Opinion

WELL PLACED TO SUCCEED? Absolutely

Special Issue

BREAKROOM SPECIAL

Most independent dealers have dabbled in the broad category of facilities supplies and all it entails. But there’s every reason for them to lean forward and make the most of the opportunities in today’s market, says ISG’s Frank Hoard

In a recent conversation, OPI Editor Heike Dieckmann asked me whether ISG dealers have really been embracing the facilities, safety and PPE segment, particularly compared to pre-COVID times. The short answer: absolutely, they have. There are still many OP channel dealers that are new to this segment, but their enthusiasm is unparalleled.

It’s been about three and a half years since ISG’s CEO Mike Gentile brought me on board to fill the newly created position of Director of the Facility Supply Channel (FSC). This forward-thinking position was originally developed to assist ISG members in the category.

The real question was: what does it take to get them really involved in a channel versus just dabbling in it? The answer is education; our members needed to understand that the category produces plenty of dollars and big margins. Many simply did not know how to effectively move within the spaces of PPE, jan/san, safety as well as breakroom supplies. My role is to help them develop strategies and learn where the pitfalls are.

COVID WAKE-UP CALL

I had been working at ISG for about 15 months when COVID-19 hit. Even for those independents already experienced in selling in FSC, it was a massive wake-up call; it forced all members to think differently about the category.

Obviously, pandemic-related items were instant movers, with waves of varying demand. But for more than 18 months, our members battled larger companies, established relationships and misconceptions that “my local office supplies guy doesn’t have access to those products”.

ISG members were smart enough to capitalise on the opportunity of disruption, and many of those that had dipped their toes prior to the pandemic are now full-fledged jan/san houses. I would go as far as to say our dealers have grown stronger amid the supply chain disruption and a new landscape of customers. Thus far in 2022, now pandemic products have fallen off sharply again, we’re seeing our membership selling twice as much in FSC compared to 2019.

Most of the US – from retail to commercial distributors – are now sitting on a mountain of wipes, masks, disinfectants and maybe even a few COVID tests. Although the disposable glove supply chain has normalised and prices have fallen off their peak, the freight aspect has continued to keep costs high compared to pre-COVID levels.

Nitrile gloves sales have levelled off, but are still well above those of 2019, and there is an expectation that demand will continue in an upward growth pattern of about 7-10% for the next ten years.

Current conversations with dealers suggest foodservice and MRO products are in high demand. The ISG team is constantly talking to manufacturers, suppliers and rep groups within all channels to make sure we have solutions in place prior to potential disruptions.

Many of those that had dipped their toes [into facilities supplies] prior to the pandemic are now full-fledged jan/san houses

EXCELLENT POTENTIAL

Independent dealers are very well placed to succeed in FSC and there are a few specific factors which have opened up opportunities for them. The consolidation happening within the jan/ san distributor market mirrors what we saw in the OP channel in the 1990s.

After layoffs of national sales forces by major OP jan/san commercial suppliers, customers have started turning to local operators – they respond quickly and offer a customer service that is geographically close. All of the above have led customers back to the ‘traditional’ independent dealer community.

During the pandemic, ISG members were recognised as essential businesses and were allowed to stay open when others had to shut down. Historically, these types of small operators weren’t on the radar for products like PPE and safety items, but once they were able to supply their customers with hard-to-find COVID SKUs, it opened up a completely new supply category in those customers’ eyes.

Having elaborate ordering websites which work well in this age of ‘click and buy’ is very important and, unlike the jan/san channel, our OP members continually present ordering site technology that end users demand now. They also have the ability to adjust to how a customer wants to do business.

Let’s face it, when end users have a real need and don’t know what will get the job done best, a website will only take them so far. This consultative component of the ordering process is where independent dealers will continue to see growth within any category as long as they are proactive.

However, being proactive is more than just developing a strategy of talking – virtually or in person – to your customer base. For dealers to expand their offering, they must understand that, to be more profitable within FSC, means buying direct from manufacturers. It provides many obvious advantages, including better competitiveness against traditional FSC suppliers; increased margins; control over the supply chain; the ability to set better expectations for themselves and customers; and to develop a true programme. Let’s focus on this last point. Years ago, many of our members developed furniture or printing programmes.

That same model of hiring customer-facing consultants, selecting vