro Paper • PBS Holding • Quantore • Soennecken/LogServe • Westcoast Young Executive of the Year • Antoine-Louis Cloquet, Franchise General Manager, Bureau Vallée • Sarah Foley-Williamson, Product Integrity Team Leader, EVO Group • Kate Hunter, Business Workplace Design Consultant, Banner • Falko Nils Köhler, Customer Experience Director, Lyreco Germany • Alex Stone, Head of Sales, Office Friendly Professional of the Year & Industry Achievement No shortlist – winners announced on the night
Generation change at Eaton’s
January/February 2022
Bruce Eaton & Andrea Bradley
Andrea Bradley took over as President and main shareholder of well-known US dealer Eaton Office Supply on 1 January 2022, succeeding her stepfather, Bruce Eaton. Bradley joined the company in 2008 and became Marketing Manager in 2011. She has been on the board of directors since 2018. Eaton – who joined the family business in 1977 – had been President of the dealership, based in the state of New York, since 1987. He has been a leading figure in the independent office products arena, including spells as Chairman of dealer groups TriMega and Pinnacle Affiliates, as well as dealer group consortium BPGI.
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ON THE MOVE It has been a busy few weeks in terms of executive moves in the business products industry. See our roundup of the latest departures and appointments below.
Craig Varey
MD leaves Banner Craig Varey, Managing Director of UK reseller Banner, left the business at the end of 2021. At the time of going to press, there had been no confirmation of his successor at the EVO Group-owned company.
Daron Hines
SPP appoints President Staples Promotional Products has named Daron Hines as its new President. Hines joined the Staples Inc subsidiary from food company Morton Salt, and was previously with JM Smucker and General Mills.
Sam Mallow
Ramon Kok
Manutan promotes Kok European reseller Manutan has appointed Ramon Kok as Managing Director of the group’s Enterprise division, which has 21 subsidiaries in 17 countries. The former Lyreco and Office Depot exec joined Manutan in 2015.
Scott Huling
SPR appoints regional sales director US wholesaler S.P. Richards has appointed ex-Grainger exec Scott Huling to lead its sales effort in the south-east of the country. Florida-based Huling has also previously worked at OfficeMax and FedEx/Kinko’s.
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Robert Baldrey
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Mallow rejoins HSM HSM of America has appointed Sam Mallow as its new National Sales Manager. He was formerly a regional sales manager at the manufacturer before leaving five years ago to work at office furniture specialists Iron Age Office and Coriden.
Marcello Barone
Baldrey joins Aurelius Well-known European OP exec Robert Baldrey has joined private equity firm Aurelius as Operating Partner. Baldrey played a pivotal role in the sale of Viking to RAJA at the end of last year, a transaction that enabled Aurelius to exit its Office Depot Europe investment. New Marketing Manager at Beaverswood European viscom/facilities products vendor Beaverswood has named Marcello Barone as Marketing Manager. He joins the supplier from Newell Brands in the UK, where he spent seven years in a brand marketing role.
Johann Pintarich
Management change at OWG Johann Pintarich is now the sole Managing Director at Swiss office products organisation Office World Group following the departure of Philipp Sigrist. The two execs had been joint Managing Directors since early 2021.
Vuk Trivanovic
Shurtape names group CEO Vuk Trivanovic has expanded his role at US adhesive products specialist Shurtape to become CEO of all its operating divisions. The move comes following the retirement of John Kahl, CEO of the vendor’s Consumer & Craftsmen unit, at the end of 2021.
Ehab Abou-Oaf
President role filled at KCP Kimberly-Clark Professional’s new President is Ehab Abou-Oaf, an experienced international FMCG expert. He fills the post vacated by Russ Torres in April 2021. Abou-Oaf joined Kimberly-Clark in 2019, and previously spent 19 years at Mars.
New head of Durable France Former edding France Managing Director Vincent Blanchard has been named as Operations Director of Durable France. He takes over from Franck Baron, who has retired after more than 21 years at Vincent Blanchard the vendor. Promotions at Floortex Floortex has promoted Christina Williams to Head of North American and Export Sales. She was previously Head of E-Commerce. The vendor has also named Julia Rhein as Head of European Sales. Based in Germany, Christina Williams Rhein was formerly General Sales Manager for the Nordics and DACH regions.
Oliver Lux
MD change at Office Centre Germany The German unit of European office supplies retailer Office Centre – which still trades as Staples – has named Oliver Lux as Managing Director. Succeeding Jochen Bohl, Lux joins Office Centre from mattress retailer Matratzen Concord, where he spent 28 years.
New purchasing chief at Bruneau Leading European reseller Bruneau has appointed Thibault Lagrange as Director of Products, Purchasing and Sourcing. Lagrange joined Bruneau from Amazon France and takes over from Eric Boudet, who Thibault Lagrange has left after eight years with the company.
Philippe Guillotin
Guillotin leaves ADVEO ADVEO Managing Director Philippe Guillotin left the France-based group on 12 January. Owner Sandton Capital appointed turnaround specialist Dominique Bernard to succeed him.
Wulff looking to double revenue
Messe Frankfurt has been forced to cancel four of its prominent consumer goods trade fairs expected to take place in Germany in January/ February this year. The company pointed to the “extreme deterioration” due to the spread of the Omicron variant that made it “impossible” for the four shows – Paperworld, Christmasworld, Creativeworld and Ambiente – to run as scheduled. “This decision was anything but easy for us,” said the organiser. “However, in agreement with large parts of the industries represented at the fairs, it is now our responsibility to take this difficult step.” There are no plans to hold any of the impacted shows as physical events during 2022, so Paperworld will not happen before January 2023, three years after it last took place.
Finland-based reseller Wulff has announced that it wants to double its annual sales to €200 million ($225 million) over the next five years. The company said the plan is based on the expansion of its product and service portfolio as well as acquisitions in the Nordic countries where it operates – Finland, Sweden, Norway and Denmark. In May 2021, Wulff already doubled its top line to around €100 million when it bought Staples Finland. Now, it would not be a surprise to see the reseller attempt to increase its scale outside its home country. Very recently, in January 2022, Wulff made a small acquisition in the financial management services sector. Its financial services operations now generate around €2.2 million in annual sales.
IdeaStream acquired
Acquisitions for Avery Avery has spent more than $90 million on two acquisitions that will add over $60 million a year to the label specialist’s top line. The two additions to the Avery portfolio are International Master Products and Lodging Access Systems, both software-centric businesses headquartered in the US. International Master Products, based in Michigan, is the market leader for labels and tags supplied to the US horticulture industry. Founded in 1949, it trades as MasterTag and is powered by its proprietary online creative design software. Sales for 2021 were $46.3 million, with an estimated adjusted EBITDA of $9.6 million. Lodging Access Systems, meanwhile, operates under the RFID Hotel name. It is a leading maker of digitally printed and encoded RFID key cards, wristbands and fobs for the hospitality industry. Based in Tampa, Florida, RFID Hotel’s sales in 2021 were in the region of $16 million, with an estimated adjusted EBITDA of $5.6 million. Both transactions are on a debt-free, all-cash basis and are subject to customary closing conditions. The purchase price for MasterTag is just under $63 million, with that of RFID Hotel approximately $28 million. “These two transactions expand Avery’s rapidly growing portfolio of digitally enabled products to support our direct-to-consumer strategy,” said Geoff Martin, CEO of Avery’s owner, CCL Industries.
Middle East – a land of opportunity
The Middle East education sector is leading a regionwide revival in demand for stationery and office supplies, according to recent research. A white paper by 6Wresearch, published ahead of Paperworld Middle East which took place in mid-December 2021, indicated that a thriving education sector – along with increasing disposable income, a growing youth population and improving economic conditions – has driven demand for stationery and office supplies in the region. While the market predictably dipped in 2020 due to COVID-19-induced lockdowns, it has quickly bounced back, with the area’s stationery, school supplies and OP market estimated at just over $6 billion in 2021. Further growth of 4.2% annually is predicted between 2021-2027, with the sector forecast to be worth almost $7.8 billion five years from now. The education vertical is put at 61% ($3.7 billion) of the total, with the commercial office space estimated at 34% ($2.05 billion). The UAE has 639 public schools and 580 private establishments that have a combined 1.08 million enrolled students. The country is the biggest contributor to regional stationery and office supplies demand, with a 27% share in 2021 ($1.63 billion). It is followed by Saudi Arabia, which has a 20% slice ($1.21 billion), and Turkey, with just over 18% ($1.08 billion). For more on the global education sector, see our Category Update on page 31.
January/February 2022
US-based consumer goods design and sourcing company IdeaStream has been acquired by fast-growing Amazon aggregator Thrasio. Thrasio is a Massachusetts-based start-up established in 2018 that already manages more than 200 brands and has a portfolio of tens of thousands of products. It has received substantial private equity backing in the past couple of years – including $1 billion in funding less than four months ago – and has annual revenue of more than $1 billion. IdeaStream was founded 20 years ago by Tony DeCarlo and Dan Perella, and has developed into a specialist in sourcing for the retail channel. In addition to bringing IdeaStream’s brands under the Thrasio umbrella, the acquisition adds its bricks-and-mortar platform to Thrasio’s tech stack. This, said the acquirer, will allow for rapid expansion and increased availability of Thrasio products for consumers shopping in stores. Thrasio’s physical retail division will also grow in size and expertise with the addition of the IdeaStream team. DeCarlo called the two companies a “natural fit” and a “winning combination”.
NEWS
Paperworld off
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IN BRIEF
While business was supported through the pandemic, […] the continued reluctance of the government to implement a fair and just realignment of the business rates tax, fit for the 21st century, continues to damage the [high street retail] industry Theo Paphitis, Chairman, Theo Paphitis Retail Group
$305 million
£632,000 ($858,000)
Average cost of a print-related IT security breach
Imperial Dade marches on At the start of January 2022, US jan/san distributor Imperial Dade made its 47th acquisition since 2007 when it bought Salt Lake City, Utah-based company HyKo.
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Source: Quocirca
Domtar takeover finalised
Domtar, North America’s largest producer of office paper, is now owned by Canada-based Paper Excellence, after the $3 billion deal closed at the end of 2021. Paper Excellence is led by Jackson Widjaja, the grandson of the founder of Asia Pulp & Paper.
10%
opi.net poll
n Definitely n Probably n Maybe n Probably not n Definitely not
Online sale percentage s as a revenue at of total US Bes Q3 2021 t Buy,
Fujifilm strengthens IT services Fujifilm Business Innovation (formerly Fuji Xerox) has established an IT services division focused on ERP implementation. Fujifilm Digital Solutions has been established following the completion of the acquisition of Hoya Digital Solutions on 1 January 2022.
Sale price (including add-ons) The ODP Corporation got for its struggling CompuCom tech services division.
Will your company be involved in M&A activity in 2022?
31%
14% 45% 24%
30% 7%
Penetration of flexible workspace as a percentage of rentable office square footage in the US by 2030. Source: WeWork
PICTURE OF THE MONTH – ALL CHANGE IN VENLO The Viking name has returned to the former Office Depot Europe headquarters in Venlo, Netherlands. New owner RAJA wasted no time updating the logo on the building following its acquisition that closed towards the end of 2021.
BIG INTERVIEW
Onwards
&UPWARDS
DOWN UNDER
To say Peter Kelly joined Winc at a challenging time for the company would be an understatement. But amid all the difficulties of the COVID crisis, perhaps it was the best time possible to wipe the board clean and start afresh with a new approach, attitude and outlook
W
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hen Winc in Australia appointed a new CEO in March 2020, the workplace products reseller was facing a number of challenges. Despite the fact that it was the largest operator by some margin in the B2B space, operational improvements were urgently required to re-engineer the customer experience. Investment in staff engagement was also necessary to bring Winc’s people along for the ride. Last but by no means least, financially, it had become a race to the bottom, with the top line seemingly more important than profit figures. Peter Kelly, at the very onset of COVID-19, ripped apart the old Winc rulebook and began a journey which would focus on three core pillars: company culture and employee well-being; customer service excellence; and financial success. Nearly 20 months later, he was ready to talk to OPI’s Heike Dieckmann about the progress made, the obstacles that have been overcome and his strategic vision for the future.
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OPI: You joined Winc pretty much at the start of the pandemic and came from outside the industry, so are likely not too familiar to our readers. Tell us a bit about yourself and your career path. Peter Kelly: Sure. As you can tell, I’m obviously an Australian. I have a long history of working for some of the big corporates in the country. I worked for 27 years at what was Coca-Cola Amatil (CCA) until 2013 and had all sorts of different jobs in the organisation, including roles in sales and supply chain, mergers and acquisitions, and process improvement. In the final part of my tenure there, I was in charge of the South-East Asian franchises CCA owned, which comprised South Korea, Indonesia and Papua New Guinea. After that, I ran another business CCA owned, a food producing company then called SPC Ardmona.
Before joining Winc, I spent a couple of years at Officeworks’ parent Wesfarmers where I was CEO of the Blackwoods industrial supplies business. As you say, I joined Winc at a very interesting time. I vividly remember my first day which was meant to be my induction into the company. Instead, it was a COVID-19 crisis meeting about how to get everyone home safely. It’s been pretty much battle stations from that moment on. OPI: How are things now? Sometimes it seems like a relentless cycle of three steps forward, two steps back for all of us, and Australia specifically had some quite severe lockdowns. PK: Yes, the whole COVID management in Australia has had a few setbacks, particularly with regards to the sourcing of vaccines. We had a slow start to vaccinations at the beginning of last year, which essentially led us back into another very deep lockdown. The state of Victoria, of course, had one of the longest and strictest lockdowns in the world. On a positive note, there have been few deaths caused by COVID, and we now have high vaccination rates. I live in New South Wales where rates are approaching 95%. As a general observation, and this will come as no surprise to you, there’s a lot of mental anguish
BIG INTERVIEW Peter Kelly
M&A [...] can lead to great upsides and openings, fresh talent and new corridors for growth, but it can also be handled poorly, cause confusion and crisis as a result of the pandemic. It’s more important than ever to look after your people. We now have mental health first aiders at every one of our sites to recognise and address the stresses that people might be going through. The goal is to stick together, get out of this and emerge stronger. I think we’re on track for it.
OPI: This bad handling, what was this due to – the new private equity owners? PK: No, it had nothing to do with Platinum. It’s management that has to be accountable. People in these roles have to stand up, make the right decisions, lead with values, have a simple plan, follow it up and chase through on the issues. M&A is never just a fast track to success – the real grafting work starts after the deals are done. And if you start to forget about your customers and the people who work for you, shareholder returns will eventually suffer. That’s what I was looking at in
January/February 2022
OPI: We’ll come to COVID and its impact in a moment, but first, could you tell me what you saw when you arrived in 2020? Platinum Equity had bought Staples – which included what was formerly Corporate Express Australia – in 2017, acquired OfficeMax in Australia, rebranded to Winc, etc. It was a period of constant change, for Winc but also the wider competitive landscape. PK: To be honest, I don’t really care too much for the history of it all. What I would say is that M&A
can be a double-edged sword. It can lead to great upsides and openings, fresh talent and new corridors for growth, but it can also be handled poorly, cause confusion and crisis. Part of my career has been spent in M&A, and in this case, I don’t think it was handled very well. It created a lot of pain for our customers in 2018 and 2019. I knew, coming into this role, my job was to get on top of all those issues. Serve customers better, fix the company for our employees and make them love Winc again. Then get our financial returns back in order – these have been the three core areas we’ve relentlessly focused on in the past 18 months. You can’t have one without the other – they are all completely interlinked.
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Peter Kelly BIG INTERVIEW
2020. When you first reached out to me back then, I wasn’t keen to talk because it wasn’t time for talk, it was time for action. OPI: What did you do? PK: We had a number of pressing issues. I wanted us to go out to see our customers, tell them things are going to change, and assure them they’re front and centre of our desires and aspirations for the future. Another was to engage our people in open and honest dialogue: emphasise why this was going to be a great place to work again, and show them our plans to make it a highly engaging workplace. When these two components are right, the third area – improved financial results – happens almost by default. That’s when you and your shareholders get what was originally anticipated from the acquisition.
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OPI: Speaking of shareholders, how involved is Platinum and its principal Renee Koontz in particular in the business? PK: Platinum is a smart investor and supportive of what we are doing. There always seems to be a lot of interest in what private equity outfits are really like. I report to an Operating Committee. They’re a great bunch of very clever and helpful people. It’s a board of directors, just like other boards I’ve worked for. This has certainly been an unusual time, of course, because communication with the Operating Committee has had to be done remotely. At the end of the day, Platinum appointed me as CEO and expects me to run the place well. The team – with Renee at the top – oversees our plans and monthly results like every normal board does. I’ve found Renee and the other committee members to be good people. They’re experts in operations which, in many ways, has made it a lot easier for me. They understand what needs to be done and they’re quick and efficient decision-makers which helps, particularly in these fast-moving pandemic times. I know Platinum is very pleased with the progress we are making.
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OPI: Tell me about Winc’s current footprint. PK: It’ll come as no surprise to you that I’m going to be cagey about any financials. Other than that, I run both the Winc Australia and the New Zealand businesses, the latter known as OfficeMax New Zealand. The Managing Director there reports to me, but we’re quite autonomous. In Australia, we have about 130,000 active customers – exclusively B2B. We have 1,500 staff here and another 400 or so in New Zealand. In terms of logistics, we have five large distribution centres in Australia and about 13 small ones. And, of course, the head office in Sydney. New Zealand has two large distribution centres. OPI: What about customer focus? PK: We have a vertical structure whereby we focus on different segments of the market in Australia: professional services, education, industrial, care and government. We have a reasonably balanced business across these sectors, so about 20% each. OPI: What does this mean in terms of the products you sell? PK: We sell 12 different categories. Imagine you tipped an office upside down – any office in those verticals. Whatever falls out is fair game for us. That’s how I would describe it. The one-stop-shop is what we’re striving for – everything your workplace needs. In some sectors, there’s more demand for traditional office products, but COVID overall has obviously catapulted segments like hygiene and safety into orbit. The care vertical, unsurprisingly, has boomed with hospitals operating at full capacity. What’s been a real surprise for us is our solutions business. This is the bespoke part of the organisation where I expected a bit of a crisis because many customers have been cutting back their capex. But this was a real bright star in 2021. We had a lot of big wins in bespoke furniture and furniture fitouts, managed print services, etc. We also have our Everyday Furniture Essentials business – the type of products you’d need for
a basic home office. That’s been going well as people set up their homes at the start of the pandemic. With that also come all the peripherals, computer equipment and things people are now duplicating in their home office environment. OPI: You referred to five verticals. Drilling down into these, what’s your customer demographic in terms of company size? My understanding is that you’re playing in the top end of the market which – particularly during the pandemic – has clearly come with huge challenges.
We have huge aspirations to grow our share in the mid-market. It will be nice to add this to our portfolio
Presenting to the warehouse team in Melbourne
OPI: The large corporates are a tough nut to crack at the best of times, pandemic aside. PK: Absolutely, and at the big end of town, we have a very disciplined process with a bids and contract team. If the business is not attractive enough, we won’t bid for it.
OPI: How did you manage last mile delivery, given the occupancy rates you’ve referred to and the resulting dispersed workforce. PK: With difficulty. But we’ve delivered to consumer’s homes – it’s just a COVID reality. We didn’t know how long the remote working and learning would last, how quickly there would be a vaccine, etc, so we decided to open ourselves up to everything and explore what was possible. Logistics are challenging in Australia because of the sparse population and the vast distances to cover – it’s one of the reasons why Amazon has not been instantly successful here. You can set up in Sydney and Melbourne, but it starts to get hard even to do B2B deliveries in others states and remote country areas, let alone to people’s homes. We’re working hard to make deliveries as efficient as possible – not just from an economic point of view, but also with sustainability in mind. One of the advantages of selling such a vast range of products is that when you increase the average order size, you experience cost efficiencies and also reduce your impact on the environment. OPI: You mention your interest in penetrating the mid-market more. Are there more acquisitions on the cards for you in order to achieve that? COS buying Lyreco gave it a massive boost in this customer segment. PK: It very much depends on the acquisition. A lot of the potential targets in Australia are small, family-run A$20-A$30 million (US$15-US$22 million) businesses in real financial stress. Say we bought a small office supplies company that was going bust – what would this really add to Winc? We’d get the poor contracts of that operator, its loss-making customers, old stock, and own a brand that doesn’t match ours. It can be more trouble than it’s worth. On the other hand, we have already proved that our sales team can win us more than A$100 million a year in new business without acquiring anything. That’s existing products, websites, brands, and supply chain. It would have to be something quite special to invest time and effort, and to take the risk of distracting our team.
January/February 2022
PK: You’re right, we have the largest customers in Australia – big government, for example, or large healthcare operators. That’s great in one way, but difficult in another, as there are often margin challenges in this demographic. And obviously, a lot of these organisations operate in the Central Business Districts (CBDs) of the main cities which – as you alluded to – were hurt by COVID stay-at-home orders last year. Sydney and Melbourne had a 4% occupancy in October. That’s a lot of people not at their desk writing with pens, tapping on their computers and drinking coffee. While Australia is now coming to terms with the Omicron variant, further lockdowns are extremely unlikely. Prior to Christmas, the situation was steadily recovering. As we all learn to live with this much milder virus, more companies will be looking to bring their people back, which means the recovery will only continue. In addition, we have huge aspirations to grow our share in the mid-market. It will be nice to add this to our portfolio. I think we can do it.
BIG INTERVIEW Peter Kelly
Peter Kelly speaking to suppliers at a Winc Connect gala dinner in November 2021
We’ve spent a lot of time training our people that we’re not after profitless volume. We’re very transparent with them about how we make money, where the costs are, what a fair return is, etc. We have actually let some customers go in the past two years because we couldn’t find a way to make a profit from dealing with them. We want to create great value for them and earn their loyalty, but if they want us to do it at a loss, sorry, not interested – we don’t throw money at customers to get them to come to us. Some procurement managers might say: “Look, I just want the cheapest thing. What is the cheapest pen? I don’t care how horrible it is, just quote me on it.” It’s not what we do. It’s not a race to the bottom for us and we like to deal with customers that appreciate this business philosophy. We want to give them the best value pen, the most productive item that people actually love using.
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Peter Kelly BIG INTERVIEW
OPI: Let’s go back to COVID and the impact it’s had on you. You were rumoured to be a A$1 billion company prior to the pandemic. What are you looking at now? PK: I’m not going to give you specific numbers, but as I said, office occupancy in our CBDs has been exceptionally low during the pandemic. Large clients in those CBDs are our bread and butter, so it’s fair to say it’s not been an ideal circumstance, particularly during July to September last year with stay-at-home rules in place. A player like Officeworks – essentially a B2C operator – certainly has had a free kick with COVID, as homeworkers had to use its warehouse stores in the suburbs.
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OPI: What did it mean for your staff? Did you have a lot of redundancies? PK: Let me give you the back story. When we sent everyone home in March 2020, my executive team – 80% were new – made a pact to save the jobs of our staff. The same month, 1.25 million people became unemployed in Australia. Businesses laid people off so they wouldn’t have the salaries – it was heartbreaking. My team did not want to do that, so we didn’t. During this pandemic, we haven’t let one employee go because of COVID. Senior managers took temporary 20% pay cuts, middle management reduced to four days a week to keep costs down. We left the staff in our DCs and service centres untouched and at their usual pay. I am proud of the way we handled this and think it was a turning point in our relationship with our people. Instead of cutting our workforce, we focused on everything to do with customer service – delivery in full on time (DIFOT) and our website experience. As an example, over the past 18 months, we have spent about A$3 million improving our online experience. We now have a Net Promoter Score that moves between 60 and 70.
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OPI: Which is extremely impressive. PK: We’re very happy about it. But we’re only about 30% of the way through the overall improvement journey – there’s so much more to do. Essentially, we’ve used all this time and the hardship of COVID to get our act together. And it’s paying off. The day New South Wales removed its stay-at-home orders, our sales bounced back into double-digit growth. With all this focus on processes, we dropped our break-even point significantly. We pay a lot of attention to efficiency programmes, automation and the use of our fantastic technology platform, and we now feel we’re in a very good position for as and when people come back to work in 2022. I am totally convinced the CBDs are not going to be empty for long. I don’t buy into consultants saying that everyone’s going to be working from home from now on. We are tribal people, we need to innovate, collaborate and communicate. Yes, we can do some of these things on Microsoft Teams, but it’s never as good as in person. I love being back at work after months of being confined to my home and I am convinced many
feel the same way. The buzz and excitement in our offices is certainly palpable, and the same will happen in the CBDs. It has to – imagine the economic impact if they remained at 4% occupancy. And when it does, we’ll be ready.
Addressing Winc’s delivery drivers
OPI: You said you didn’t lay anyone off during the pandemic. Did you make use of the government’s financial aid? PK: We didn’t. Australia had a support programme called JobKeeper. It was meant for companies in financial stress with severe volume declines.
Essentially, we’ve used all this time and the hardship of COVID to get our act together. And it’s paying off We decided we didn’t meet the criteria to accept it. We did the right and ethical thing in my view. The JobKeeper system was abused by many companies in Australia – Winc was not one of them. OPI: As some things slowly return to normal, others show no sign of letting up. Global supply chain issues and raging inflation spring to mind – what’s been your experience? PK: It’s been devilishly difficult, but we are doing relatively well in the circumstances. Add up all the things you know about the supply chain in Europe or North America and then imagine you’re at the other side of the world, at the end of the longest shipping route down to Australia. I have to tip my hat to our suppliers. Back in 2018-2019, Winc’s relationship with vendors was strained, to put it mildly. We had to find a better way. So we invested our time in an initiative called Winc Connect and began working with our suppliers in the same style we’re trying to work with our own employees: highly collaboratively and transparently.
OPI: On the topic of suppliers, I wanted to ask you about own brand products. Shortly before you joined Winc, there was a big announcement focusing on a Corporate Express private label rejuvenation. I never heard any more and from what you said earlier about not succumbing to the cheapest product pressure, this doesn’t seem to be the direction you’re going in. Was the plan abandoned? PK: It was. I’m not an own brand person. I believe in the power of brands, and I think we’ve got suppliers with excellent brands. I’m keen on their products and as long as they’re innovating and serving us with the same passion we serve our customers, working with us to convert clients and get business wins, then I’m all for them. There are a lot of brands to choose from – probably too many, to be honest. And I can see us having fewer vendors in the future because I want to give more of our business to the best – the ones that perform well, are innovative and collaborative. We still have own brands, and we use them where we have to, but it’s not high on our agenda and our suppliers know and appreciate this.
OPI: I’m guessing there’s little point in asking you about the many much smaller fish in the sea – the ones often associated with the dealer groups in Australia. How do you think they’ve been doing in the past 20 months or so? PK: You’re absolutely right – there’s not much I can say. We’ve had so much to do and fix ourselves that I just don’t focus on anyone else. One thing I can say is that during COVID, and certainly in the more rural areas, people have tried to support local businesses out of a sense of community. And it’s been a blessing to those small, agile players, many of which have done an excellent job. OPI: You referred to your intense focus on customer service. How can a large company like Winc give the same level of service a small operator can – the type you’ve just alluded to? PK: In my opinion, we can actually give customers a much better experience. Yes, the guy you went to school with in a country town and who now runs the little office supplies firm will know you, but can he give you everything you need in one place? Does he have our buying power and scale to keep prices competitive? Can he source products which are in short supply? Can he invest in a website that works well? Can he give you the innovation, automation and all the data needed to make a supply chain hum? Can he deliver 97% DIFOT customer service scores? It’s quite simply a different proposition. OPI: You briefly referred to Amazon earlier when we talked about the last mile. Has COVID made a difference to Amazon’s presence and importance – or lack thereof – in Australia? PK: I have no idea what Amazon has done to other industries, but in terms of specific impact on us? It’s still negligible to date. OPI: Wrapping up, it sounds as if you’ve achieved a lot in a short and intensely difficult time and are pretty buoyant about the future. PK: I absolutely am. There’s so much more to do still, but I’d like to publicly share my admiration for our people – Winc’s employees. We have great people and many are very long-serving staff. The way they’ve reacted and come out of the blocks all guns blazing over the past 20 months, with passion and pride, has been remarkable and humbling – I’m proud to be their CEO. The same is true for our suppliers. To see their faith restored and experience their openness to restart, re-energise and be part of our new journey is just fantastic. OPI: A great way to finish – thank you Peter.
January/February 2022
For more from the interview with Peter Kelly, including further details on OfficeMax New Zealand and Winc’s new joint venture with Tier 1 First Nations workplace supplies company Mandura, see our Xtra content in the January/February issue on opi.net
OPI: Let’s talk about the competitive landscape. You mentioned Officeworks earlier, but it’s COS which is probably your biggest and nearest rival, isn’t it, particularly with the purchase of Quick Corporate Australia a few months ago? PK: The COS people sound like a nice family – I wish them the best. But our strategies are not really comparable. When I was working at Coca-Cola, what would I have done with a copy of the Pepsi business plan? It’s interesting to see it, but what would I do with it? Market leaders have different scales, capabilities, opportunities and approaches. It’s not a juicy, confrontational answer, I realise, but our biggest competitor is the potential for our own complacency. I worry about us resting, not wanting to continually improve, not thinking about customers enough, not communicating with employees enough. My 100% focus is on improving ourselves. As an example, one of my big concerns when the pandemic first hit was: “How do you change
the culture in a company at a time when everyone’s just got sent home?” The answer for us was a lot of communication. I write a detailed comms to all of our staff every night. We put it on Workplace where we also share full details of our performance and aspirations. And we recognise people for what they do – that’s really important to me.
BIG INTERVIEW Peter Kelly
We recently launched a supply and operations planning programme. It’s a fully integrated, end-to-end forecasting, supply chain and capacity planning tool. As part of this, we give our suppliers 13-week forward forecasts. The biggest vendors have weekly collaborative meetings on supply chain planning and I meet with the CEOs personally to ensure we are aligned. It’s been fantastic for us and we have filled our supply chain planning team with excellent talent from within Winc and outside. They really know what they’re doing. Suppliers like that we’re open and sharing with them all of our scorecards on their, our, and our customers’ performance. In return, they’re giving us their loyalty and cooperation. The fact we have had this in place has certainly protected us from the worst of the supply chain crisis to date.
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FOCUS
SHAPING
the future
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OPI takes a look at some of the key themes and takeaways from the recent European Forum Online
ith COVID still very much impacting in-person meetings and travel at the end of 2021, OPI chose to hold its annual European Forum as an online event from 1-2 December last year. It’s a format the OPI team has been able to fine-tune over the past couple of years and the latest programme didn’t disappoint. Under the tagline of Shaping the Future, about ten hours of content were designed to cover the hottest topics of the moment and help inspire strategies for success. And both it did, judging by feedback from delegates. There was an impressive turnout from leaders across the business products industry, not just from Europe, but also from countries such as the US, Canada, Australia, China, South Africa and Botswana. It was good to see very strong representation from the reseller community, which accounted for 55% of attendees, with manufacturers making up a further 30%.
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EVOLVING EUROPEAN LANDSCAPE Event host and OPI CEO Steve Hilleard kicked off proceedings and, after a brief introduction, launched into a series of quick-fire interviews with several executives from influential workplace supplies firms. These included three companies that have helped reshape the pan-European reseller landscape by acquiring parts of the former Staples Solutions and Office Depot Europe organisations: Lyreco, PBS Holding and RAJA. “The break-up of Office Depot and Staples in Europe is creating opportunities for many,” declared Lyreco CEO Greg Liénard, adding: “[The industry] will keep on reshaping over the next few years – the main European operators are rising, with strong local players also taking part in this new ‘game’.”
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PBS Holding Managing Director Richard Scharmann referred to consolidation that is “speeding up significantly” and said: “In light of an increasingly uncertain future, some investors want to exit even faster. The industry is going back to its roots, with industrial players and less private equity which, I believe, is a positive development.” A common theme emerging from the interviews was a focus on the customer experience. “At Lyreco, we don’t see eliminating cost as being the main objective; what we are striving for is customer satisfaction,” said Liénard. He added: “When we look at the way we operate and our [associated] costs, we don’t want to downgrade customer satisfaction. Therefore, in some cases, things cost more. For example, we deliver through our own drivers because we believe they are a valuable asset for customer satisfaction.” Nevertheless, Scharmann also highlighted the challenges that could come from having to manage an eroding top line. “It leads to costs pressures and chasing an improvement on
Steve Hilleard
“It genuinely amazes me how such a reliably superb event like the OPI Forum (European or Global) can just keep on getting better every year, whether it’s face to face or virtual. The mix of speakers and topics was fantastic, and the open sharing of knowledge, opinions and ideas I find extremely valuable. There really is nothing else like it, in this industry at least” – Steve Bilton, Managing Director, FusionPlus Data
Forum 2021
productivity, with a close eye on processes, systems and how we manage our services to customers,” he noted. “Overall, 2021 was more challenging than 2020, and I don’t expect 2022 to be any easier.” Speaking about the learnings from the 2019 acquisition of parts of Staples Solutions, RAJA Managing Director Alain Josse in his chat with Hilleard welcomed the fact that “the DNA of taking care of customers” was still very much intact. “This was reassuring and a major reason why we decided to pursue this acquisition,” he stated. Josse pointed to a similar situation at Viking – acquired last year from Office Depot Europe – where a commitment to the reseller’s famed “fanatical customer service” would underpin RAJA’s strategy. “The Viking brand equity is still very much alive,” he noted. “We just need to complement this with a local footprint – a bit like getting back to basics, but in the context of the 21st century.” MARKETPLACE OPPORTUNITIES On the theme of reshaping the industry, one disruptive element that is set to become more mainstream is online marketplaces, both as B2B and B2C sales channels. Specialist agency TFE – headed by former Lyreco executive Bob Boekema – provided an informative overview of marketplaces in several key European markets. While Amazon is by some margin the leader in a European market estimated at around €220 billion ($251 billion) in 2020, its share of 20% means there’s still plenty of scope for other players. eBay, for one, is looking to grow in the B2B space and would appear to be the natural international challenger to Amazon. Then there are established or emerging local players such as
Cdiscount and FNAC/Darty (France), OTTO and Conrad (Germany), bol.com (Netherlands) and OnBuy (UK). Indeed, Boekema cautioned against putting all eggs in one basket when it comes to marketplaces. “The online opportunity is still growing,” he said, “It’s important to find the right balance and not be dependent on one customer.”
The industry is going back to its roots, with industrial players and less private equity
He also raised the issue of the need for vendors to implement an online pricing strategy. “When they are chasing volume on platforms such as Amazon, a lot of suppliers are not in control of their pricing,” he noted. Later on, during the final ‘takeaway’ panel of the European Forum, Brother UK Managing Director Phil Jones too recognised that marketplaces are a fast-growing channel. But, he argued, they come with considerable challenges as well. In October 2021, he revealed, Brother removed more than 48,000 lines from 38 platforms in 22 countries for trademark and imagery infringements and counterfeit products. “It’s an ongoing problem for a vendor and new costs emerge,” he admitted, saying that Brother has, in fact, hired a third-party company to police digital platforms on its behalf. Lyreco’s Liénard, meanwhile, called online marketplaces “a very complex topic”. Certainly, one issue for resellers like Lyreco is the evolving
“An outstanding European Forum with great content, varied and diverse speakers and topics, and the opportunity to network informally. In a nutshell, as close to a real-life event as is possible to do virtually. OPI consistently attracts thought-provoking industry leaders and this time gave airspace to some great young talent who added a refreshing blast of new thinking” – Jonathan Smith, Consultant
January/February 2022
Greg Liénard
FOCUS European Forum Online
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European Forum Online FOCUS
nature of contract leakage, which is being impacted by trends such as work-from-home and pricing transparency on digital commerce sites. “We do have projects to ensure we address this,” he revealed. “At the end of the day, it’s about what the customer wants. Ideally, that is to be able to buy from one platform, have one delivery, one invoice and a perfect level of service.” Does this mean a Lyreco marketplace is in the pipeline? Liénard didn’t go that far, but our take is to look out for some developments from the reseller along those lines during 2022. AN OPPORTUNITY FOR CHANGE A key issue which has been affecting all channels – and very much continues to do so – is cost inflation at many different levels. This was covered in a panel debate during the event. However, following keen interest in this session, the topic was also covered in some depth in OPI’s first-ever Insights webinar on 11 January (turn to page 50 for more information).
Steve Hilleard
Robert Baldrey
Charles Nusse
Steve Haworth
Jeanette Bresitz
Nicolas Potier
That said, Steve Haworth, CEO of the UK’s multichannel EVO Group, made an interesting comment during the conference discussions. He referred to “unrealistic RRPs, no channel pricing structure, a lack of recognition of the cost to serve in the pricing methodologies, and a focus on percentages versus cash margin” and concluded: “If all we do as a result of this [inflationary situation] is successfully pass prices on, that would be a failure. This has got to be an opportunity for change, not just in terms of pricing, but in the way we work.”
Sustaining SUSTAINABILITY
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s the saying goes, it takes a village to raise a child. So, too, will it require everyone involved in the entire business supplies sector to develop a genuinely sustainable industry. The path will be bumpy with plenty of setbacks, but key players from across the various channels have nevertheless already made significant strides. Two central messages emerged from sustainability leaders Essity, Lyreco and Greenspeed during the Creating a Sustainable Business Industry panel at the European Forum. The first was we shouldn’t wait for governments to take action and implement legislation, the second that companies cannot work in siloes – the entire sector must work together. One way to embark on the journey is to talk to customers right now, said Greenspeed CEO Michel de Bruin during the panel discussion led by Planet Mark’s Head of Business Development Jonathan Withey: “You don’t need to wait. Select five or ten key accounts and discuss and work with them to reach a higher level of sustainability and get them ahead of the game.” Working on your own objectives is equally vital – whether they are mandatory or not. And, as Essity Professional Hygiene Communications Director Reneé Remijnse pointed out, while it’s good to sign up to climate agreements or the United Nations Sustainable Development Goals, for example, it’s important to follow these through, have targets approved and execute some really big decisions. “Top management needs to be aligned, and I definitely think having science-based targets
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Jonathan Withey
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Michel de Bruin
help to generate changes. It’s too easy to just go for short-term wins,” she stated. “In addition, while the recent focus has often centred on net zero ambitions, we shouldn’t forget all the other sustainability initiatives.” Isabelle Daubney, Circular Economy Project Leader for France-based reseller Lyreco, concurred and also reiterated the importance of industry collaboration. “We need to all be willing to step forward and use the same measurement frameworks and metrics, and build a common language. “This is a true prerequisite for engaging in more detailed conversations about the product supply chain, building the right offer for customers, and supporting them in achieving their carbon emission reduction targets.” TOP TAKEAWAYS FOR A SUSTAINABLE INDUSTRY • Check the life cycle analysis and third-party assessments of a product • Ensure end users are fully educated about the sustainability of products • Collaborate with competitors • Seek partners outside of the industry to help achieve your objectives. This could include recyclers and waste management companies, for example • Don’t forget to include your employees in any sustainability plans and ambitions • Be positive and try to avoid ‘doom and gloom’ scenarios
Isabelle Daubney
Michelle Sturman
Reneé Remijnse
Select five or ten key accounts and discuss and work with them to reach a higher level of sustainability and get them ahead of the game
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ne of the most interactive and engaging sessions at the European Forum was a panel discussion entitled An Audience with Tomorrow’s Leaders. Expertly led by Alex Stone, Head of Sales at UK dealer group Office Friendly, the panel delved deeply into several topics that are – or should be – top of mind for operators in our sector, for succession planning as much as for overall continued company progression. What can the industry do to attract new talent, what do these recruits bring to the table and why is this so important? What do young employees expect from a job? These were just some of the questions asked over the course of the debate.
Lisa Hölzl
Falko Nils Köhler
Jérôme Perhaut
the manufacturer to continued learning and professional development, a great company culture and plenty of room for progression. EASING THE WAY IN Creating accessible pathways for young people to come into the industry is vital, the panel acknowledged, be it through apprenticeships or links with universities, for instance. With this – often very well educated – talent in the picture, it is crucial to give employees a voice that is heard loud and clear and not being drowned out by the experience of the older generation.
It is crucial to give employees a voice that is heard loud and clear and not being drowned out by the experience of the older generation In addition, said Jérôme Perhaut, Key Account Manager at Fellowes Brands France: “For me, it’s really important that companies use the language and tools of millennials – Snapchat and Instagram for example – to adapt their messaging. This will ensure access to new customer audiences.” In a session that generated a huge amount of positive delegate feedback, all panellists agreed on one core theme when asked what employers should do to attract but also retain young talent: encourage and guide employees towards what needs to be done, but then give them the freedom to explore how it’s done.
“The OPI Forum gives me exposure to current trends and international best practices in the office supplies industry. I appreciate the extent to which industry leaders invest their time and effort in sharing their insights and experience in a time of intense change” – Bill Bayley, Rexel Office Products
January/February 2022
BROADEN YOUR SCOPE One point raised by Falko Nils Köhler, Customer Experience Director at Lyreco Germany, was the fact that the industry defines itself too narrowly, to the extent where it becomes isolating and limiting. Consumers don’t shop for office products, for food, etc, he said. They don’t segment it in this way – they just shop. Equally, it should not merely be seen as a sector to work in, whatever its definition – office products, business supplies and the like. Instead, people seek to work for companies which can meet and fulfil their job aspirations, be that in the areas of IT, customer service or sales, to name but a few. As such, the often dreaded declaration of “I work in office products” becomes completely redundant. Diversity in terms of a company’s overall remit and scope is also key, according to Köhler: “As customer requirements are changing, operators in this industry have to cover a much broader array of disciplines. “As a manufacturer, for example, you don’t just need to be good at making products, you also need to excel at market research across a broad spectrum, at data collection and analysis or at robotic process automation. It’s often out of the comfort zone of many traditional players and as such, they need to attract and engage people that have a more integrated approach to work. This will, by default, bring in new cultures and mindsets which help companies to progress.” By the same token, employers need to offer something tangible that attracts job seekers. For Lisa Hölzl, it was innovation. She joined COLOP in 2018 with a remit to write her Masters dissertation on the vendor’s innovative processes in digital stamping. Now Product Manager at COLOP Digital, Hölzl attributes the fact she’s still with
Alex Stone
FOCUS European Forum Online
How to… ATTRACT AND RETAIN TALENT
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n a highly illuminating keynote presentation at the beginning of day two and no doubt one of the highlights of the OPI European Forum Online, Phil Jones, Managing Director of the UK arm of global technology manufacturer Brother, provided a refreshing insight into planning amid all the current chaos. Entitled The Age of Entropy, Jones described our current situation as living in a volatile, uncertain, complex and ambiguous world. To deal with this reality, he proposed three areas that will help leaders navigate their way: growth and resilience, environmental and social governance (ESG) and the future of work. LIFT YOUR HEAD By growth and resilience, Jones meant building a sustainable future for yourself, the company and employees. While he acknowledged the current challenges around the supply chain and changing workforce and customer demands, Jones said now is the time to lift our heads above the parapet. “Start thinking about the business you want to be and look at the building blocks that are going to take you there,” he said. One vital aspect is to look at the systems and processes used to operate a business. The majority of companies are using more digital systems than ever on a daily basis; it is time to ensure they are fit for purpose if they are to support future strategies and vision. In particular, cybersecurity must become top of mind as more digitally orientated organisations and supply chains are built. GET YOUR HOUSE IN ORDER Jones reiterated the urgency to “get your house in order” when addressing the climate crisis. ESG in the widest possible sense will no longer be a ‘nice to have’, but will likely become mandatory. Businesses need to ask themselves what they are contributing towards reducing CO2 emissions throughout the entire supply chain, for instance, and start studying the long-term sustainability of products from cradle to grave. Said Jones: “The journey really starts now, and we need to have a deep sense of responsibility for everybody on the planet, not just the people within our building. We must think about the entire footprint of the office products industry globally. What are we doing as a consolidated effort, with a common map of the future concerning our contribution to Earth’s crisis?”
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SUCCESSION PLANNING Dealing with the “uncomfortable truth” of an ageing industry and not enough young people joining, Jones – echoing many of the thoughts of the panel discussion the previous day – highlighted the urgency of making our sector more attractive. The pandemic has reset the world of work with the acceleration of hybrid working and work-from-home, coupled with the extraordinary and rapid power balance shift from employers to employees. “We, as employers, have got to confront all of these issues. We now know in the wider context
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of chaos
Phil Jones
of the Great Resignation that the existential impacts of COVID are significant – people are leaving relationships, moving house and changing employers. They are thinking differently,” stated Jones. Another aspect to bear in mind is the changing of the guard as Gen X begins to leave the workforce in the next decade or so. As these employees depart, the question is: who will take up the mantle as the next leadership team, carrying the business into the future? TOOLS OF THE TRADE To create order out of chaos, Jones shared a couple of tools he uses to make sense of everything. Always at the ready with a fitting acronym, he talked about ‘DOT on the horizon’ whereby DOT refers to the ‘direction of travel’: “It’s a highly useful tool to ensure everybody knows broadly where you’re heading, especially as it’s incredibly difficult to navigate detail by detail given the very chaotic environment we’re currently working in.” He suggested accepting that the journey is never linear, with bumps along the way. You have to be ready for setbacks, but make sure your main effort is always behind the DOT. Creating a risk register is useful, but it needs to be kept up to date. How many CEOs had a pandemic on their list before 2020, for instance? Jones also referred to a valuable tool called a ‘priority matrix’ which enables users to focus on which ideas should have resources and effort put behind them. Within the matrix, ideas are placed in boxes depending on their ease of introduction – easy, medium or difficult – what the impact will be on the business, and whether or not they are in your control. Jones said tools such as these enable information to be filtered appropriately and action to be taken: “In the age of entropy, action is absolutely everything. We all have a vested interest in keeping this industry sustainable and great, and playing our part beyond 2030.”
Start thinking about the business you want to be and look at the building blocks that are going to take you there
SPOTLIGHT
With a back-to-the-office movement in some shape or form inevitable in 2022, it’s vital that workplaces are clean and hygienic. Enter Lysol and Dettol Pro Solutions
Reckitt:
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MS: Let me start by saying that our purpose as a company has remained the same and that is to protect, heal and nurture in the relentless pursuit of a cleaner, healthier world. We believe hygiene is the foundation of good health. As such, our products and programmes are designed to protect our customers – whoever they are – from illness-causing germs. The new brand is predominantly a visual representation of how our purpose has evolved – we’re really moving towards being an organisation that puts doing the right thing at the heart of everything we do. Renaming the company to Reckitt wasn’t actually a massive change – particularly in Europe, many people already referred to us as this. It’s just a fresher, more dynamic way of positioning our brand. In terms of our professional division and the launch of Lysol Pro Solutions and Dettol Pro Solutions, we’ve used the rebrand to put the spotlight on some of our ranges in a very focused B2B context in a way we haven’t done before.
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t was a big year for global consumer giant Reckitt in 2021. Aside from an overall name rebrand, it also put a stake in the ground with the launch of its Pro Solutions business, aimed squarely at the B2B space. OPI spoke to two long-serving Reckitt executives – Max Shearwood, Global Business Solutions Commercial Director for the Americas, and Jonathan Weiss, Global Business Solutions Commercial Director for Europe, Australia & New Zealand – about this development and the opportunities it could bring to the business products industry.
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OPI: We’ve recently heard the Reckitt name mentioned as the hygiene provider at the November COP26 conference. For those readers perhaps more familiar with your brands – I just say Dettol, Lysol, Harpic and Air Wick here – rather than the company itself, could you give a very brief overview of the business? Max Shearwood: Sure. Reckitt is a £14 billion ($19 billion) company with a presence in nearly 200 countries. We’re over 200 years old now and our origins lie in the UK. In 1999, what was then Reckitt-Colman merged with Germany’s Benckiser to become Reckitt Benckiser. We went by that name for some time, then it was RB for a while and last year we rebranded to just Reckitt. We own a very strong portfolio of brands across our various geographies and our three business units of hygiene, health and nutrition. As you’ve referred to, Lysol and Dettol are probably among the best known ones. OPI: What was the rationale behind the rebranding to Reckitt and how did that impact you in the professional space?
OPI: Is this new focus a result of COVID-19? Jonathan Weiss: We’ve had the professional business for some time, so I’d say it’s been the catalyst that lifted the security blanket on germ concern and brought it to the masses. And this obviously very much includes businesses.
Max Shearwood
OPI: As you say, COVID has raised awareness for the hygiene category more than anything else ever has in the past. But will it carry across into the workplace of the future? MS: I think there’s real recognition that cleaning and disinfection have always been important, and it’s going to continue to be vital. However, it will be more about efficient and correct cleaning
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We have a marketing programme with a wide range of tools and assets, including digital media that target facilities managers, office managers and end users, to communicate the benefits of the programme and link them up through distribution.
OPI: Jonathan, your background is in marketing I believe. What strategies are you going to deploy to maximise this new emphasis on the professional space? JW: Let me first tell you about our value proposition, and then I’ll explain how we plan to bring this to life. When we talk about our Pro Solutions – Lysol Pro or Dettol Pro as mentioned before – the positioning is all around a trusted standard of protection. We have four so-called protective strengths we talk about, be that to an organisation, a redistribution or distribution partner, or an end user.
Historically, the cleaning category has been looked at simply as a cost line item in the P&L
Jonathan Weiss
OPI: You’re clearly putting a lot of resources into this. What is the goal in terms of growth? JW: Lysol Pro Solutions and Dettol Pro Solutions represent a strong opportunity to drive long-term and sustainable growth via our value proposition. We will continue to partner with redistribution and distribution partners to grow the market as a whole via segment penetration and value-add incremental propositions, with a focus on the front-of-house space by setting a trusted standard of protection with our brands. OPI: What would be your message to independent dealers or wholesalers reading this article? MS: Historically, the cleaning category has been looked at simply as a cost line item in the P&L. COVID has changed this completely. Now there’s an opportunity to leverage a great-quality cleaning and disinfection protocol to create value, not just for the end user, but also for everyone in the distribution chain. This doesn’t only apply to cleaning products, it also extends to the rest of these companies’ portfolios. Many people are concerned about getting back out there – whether it’s the office or anywhere else. Excellent hygiene protocols can be a real determining factor when they decide where they want to spend time – both professionally and in their spare time. We’ve seen from our programmes that, when applied in the right way, patrons are significantly more likely to choose a facility if they know a Lysol protocol is being used. There’s a significant end-user need and our distribution partners can help satisfy this need. Talk to us first and then talk to your customers.
January/February 2022
The first strength relates to the products themselves: 99.9% efficacy against bacteria and viruses, and tailored innovation to meet customer and end user needs. Next, we talk about the science and the fact that our protocols are firmly based on scientific evidence. Compliance certification is part of this strength too. Our third USP is brand trust. We have world-leading brands and marketing expertise – this elevates confidence and drives footfall. The final component is around our go-to-market expertise. We sell millions of products every single day and we work hand in hand with partners to deliver channel-specific solutions. These four strengths are the backbone of our Pro Solutions. In terms of marketing, it’s all about demand generation and providing the whole package. We’re not just offering distributors products to sell. Instead, we’re talking to people about the benefits of a comprehensively targeted hygiene and disinfection protocol.
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OPI: How important are your relationships with redistribution partners and wholesalers in terms of getting this message out there? MS: They are absolutely crucial to the execution of our purpose and our strategy. For Lysol in the US, for instance, wholesalers such as Essendant and S.P. Richards have been a critical part of our go-to-market model. They’ve ensured we’re able to address a wide spectrum of end users and their needs. We haven’t been a specialist in a particular channel or behind a particular sector in the past. As such, these partnerships are essential to guarantee availability and to get the solutions and our overall wellness narrative into the hands of people in the workplace.
The No.1 brand on your communications
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in the future, as opposed to the panic pandemic cleaning that we’ve seen. So much of it is about education and this is where we can really help and play a core role with the right programmes, protocols, training, etc.
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CATEGORY UPDATE
Bouncing
BACK
As schools and universities return to the physical classroom, the education sector finally appears to be on a more stable footing – by Michelle Sturman
W
hile the coronavirus pandemic has presented everyone in our industry with a crazy time, you’ve got to feel sorry for and equally be full of admiration for those that had to deal specifically with the education sector. Highly irregular school openings and closures, and massively volatile spending patterns have been just two factors to deal with. Admittedly, 2021 was not as stop-start as the previous year as students returned to the physical classroom for lengthy periods. But it certainly hasn’t been easy, as plenty of those supplying the sector can confirm.
DISRUPTIVE FORCES In the UK, the education market is also buoyant. Speaking to OPI, Nick Cash, owner and Director of Nick Cash Agencies, which represents over 60 companies in the furniture and interiors market, reports that sales for its partners in 2021 increased above inflation, but were generally “a little more erratic than normal”. His expectations for 2022 are again above just inflation sales, although he says there are still specific challenges to deal with, such as changing school spending patterns and the reliable supply of components due mainly to Brexit and global shipping problems. “This has meant making sure suppliers are holding sufficient stocks; our stock levels are appreciably larger than before. “Along with this, partners are passing on price increases – sometimes monthly – which need to be transferred onto our customers.”
January/February 2022
GOVERNMENT AID Taking a broad overview of the vertical, sales last year substantially improved over 2020 and all the signs point to a very welcome bounceback in 2022. In the US, for example, federal action and funding have had a positive impact. Says Charles Forman, EVP Sales and Marketing at dealer organisation Independent Suppliers Group (ISG): “As of 24 November 2021, the Department of Education had already distributed two-thirds of the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) funds, totalling approximately $81 billion throughout the country. A total of 48 ARP ESSER state plans have been approved since June, but with supply chain and inventory issues, not all funds have been used – many have been approved but are yet to be spent.” Eddie Baird, VP of Furniture Sales for US-based wholesaler S.P. Richards (SPR), agrees: “We feel educational spending will continue to rise over the next couple of years due to the stimulus packages put in place.” The sector has already performed exceptionally well for SPR during 2021. The company’s SVP of Merchandising Curt Small told OPI in December
that 2021 year-to-date pureplay education product sales for SPR had surpassed those in 2020 and even exceeded 2019 figures in both core education and educational furniture. Baird adds: “We have seen very strong sales in all brands of furniture that focus on education. Our ‘Classroom by Lorell’ experienced significant growth in student desks versus activity tables. Many schools were looking for additional desks to achieve social distancing in the classroom. Fortunately for us, we had increased our inventory at the beginning of the school year.” US education furniture specialist Whitney Bros also experienced an exceptional 2021. According to VP Sales and Marketing Brian Vaillancourt, sales volumes rose to their highest level in the company’s 117-year history: “For 2022, we are similarly bullish, with a strong pipeline of forward orders, robust demand for our collections, and the tantalising promise of the federal government funding Universal Pre-K – finally.”
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Education CATEGORY UPDATE
Even though sales have rallied, there is still disruption in the sector related to the lingering global economic and societal fallout associated with the pandemic. Inflationary concerns and supply chain complications continue to hamper a full recovery (see also Final Word, page 50). According to Forman, continuing supply chain issues have caused manufacturers to raise prices or collect transportation premiums, for instance. “Price increases are very tricky when so many products are on previously negotiated contracts, thereby causing severe margin erosion. “Numerous items are manufactured overseas, and installation deadlines have been missed because goods were stuck on cargo ships. In addition, labour shortages are hampering domestic manufacturing even if the raw materials are received.”
Price increases are very tricky when so many products are on previously negotiated contracts, thereby causing severe margin erosion
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The HON Company Tangram soft seating solution for K12 students
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He says three key details will be important moving into the 2022 selling/buying cycle. The first is understanding how education buying works in the post-pandemic era – think supply chain disruption levelling out and current swelling budgets beginning to normalise in Q2. The second requires re-envisioning the typical purchasing cycle by preparing for the unexpected. Lastly, re-evaluating the kind of information administrators need at each stage of the cycle is vital. On this final point, Forman refers to trends in The K12 Education Buying Cycle eBook from the Education Market Association (EDmarket) and Agile Education Marketing. These highlight what educators want to know prior to making a purchase and include: evidence of success (57%), associated costs (52.8%), key benefits (38.3%), features (37.9%), implementation details (34.1%), and examples of uses in other districts (25.2%).
BACK TO REALITY While challenges exist – mostly global – they are not insurmountable. The general consensus is that last year’s gradual return to normal buying patterns in the education sector will continue. In South Africa, where the school year begins in January, there has been an improvement in sales for the BTS period, for example, according to Craig Noyle, CEO of dealer group Inovocom. On the downside, however, he says there is no doubt that parents’ budgets remain constrained, and there is a lot more demand for cheaper items. Further factors at play may mean the rebound in the country is not vigorous as in others, as Noyle explains: “Stock availability is currently a key issue and product is being substituted on a daily basis to fulfil orders. There was also a lack of confidence and planning due to the muted sales last year, and now most dealers are scrambling for whatever stock they can find. “The other issue is the devaluation of the rand coupled with inflation of oil and pulp prices, which is placing immense pressure on prices in the marketplace for educational spending.” In Australia, Jane Richardson, owner and Manager of Victoria-based dealer CVOS Office Choice, says COVID did not actually have a significant effect on last year’s sales. She explains that schools kept purchasing during lockdowns, even when pupils were off campus, because they were putting together kits to send out for homeschooling. That said, she adds: “We are now noticing schools ordering less due to existing stock sitting around. Parents are also purchasing less as they received home supplies which previously they would have had to buy themselves,” she adds. Melbourne-based business products retailer Officeworks is firmly established as a BTS supplier, offering price promises and school list services. Managing Director Sarah Hunter says its research shows that parents have become more involved in their children’s education through the pandemic. “This, together with the many consumer behaviours we’ve seen emerge from COVID-19 – increased online shopping and a greater focus on
HON launched the Build Makerspace table, which incorporates intuitive storage and organisation options for the classroom. “As we see the emphasis on collaboration and social skills continue to develop within schools, we have also launched a new soft seating collection, Tangram, designed specifically for K12 students. While educational institutions are adjusting their teaching styles to meet the needs of students, our furniture must do the same.”
The technology space is increasing in popularity as schools move their learning to interactive and digital platforms WORKING TOGETHER As a collaborative initiative, ISG and EDmarket recently formed an education industry purchasing consortium to grow dealer and supplier sales, and provide the back office service and centralised billing. As Forman explains: “EDmarketplace powered by IS Contract will grow sales and bolster the education channel through a broad range of goals: establishing preferred pricing with participating suppliers; strengthening supplier-dealer relationships; training personnel to better represent brands; focusing salespeople and designers on specifying active suppliers; and raising the industry profile of the associated brands.” In spite of the diverse concerns those supplying the education segment still have, the category is definitely recovering and a vertical worth pursuing. Says Calder: “As one member put it to me recently, schools and education establishments are difficult accounts to win, but when you do secure them, they are also much less likely to leave you. “The other benefit, particularly in this difficult period, is the fact the sector is very good at paying on time, making it an excellent and reliable account to have.”
January/February 2022
CHANGING PATTERNS While these availability challenges rumble on, there are positives too. One of them is an ever-broadening product range to sell as classrooms are rejigged, pack sizes are changed, and new items are introduced. SPR’s Small, for instance, mentions pack sizes in categories such as writing and colouring that have become more individual versus the traditional ‘class’ kit. In Australia, both Hunter and Richardson are seeing more technology products added to the list, including memory cards, laptops, tablets and headphones. “The technology space is increasing in popularity as schools move their learning to interactive and digital platforms,” notes Hunter. Additional trends, according to ISG’s Forman, include flexible, movable furniture and outdoor learning spaces and products. In addition, soft seating is being utilised and innovative storage solutions are being included within most new school projects. Furniture manufacturer The HON Company says education represents an important and growing division of its business. In the past few years, the company has quadrupled the team members working in this category. Talking to OPI, Megan Wadsworth, Education Channel Marketing Manager at HON, comments: “As learning has grown increasingly flexible, schools are looking for adaptive furniture that fits their teaching style and can move around to support individual, small or large group sessions throughout the day. The furniture needs to encourage collaboration while also supporting the use of technology.” To this end, HON has launched several new product ranges, such as the Build Makerspace table and the Tangram soft seating solution. Education Product Manager Whitney Potratz states: “With the growth of STEAM environments,
CATEGORY UPDATE Education
value and sustainability – is going to change the way parents shop for school supplies we believe.” In the UK, Alan Calder, Marketing Manager for dealer groups Nemo and Office Club, refers to supply chain problems which will require earlier buying commitments. He says: “In recent years, but pre-COVID, the BTS purchasing period for dealers had moved much later in the calendar to where it used to be 10-15 years ago. “We anticipate this will change in 2022 and suppliers will want orders much earlier again to ensure stock availability and deliveries on time.” In terms of combatting availability predicaments, SPR’s Baird is in complete agreement, warning the supply chain will continue to be an issue for all products. “Even domestic vendors are having problems obtaining raw materials. For example, a large component of education furniture is steel, and there are many challenges with access and the rising cost of the material. “This is causing lead times to extend out past 12-14 weeks. The only way to overcome these challenges is to order a long way ahead.”
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OPINION
Education
SHIFTS IN BRAZIL
A
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fter an excellent 2020 back-to-school (BTS) campaign in Brazil (Editor’s note: the academic year in Brazil starts in January), office supplies and stationery retailers in the country experienced a dramatic shift in their operations with the lockdowns that began in March caused by COVID-19. Stay-at-home orders and social isolation took millions of students and professionals out of circulation. It also brought many negative impacts on consumption and created great challenges for producers, importers and retailers.
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DIGITAL TRANSFORMATION At the same time, the pandemic accelerated the digital transformation in the retailing and education sector. It was a trend that was already present, mainly in higher education but, in a very short period of time, it became mandatory to be digitally savvy for the entire sector, including both primary and secondary schools. The importance of technology cannot be overstated in terms of making distance learning and homeworking a possibility and reality. At Kalunga, we saw a 44% surge in demand for notebooks and PCs in 2020. We also saw a major shift to our digital platform by customers – online sales accounted for 24% of our total revenues in 2020, more than double compared to the prior year when it was just 11%. Throughout 2020 and the first three quarters of last year, all education was conducted through distance learning. As such, the 2021 BTS season was significantly affected. Added to this, students had barely used the school supplies they bought in 2020 which meant parents were reluctant to spend more on these items. According to a survey by the Instituto Brasileiro de Geografia e Estatística (IBGE – the Brazilian Institute for Geography and Statistics), as of March 2021, the publishing and stationery sectors had accumulated 14 consecutive months of decline in sales, resulting in a 19.7% drop year on year. In view of Brazil’s size and the complexity of its cultural and social diversity, the pandemic brought several challenges to the country’s education sector. The ultimate effect was a surge in school truancy which, in 2021, increased by 171% compared to 2019, according to a report published by education organisation Todos Pela Educação (All for Education).
This was in addition to a significant loss in the quality of education, which will have to be addressed by both educational institutions and the Brazilian government.
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HOPE FOR THE FUTURE But there’s light at the end of the tunnel thanks to Brazil’s vaccination campaign – roundly accepted by the majority of the population – which has been curbing infection rates as well as hospitalisations.
The forced adoption of technology in all walks of life, including education, has become the new status quo The forced adoption of technology in all walks of life, including education, has become the new status quo. It is hoped that this will be further developed in the coming years, as hybrid teaching and technology-orientated learning – especially through gamification – have been identified as great opportunities for students. Both stimulate interest, increase participation, develop creativity and autonomy, and promote dialogue and problem-solving. The main BTS period in Brazil is currently in full flow. We anticipate double-digit growth at Kalunga, in the region of 15-25% against 2021. The post-pandemic process will continue to revolutionise purchasing behaviour as a result of a new set of parameters which include: • the speed of available information • the evolution and growing engagement of social networks • the relationship of consumers with brands • a growing awareness of social and environmental factors • unprecedentedly fast advances in technology. All of the above will bring many challenges for the business supplies industry and its entire supply chain. They will force channel participants, from manufacturers to retailers, to comprehensively reinvent themselves. But they will also result in a great deal of new opportunities.
Paulo Garcia, Chairman, Kalunga
CATEGORY UPDATE
The write
CREATIVITY
Despite a topsy-turvy year, the writing instruments sector has again proven its resilience and is looking forward to the year ahead – by Michelle Sturman
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t may come as a surprise to some to hear that the traditional writing instruments sector is in an extremely good place. After a turbulent 2020, sales last year were boosted by an improved back-to-school (BTS) season as the education sector returned to face-to-face learning in many countries (see also Category Update, page 31). A continued appetite for products in the arts and crafts segment further contributed to the upward trajectory. In the US, Zebra Pen saw the market rebound from the pandemic with commercial pen sales up 10% versus the prior year through to September 2021. Marketing Director Ken Newman says the retractable gel space still represents the largest segment in pens, with the traditional B2B office supplies niche accounting for 45% of its pen sales. It was a solid year for Uni-Ball Corporation North America too, confirms Director of Marketing Jim Holland, as the focus shifted to new and core category expansion. This year, Uni-ball is seeking sustainable growth. According to NPD Group, the market rebounded in the first nine months of 2021 in North America, increasing 16.8% in value, with the gel segment as the principal driver. BIC added that the region’s BTS season was notable as it increased by almost 30% compared to the corresponding period in 2020 and in the low single digits versus 2019. In Europe, meanwhile, Stabilo recorded its best-ever year during 2020/21, breaking through the €200 million ($227 million) barrier. Sales for the German company grew 7.8% to €209 million. According to CEO Horst Brinkmann, while the market has decreased almost 8% in terms of value since 2017, Stabilo has achieved 17.5% growth. Market research firm IRI reported the French stationery market grew 3.1% – almost back to pre-pandemic levels – while the UK increased 2.2% in 2021. During the BTS season, BIC
maintained its leadership position in France, and in the UK gained 2.1% market share in value. Ewoud Bosch, VP International Sales for edding, reveals that European sales were well above those of 2019. On a global basis, sales in the company’s Writing & Marking division in the first half of 2021 were up 9.8% compared to H1 2019, with its creative range significantly contributing to this growth. It’s not the same story everywhere, however. Bosch adds that edding’s most important markets in Latin America – Argentina and Colombia – have not yet recovered from the pandemic. Pentel’s Director of Sales UK & Ireland Graham Craik says the vendor set itself a target in 2021 to return to the sales levels of 2019 and is very much in line to achieve and possibly exceed this. He also singled out the arts and crafts ranges, including educational products, which have performed exceptionally well over the past year. EDUCATIONAL INFLUENCES The coronavirus crisis sucker-punched the BTS season in 2020, shifting buying patterns and moving teaching to online learning. By all accounts, sales in 2021 were certainly on the road to recovery, which bodes well for this year as students have mostly returned to the classroom. Brinkmann reports a mixed picture, however: “In France, for example, we ended up with a very pleasing BTS season in 2021. Many regions in Southeast Asia, on the other hand, are still affected by COVID, and schools may have been closed since the start of the pandemic.” In the UK, Pentel Marketing Manager Wendy Vickery believes sales have some way to go to achieve pre-pandemic levels. Having said that, with the vaccination of the wider population in full swing, including younger age groups, there is greater confidence for the BTS period this year.
MARKET DISTORTION As Chairman of the UK’s Writing Instruments Association, Pentel’s Craik has unique insight into the category. He says the coronavirus crisis has created some interesting dynamics. “COVID-19 has really distorted the market through school closures, lockdowns and the move to online learning for the majority of students. “Amazon and other online resellers, as well as supermarkets, benefitted greatly from the lockdowns through 2020 and early 2021, to the detriment of stationery retailers and dealers.
GETTING CREATIVE What trends will help drive this recovery? Cognisant of the changing workplace, edding’s Bosch foresees tremendous opportunities as a result of hybrid working. “As an industry, we suddenly find ourselves in this most interesting development. Innovative solutions and concepts for the home office and ‘new work’ are being created almost every day.
January/February 2022
The BTS season was incredibly unique given the highly anticipated return to the physical classroom
“We saw a significant return to normality during the second half of 2021 as a result of restrictions being lifted. However, consumer confidence remains somewhat shaky, especially as a considerable number of employees have yet to head back to the office.” There is definitely hope for a better 2022 as successful vaccination programmes mean COVID will likely become endemic at some point this year. Nevertheless, additional lingering challenges are still hampering the category. Newman says: “Supply chain issues remain quite a struggle at the moment, and we are continuously strategising and making decisions on how best to keep our customers stocked. “Based on global reports, many believe this crisis will not conclude any time soon, but more likely last until 2023. Even as consumers and customers are willing to loosen their spending, the challenge will be satisfying their demand.” Bosch also believes problems will persist: “It is hard to say when the difficulties will be resolved, but all these things will return to how they were before COVID. As for 2022, we are not expecting marked improvements in the supply chain.” Brinkmann concurs, adding that availability and cost for transportation and freight remain a concern in many regions. “Prolonged lead times for packaging material and paper resulted in rising costs. Most importantly, the rapid and immense increase in prices for polymers will have a short to mid-term impact. Costs have stabilised, but they are not expected to fall significantly in the near future,” he comments. Vickery is slightly more hopeful: “The supply chain has been the bane of every manufacturer’s life over the past 12 months. While no one would assert this situation is resolved and the potential for further disruption caused by new strains of coronavirus cannot be underestimated, we believe it is looking decidedly better for 2022.” Writing instruments vendors clearly remain an optimistic and resilient bunch, despite all that has been thrown at them over the past few years. As Holland enthuses: “We are truly looking forward to 2022 and forecasting a significant increase in sales, primarily from our new product development pipeline. The myriad of items launched in 2020 and 2021 are absolutely resonating with consumers and the sales line is reflecting this.” His enthusiasm matches that of Newman, who adds: “Initial indications would suggest the pandemic rebound continues into 2022 as consumers appear to be a little more relaxed and open to spending.”
CATEGORY UPDATE Writing Instruments
BIC took advantage of social and digital media to encourage sales globally last year. As the company’s Marketing Director for Europe, Elisabet Boldu, told OPI: “The BTS season was incredibly unique given the highly anticipated return to the physical classroom in many countries. To support this key selling time in France, we rolled out a very successful digital and national out-of-home campaign – BIC Reinvent – to raise awareness of our product line with ecological benefits. “In Canada, the Gel-ocity line was promoted by partnering with credible third-party spokespeople to deliver key messaging. This also included Instagram and TikTok influencers to create and share custom content around BTS shopping. It was complemented by a dedicated media outreach to drive coverage and keep the brand top-of-mind among parents and teachers. “For US consumers, BIC coordinated a block-and-tackle media relations programme, in addition to working with a third-party lifestyle expert. As a result, our stationery products appeared in numerous US-based, top-tier national outlets spanning multigenerational audiences.” Reading between the lines, one positive sign towards the return to some semblance of ‘normality’ can be found in end-user BTS purchasing patterns. Says Newman: “The percentage of e-commerce sales for pens retreated to pre-COVID levels during the key months of BTS (15%-17%). Throughout the pandemic, this sales channel reached 28%.”
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Writing Instruments CATEGORY UPDATE
“We aim to actively help shape this evolution. For example, it is recommended all employees only use their own personal office supplies, so edding has designed various personal sets containing selected products for meetings, the workplace or presentations.” For the writing instruments industry, hybrid working has undoubtedly provided a chance to get creative and present customers with different options. Both Uni-ball and Pentel, for example, have leaned into the work-from-home market to offer more convenient, smaller pack sizes. Pilot, meanwhile, has taken into consideration the current alternative ways of working and changes in the setup of office spaces and introduced the Set2Go packaging solution. “Made from 100% recycled plastic, Set2Go is a reusable smart pen holder that turns into a fantastic desk organiser. Compatible with most Pilot pens, it can be used on its own or multiple cases may be clipped together,” says Cecile Poirot-Crouvezier, Brand Communications Coordinator at Pilot Corporation of Europe. With all the stress of the pandemic, it’s little wonder demand for colour and creativity remains on-trend. “These two features are still very popular with our customers at this difficult time because they allow small escapes from everyday life,” explains Brinkmann.
Sustainability continues to grow in importance as millennials search for ways to make their mark on the world
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He adds: “We are witnessing a good development for colouring products and highlighters, with a trend for large sets featuring a broad choice of colours. One of the most successful items of 2021, for example, was the 23-piece Stabilo BOSS Original Deskset.” Zebra Pen too is seeing the rise of colour supplies that align with creative applications, providing a balance to the world of black and blue writing instruments. Says Newman: “We are identifying more consumers using colourful writing implements to express or organise themselves as they embrace opportunities to disconnect from technology and reconnect with pen, paper and true self-expression.”
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SUSTAINABLE SOLUTIONS While it’s still too early to quantify the knock-on effect of the recent COP26 event, the writing instruments sector has always been hot on the issue of sustainability. Edding, for example, introduced its environmentally friendly EcoLine series a decade ago, and all packaging is completely made of cardboard. “Edding has set itself the goal of being climate neutral by 2025. This objective applies to the entire group and all company locations, and should be achieved with the help of carbon offsetting. A first step in this journey was taken
in 2020 when the EcoLine product range was certified as climate neutral,” says Bosch. Stabilo is also aiming for climate neutrality by 2025. Under its company-wide sustainability initiative, Stabilo Together, it has ambitious goals and is “working intensively to reduce our footprint in the areas of production, packaging and transportation,” according to Brinkmann. Pilot’s Refill It, Don’t Bin It campaign has helped to establish pen refills as one of the company’s leading sellers. In 2020, more than 80 million refills were sold in Europe alone. Recently, Pilot created a 100% recyclable packaging format for its Begreen blister pack range. It has also enlarged its B2P line with the addition of the Ecoball, which is made from 86% recycled material from plastic bottles, including 2.5% from reclaimed ocean plastic. The pen is also CO2 compensated and has a sales projection for this year of 3.5 million pieces. “Sustainability continues to grow in importance as millennials search for ways to make their mark on the world and be a catalyst for positive change. This impacts their buying habits,” says BIC’s Boldu. She adds that research carried out by BIC France in May last year revealed 51% of French consumers are ready to pay more for environmentally friendly supplies. Like Pilot, BIC continues to introduce sustainable writing instruments to the market, which Boldu believes are key to the sustained growth of the sector. “In April 2021, the new ReVolution line of stationery was introduced in the US, made of at least 50% recycled plastic and 100% recycled packaging. ReVolution features a BIC Ocean Retractable Ball Pen made with 73% recycled ocean-bound plastic. “In Europe, we launched the Cristal Re’New, our first refillable metallic Cristal ballpoint pen, to respond to growing consumer demand for reusable goods. 16 of our stationery items in Europe have been awarded ecolabels.” While the writing instruments sector is unable to control current market forces, it is clearly doing everything possible to ensure a successful 2022.
ADVERTORIAL
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On the Move... INTO ITS 105th YEAR I
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n 1917, a family business was born as American bankers were introduced to an innovative new way to organise old records. Income tax had been enacted by Congress several years earlier and, therefore, careful record-keeping had become an important new requirement for banks. Harry Fellowes named his business the Bankers Box Company because bankers were his target market, and a box was his product. He chose ‘Liberty’ as his brand in celebration of freedom and the fresh opportunity for prosperity brought about by the end of World War I. The product was a novel idea: a box made of a new material – corrugated fibreboard – which held 24 inches of sequential, like-sized records, protected with a secure string and button closure. For over 100 years, the Fellowes family has built its global business around the theme of innovation. Its markets have changed dramatically over time, but the company challenges itself to remain relevant and continuously think more expansively. It has successfully expanded its product range and geographic frontiers through four generations of family leadership. OPI recently
caught up with Harry Fellowes’ great-grandson, fourth-generation John Fellowes, who became President and CEO in July 2014.
OPI: Going back to the early days, what would Harry think of what his business has become? John Fellowes: Good question. I think he would be pleased by our expansion of the busines but, based on what I have learned about him, I believe he would be even more interested in our culture. He was a principle-driven entrepreneur with a keen sense of business ethics. As such, the preservation of his values like hard work, business integrity and entrepreneurial leadership would really matter to him. As would our continuing commitment to innovation. OPI: How has Fellowes maintained these values through four generations? JF: The simple answer is that each succeeding generation of family leadership has ‘grown up’ in the business before running it and experienced first-hand its founding principles. Fuelled by these formative experiences, every generation has naturally embraced the values and practices grounded in the beginning.
be cheaper to automate or relocate this function to the other side of the world. But such a strategy would not rise to the level of even consideration. We believe the customer service experience is a crucial human connection to our customers and the users of our products. We want it to be an excellent interactive experience. What happens on a call shapes how people feel about our brand. It’s important to us. Of course, being a long-standing family business can also have its challenges which need to be managed. This is one of the reasons we believe that being ‘The Brand on the Move’ and embodying both ‘family’ and ‘innovation’ in our values are crucial to our future success. Family businesses can sometimes lose relevance over time due to too much continuity and not enough shareholder challenge. With this risk in mind, we are intentional about constantly challenging ourselves to increase our market value and competitiveness.
ADVERTORIAL Fellowes Brands
By the same token, all leaders have also interpreted Harry’s principles and values, which is important because common language and expressions change with time. We have recently published a restatement of purpose and values, which I believe harmonise with our heritage but also modernise our way forward. Today, Fellowes’ purpose is stated as ‘The Brand on the Move – Helping Professionals be at their Best through Wellness, Productivity and Inspiration’. Our cultures and values are embodied in the statement ‘Serving at the Intersection of Family, Innovation, Quality and Care’. These are not just words or aspirational phrases; they describe who we are and who we have always been. It’s a variation on a familiar theme with new points of emphasis. These points are alive in our culture and continue to inform our decision-making as it relates to key considerations like investments, brand strategy, partnerships, product innovation, employee benefits, and so on.
Our cultures and values are embodied in the statement ‘Serving at the Intersection of Family, Innovation, Quality and Care’
John Fellowes
OPI: What makes Fellowes unique these days? JF: Being a private, multigenerational business with active family leadership and ownership is increasingly distinctive these days. This characteristic alone supports prevalent management dynamics at Fellowes, including continuity of leadership, long-range thinking, and a commitment to family values. For example, we are less likely to be upset by a bad month or quarter if we understand the reasons behind it and can see the path to future success. We do not need to explain ourselves to a public audience. This simplification in our focus and culture allows us to avoid distractions and stay focused on creating greater value for our customers and end-users. We also take our brand very seriously in a highly personal way. Related to our customer service approach, for instance, it would certainly
OPI: Has this journey of bringing the next chapter of change and relevance been quickly embraced with your internal teams and people? Has it been a smooth ride? JF: It was mixed in the early days, but we have seen increasing engagement across our business
January/February 2022
OPI: We’re seeing a lot of new products from Fellowes. How do you keep momentum across existing as well as new categories? JF: Firstly, we made a decision about a decade ago to invest and broaden our product development capabilities and organisational structure. Today, Fellowes is fully vertically integrated with in-house capabilities. We see great benefits across leverageable technology, cohesive design language, modular functional design, and employee engagement and retention. We have also shaped our product strategy through our brand purpose and vision, rather than starting with our legacy categories. While these categories are – and will continue to be – an important part of our brand, a fixation on shrinking and consolidated spaces can limit creative thinking. Fellowes products will continue to evolve into an ecosystem of solutions that surround the professional experience and help end users work and feel better. Over the past ten years, we have increased our brand reach into contract and service channels, while our product strategy is embracing the goal of innovative leadership across our solutions. We actively pursue a broader vision each day, but it’s also good to look in the rear-view mirror and note some of the ground we have covered.
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Fellowes Brands ADVERTORIAL
each year. Change is difficult for most people, and new horizons are not always comfortable. Some people are early adopters and others more wait-and-see. But we have exercised both patience and persistence and most of our people have embraced the ‘new’ over time. It’s been very fulfilling to observe many individuals who have grasped the opportunity and blossomed into enhanced contribution or leadership roles. It is clear we have taken some big steps to create an engaged team and culture around a new vision. Recently, we have been honoured with four prestigious awards pertaining to our workforce and culture: Forbes 2021 Top Places to Work (in Illinois), Crain’s 2021 Top 5 Most Innovative Companies in Chicago, 2021 Chicago Tribune’s Best Places to Work, and a Great Place to Work Certification (Fellowes Canada).
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OPI: I have heard you say, ‘Fellowes strives to be a company with a conscience’. How does this drive your decision-making? JF: Doing what is right has many facets across a company, but let’s talk about citizenship. For us, running a business carries a responsibility to the world around us. It has to do with the way we treat others and our duty to comply with the laws and regulations of the countries in which we operate. It also recognises that there are many in our world who suffer mightily. We live relatively comfortable lives, so we sense a responsibility to show benevolence to those who struggle. Fellowes GIVE is our philanthropic initiative. We formalised our charitable giving into this new structure in 2014 with four categories of giving: cancer research, social services, education and world poverty. We felt the new structure would help us be more intentional about where we should invest, and it engaged our people globally. Third world poverty has been a key area of focus for years. We have funded major projects like fresh water to villages in Mozambique, outfitted children’s care centres in China with commercial air purification and sponsored vocational education programmes in Nicaragua. Each year, we conduct an annual team trip with 6-8 selected employees from our global teams to monitor and observe one of our sponsored initiatives. While on the trip, they report back daily to our global organisation which sparks a great deal of engagement and conversation.
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Solar panel installation at Fellowes’ corporate headquarters in Itasca, Illinois
This year, we are shifting some of our resources to what we call ‘backyard neighbourhoods’. This will target social issues in close proximity to the cities in which we operate around the world. One of these neighbourhoods is Chicago, which has grabbed persistent headlines because of its gang activity, police violence and racial tension. As we go forward, we will increase our investment into Chicago with several partners that serve tough neighbourhoods and communities. One faith-based group, By The Hand Clubs For Kids, will be a lead partnership. Their five clubs in Chicago’s most under-resourced neighbourhoods not only give these kids a safe harbour, but seek to break the cycle of urban poverty through physical, mental and spiritual restoration. This programme, which started 20 years ago, now serves hundreds of kids each day and has improved high school graduation rates of its students to 83%. In addition, 71% of those who graduate from this programme go on to college which was a remote option in prior years. Good citizenship also means a responsibility to our planet with respect to the dangers of global warming. For decades, we have paid attention to carbon emissions and aimed to act responsibly as it relates to the design and manufacturing of our products and the carbon footprint we are leaving behind.
For us, running a business carries a responsibility to the world around us In 2019, we took a much larger step after a group of concerned employees had begun to look into the feasibility of shifting our electrical resource needs into renewable energy. They ultimately brought us a proposal that led to the installation of 3,100 solar panels on our Itasca roof. It now provides a third of our energy needs. We run big machines in this plant five days a week which requires huge amounts of electricity, so this is a big step forward in terms of reducing global emissions. OPI: Finally, what is ahead for Fellowes? JF: We have just launched our next three-year plan – THRIVE’24. Our aim is a bold and ambitious strategy to drive continued growth, positive influence, increased relevance, and greater connectivity across our global business and brands. The plan is supported by nine specific ‘impact zones’, representing where we will put the majority of our time, energy, investments and collective brain trust in the coming years. You will see a continued elevation of and cohesion to the Fellowes brand. We will also be furthering our ‘product ecosystem’ into realms of solutions that are new to us as well as the business products industry overall. Many of our most significant project efforts are coordinated to launch in about a year. Stay tuned!
THE event for the business supplies and associated sectors – the perfect chance to discuss the unique challenges and opportunities for our industry.
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22 – 24 MAY 2022 SOFITEL HOTEL, CHICAGO
For more information contact: Steve Hilleard, CEO, OPI Email: steve.hilleard@opi.net Tel: +1 312 957 8510
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RESEARCH
Game CHANGER
Are you ready for the disruptor that is 5G?
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e’re all acutely aware the world of work has changed irreparably over the past couple of years. Trends such as hybrid and homeworking with accompanying digital solutions like videoconferencing have accelerated massively. But there have been issues, as lag times and drop-outs have caused many a hiccup or miscommunication during online meetings and conferences. The good news is these kinds of problems are about to be solved with the advent of the fifth generation global wireless standard – 5G. The technology promises to turbocharge the movement to connect everyone and everything in an increasingly hyperconnected world.
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DIVERSE STRATEGIES Those due a mobile phone upgrade have likely noted the increasing availability of 5G handsets. According to the Global Mobile Suppliers Association, as of Q3 2021, over 500 5G smartphones had been announced. There are also plenty of real-world use studies being tested around the globe – everything from smart transport and city infrastructure to smart factories and offices. Delving into some figures, mobile network operator association GSMA says by 2025, 5G networks are likely to cover one-third of the world’s population. In its 5G Technology, Market and Forecasts 2022-2032 report, research firm IDTechEx states that, by the end of 2021, almost 80 nations had either commercialised 5G or were conducting trials. As reported by IDTechEx, in the absence of dominant US-based 5G telecom equipment suppliers, the Federal Communications Commission has been supporting OpenRAN development, with each operator holding a separate portion of the 5G spectrum. This means each deployment strategy is marginally different. Verizon, for example, has made mmWave a priority, while T-Mobile has opted for low and mid-band expansion. AT&T and Verizon both have plans to roll out mid-band service with a goal to cover 100 million people this year. China, on the other hand, is advocating for 5G national development. The country’s action plan extends to 2023 and includes increasing user penetration to above 40%, raising network access
traffic to over 50%, and pushing penetration in big enterprises to more than 35%. Simultaneously, telecom operators in China are working together to build a shared 5G network infrastructure. In December, the European Commission adopted its first Work Programme for the digital section of the Connecting Europe Facility that will receive in excess of €1 billion ($1.1 billion) in funding from 2021-2023. Aims include ensuring each EU household has gigabit connectivity and all populated areas are covered by 5G by 2030. At the time, EU Commissioner for the Internal Market Thierry Breton commented: “Secure and fast connectivity is the pillar on which we will build Europe’s Digital Decade. It will give Europeans access to digital skills, let businesses innovate and support the availability of unprecedented applications in fields such as health, education and online public services.” GETTING CONNECTED According to analysts CCS Insight, 5G network connections globally are expected to double this year to 1.34 billion and are firmly on track to reach 3.6 billion by 2025, despite component shortages affecting the mobile phone market. The analyst firm also identified two other drivers for 5G adoption – industrial cellular IoT devices and fixed wireless access. The latter remains niche for now, although CCS believes some network operators may soon target business users with the technology. Looking further ahead, the Ericsson Mobility Report November 2021 predicts that, by 2027, 5G will be the dominant mobile access technology, representing 50% of all mobile subscriptions globally (4.4 billion) and carrying 62% of global smartphone traffic.
5G is far more than a simple mobile network upgrade You may wonder why all this is important. Put simply, it’s not about faster online browsing via a smartphone – although this is a great bonus – but more about future market competitiveness. In Deloitte’s Enterprises Building Their Future with 5G and Wi-Fi 6 report, 86% of networking executives surveyed believe these advanced wireless technologies will transform their company, and 79% said the same regarding their entire industry. Furthermore, 87% commented that leveraging the technology will produce a significant competitive advantage. Deloitte noted that adopting 5G and wifi 6 is seen as a strategic necessity. The top benefits are: improving efficiency, enhancing security and taking advantage of new technologies such as edge computing, big data analytics and AI. 5G is far more than a simple mobile network upgrade. It offers much greater speed – potentially up to 100 times faster than 4G – with ultra-high bandwidth, better reliability and almost zero-latency connectivity. It will power smart cities
UNPRECEDENTED OPPORTUNITIES With the massive network capacity of 5G – connecting around one million devices per square kilometre – the IoT universe of applications, sensors and devices will present unprecedented manufacturing and business opportunities. Benefits include increased efficiency and productivity, improved customer service and as yet undreamt of services, as well as lower costs. It will also herald a new era for the cloud through edge computing solutions. With cybersecurity a considerable concern for many businesses, an additional advantage of 5G lies in its network slicing capabilities and its ability to enable employees to connect to their company’s private wireless network. Ultimately, the upgraded mobile standard will aid hybrid working, untethering employees from a wifi router or fixed line. Users will enjoy superfast data transfer speeds and the ability to use several bandwidth-intensive applications at the same time on 5G-enabled devices, even in crowded spaces. In its Preliminary Global Notebook PC Shipments and Market Share: Q3 2021 Results, Strategy Analytics expects sales of 5G-enabled notebook PCs to reach 14.3 million by 2025, representing 69% of the market. Meanwhile, extended reality (XR) – incorporating virtual and augmented reality – could become very relevant for hybrid working, and be adapted for remote training, holographic conference calls and virtual sales showrooms, for example. Indeed, the power of 5G is almost certain to be realised by remote workers first, especially if XR takes off rapidly as a viable collaborative tool for connecting work colleagues through immersive experiences, wherever they are.
Edge computing: As the name suggests, edge computing means cloud applications and services being moved to the edge of a network, ie carried out at or very near to where the source of the data is being generated or consumed. This reduces latency, resulting in a better user experience. Extended Reality: Extended Reality (XR) is a blanket term encompassing augmented (AR), virtual (VR) and mixed reality (MR) immersive technologies that blend real and virtual environments. High-band network or millimeter wave (mmWave): The ultra-fast option associated with 5G (above 1 Gbps) is currently available in limited countries, but includes the US, China, Japan and South Korea. This spectrum offers plenty of bandwidth and operates above 26 GHz. The trade-off is its unreliability over long distances, and the signal can be interrupted by obstacles or walls. Low-band network: Operates below 1 GHz and is traditionally used by mobile networks, broadcast TV and radio. Signals cover large distances and travel through walls, but the spectrum is crowded and offers comparatively lower speeds of up to 250 Mbps. Mid-band network: This network covers the wireless (wifi, mobile, Bluetooth, etc) spectrum between 1 GHz to 6 GHz. Signals can achieve speeds of up to 1 Gbps with a wide geographic reach. Network slicing: One huge benefit of 5G is network slicing, or the ability to create virtual networks on-demand over a shared network. It enables a mobile operator to reserve part of its network for a customer’s application, service or device with tailored performance and security functionalities. OpenRAN or O-RAN: RAN stands for Radio Access Network and connects devices to the network through radio connections. OpenRAN refers to the creation of industrywide open standards that support interoperability between vendors’ equipment. The standards would also be open to software developers. Wifi 6: The next generation wifi is known as wifi 6. While it does offer a speed boost – potentially up to 9.6 Gbps – the more important aspect is that it improves overall wireless performance in terms of connectivity and efficiency, which is especially vital as more devices are added to the network.
January/February 2022
GET READY 5G has the ability to impact just about everything: from the way we communicate and the introduction of entire new ranges of devices that run the workplace securely, to the products used to carry out our work, and even the design and fitout of the office environment as it becomes wireless. Having said all this, while hailed as revolutionary, the rollout of the mobile network globally is still very much in its infancy. 5G will likely be utilised incrementally in the workplace as it becomes smarter and more connected through IoT. Preparation is key. Getting ready for 5G now should provide those fast on the uptake with the first-mover advantage. If you’re in any doubt about the impact it will have, remember it was only in late 2009 that 4G introduced the world to mobile broadband and provided the platform for m-commerce, Uber, FaceTime, Deliveroo, Instagram, TikTok, Netflix, etc. You get the picture. The potential of 5G represents a leap far beyond this, helping to usher in the fourth industrial revolution where the possibilities are limitless.
5G jargon buster
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and buildings, along with Industry 4.0, through smart factories utilising AI and machine learning, providing real-time data collection and analysis.
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RESEARCH
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STATE OF THE INDUSTRY PREVIEW
he global business products (BP) industry this side of the COVID-19 pandemic is looking very different to the one that went into it. Amazon now typically accounts for at least a quarter of manufacturers’ sales and it’s a percentage which is rising rapidly. For resellers in our sector, the prime focus now is to maximise the opportunities and minimise the risks. But there are things they need to know to allow them to do this effectively:
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• What is the current market penetration of Amazon and Amazon Business, and what can resellers still do to respond to this giant? • Which new product areas have emerged as real opportunities? • Which new channels/distributors offer potential? • How important are online marketplaces/platforms and what are the key players at present? • How have the changes in ownership in 2021 of the former big boxes affected the market and what type of operator (if any) is now in the best position to service the corporate sector? • What will be the effect on industry players of the ending of government support schemes for businesses initiated during the pandemic (eg the UK’s Coronavirus Job Retention Scheme and the Employer Retention Tax Credit in the US)? • Which factors (raw materials, labour, logistics, fuel) will represent the greatest inflationary threat for businesses in 2022 and what responses are planned to adapt to this?
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ASKING THE EXPERTS All of the above questions demand reliable answers from trusted sources. The State of the BP Industry 2021-2022, the ninth edition of Martin Wilde Associates (MWA) and OPI’s annual research study, does just that. It offers insight by asking some of the sharpest minds in the industry – the senior executives running the major BP companies globally – these and many other vital questions.
Based on in-depth and online interviews with these executives in Australia, Benelux, Canada, France, Germany, the UK and the US, the survey will also focus on the crucial KPIs that the COVID crisis has been affecting. What, for example, were respondents’ overall revenue and margin trends in 2021 and, going forward, what are the expectations for 2022? What share of distributors’ sales were accounted for by jan/san supplies, breakroom/catering products, workwear/PPE and MPS in the same period?
For resellers in our sector, the prime focus now is to maximise the opportunities and minimise the risks What share of resellers’ sales were via the web in 2021 and how will this percentage evolve in 2022? And what about resellers’ average order values – how have they been and will continue to be impacted? Finally, what was the value of the core office products market in 2021; what will it be in 2022 and where are the growth trends? INVALUABLE RESOURCE The study will report on respondents’ perceptions of the main growth – as well as declining – product categories and channels in 2021 and 2022. It will further detail the 2021 financial performance of the key 15 distributors in our sector in the US, Europe and Australia. Research for this study, which will be invaluable to the future business strategy of the BP industry’s main protagonists, commences in January 2022, with the report being published in April this year. The State of the BP Industry 2021-2022 is available for £690 (approx. $900) if ordered before 31 March 2022, and for £950 ($1,250) thereafter. To order your copy, go to www.opi.net/SOTI2022
5 MINUTES WITH...
Jill O’Neill
CAREER Q&A Describe your current job. As VP of Merchandising at Independent Suppliers Group, I negotiate the best programmes and pricing I can to keep our members competitive and make sure they receive their rebates on time.
What’s your life philosophy? Try not to take things so seriously and have fun whenever you can – life’s too short. What makes you happy? Beaches and dogs. What do you do in your spare time? I cook, garden, read and walk the dog. Best way to spend the weekend? Driving up to Wisconsin, renting a cottage on a lake and enjoying the water and the peacefulness. Early bird or night owl? Definitely night owl. Where would you most like to travel? The Greek islands – I love the food, the laidback lifestyle and the views. Favourite time of the year? Summer, for sure. What’s your guilty pleasure? Watching Bravo TV’s reality show Below Deck.
Jill O’Neill, Independent Suppliers Gro up
Your childhood ambitions? To be a teacher. I quickly realised I don’t have a lot of patience, so I gave that up. What is on your bucket list? To travel to Europe and especially the Mediterranean. I have never been and to see all the history there would be amazing. What words do you use the most? “Actually” and “interesting”. Favourite book? The Stand by Stephen King. Actually (see what I mean?!), anything by him holds my attention. Even his bad books are good. What song puts you in a good mood? Uptown Funk by Mark Ronson featuring Bruno Mars. What irrational fear do you have? I don’t like long escalators. The ones at Hong Kong International Airport and Chicago’s O’Hare International Airport (United Airlines, Terminal C) especially terrify me.
Your worst ever job? In high school, I worked at Craft Showcase. Often, we had to do inventory on Friday nights. I had never realised how many small things are sold in craft stores until you had to manually count them. Like needles and embroidery thread in all kinds of colours. If you weren’t doing your present job, what would you like to be doing? Maybe a lawyer or detective. I like to ask a lot of questions and am naturally inquisitive. Worst moment in your career? When Boise Cascade Office Products merged with OfficeMax in the early 2000s. Lots of good people left the company. Many, thankfully, stayed in the industry. The industry figure you most admire and why? The late Chris Milliken who was CEO of Boise Cascade until 2005. Chris would interact and take an interest in all associates in the company. He wouldn’t just say hello, but really talk to people about what they were working on and if they had any advice for him on how to improve the company or its culture. He had a way about him that made staff feel connected and have a vested interest in the organisation they worked for.
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Your best piece of advice to someone who has just joined the OP industry? Don’t sell our industry short. Although there is secular decline, many people still love their office products. Try to be innovative and bring new and interesting ways to make offices more efficient and fun.
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Favourite business supplies? Rediform’s MiracleBind Notebooks and gel pens that don’t smear for left-handed people.
FINAL WORD
Pricing DYNAMICS
O
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n 12 January 2022, OPI held its first-ever webinar as part of a brand new series called Insights, exclusively available at no extra charge for members and subscribers. Designed to tackle topical issues in the business products world, the webinar discussed how the industry can deal with the unprecedented cost pressures that so many sectors are facing. The hour-long session was hosted by OPI Commercial Director Chris Exner and featured four guest panellists from North America. Three of these were senior executives representing the wholesaler, vendor and reseller channel, respectively. In addition, Tim O’Connor, a pricing specialist from Retail Performance Solutions, provided some valuable context and insight into pricing and inflation dynamics. O’Connor’s introductory presentation was largely optimistic about the chances of a return to some kind of normality and stability in 2022. COVID, he said, was shifting from an event to an ongoing reality while the US Centers for Disease Control and Prevention believes the Omicron variant, combined with vaccinations and boosters, is providing a “substantial barrier to reinfection”.
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INFLATION EASING Turning to inflation, O’Connor showed that input costs across a number of key commodities, labour and freight are set to increase by 8.5% this year, down from a whopping 36% in 2021. The big question, he noted, is determining what is structural versus transitory. He explained that supply chain bottlenecks, which have been such a major disruptor at US ports, are largely expected to be clear by the middle of 2022. However, longer-term structural issues in port systems and processes and “inflexible” supply chain strategies are likely to remain an ongoing vulnerability, so scenario planning continues to be “a must”. More importantly, O’Connor noted, the “upside down supply/demand balance” will reverse, with supply improving and demand softening. This will lead to a resumption of competitive pressure, promotional activity and greater difficulty in pricing pass-throughs. For the latter, he suggested, the door is expected to close by Q3 2022. He also advised attendees not to load up downstream channels with high-cost inventory as they are unlikely to appreciate it, with PPE being a prime example. Inventory supply chain transparency and visibility will stay key, O’Connor asserted, with
speed and scenario responsiveness set to be substantial differentiators. With few suppliers having both scale and agility, it is a situation expected to benefit smaller players and lead to further SKU rationalisation at the larger ones. Other important factors will be service components to complement products, channel diversification and routes to customer, plus the need for last-mile cost efficiencies, all of which will no doubt resonate with many OPI readers. KEY TAKEAWAYS With O’Connor’s initial input, there followed an insightful Q&A session with the other panellists. Here are some of the key takeaways:
The next OPI Insights webinar will take place in late February/ early March and will be focused on the European market. To be eligible to attend webinars at no cost, please contact Commercial Director Chris Exner at chris.exner@opi.net for membership and subscription information.
• Manufacturing plants are struggling to keep up with current demand even when running at full capacity. This had led to product shortages throughout the supply chain and a drop in ‘normal’ service levels. In several cases, suppliers have had to put customers on allocation due to shortages or out-of-stocks.
Supply chain bottlenecks, which have been such a major disruptor at US ports, are largely expected to be clear by the middle of 2022 • The industry is set up to handle regular price increases, for example at the start of a year or a quarter. The sheer number and frequency of price hikes over the past 18 months has made it difficult to pass these on to end-user customers, especially for resellers outside the ‘mega’ channel which might not operate within a contract structure. • Paper is a category particularly impacted by price increases. Despite secular declines, it is still a tremendously important part of a reseller’s portfolio. The situation has been exacerbated by manufacturers switching production to higher-margin segments such as packaging. • Average order value – and therefore average order profitability – remains a considerable headache in the B2B channel as people continue to work from home. Connected to this, route density when making deliveries to residential addresses is a big challenge. • Despite customers having become used to next-day delivery as standard – and expecting this – there is more understanding and acceptance of longer delivery times. This is especially true for non-critical items.
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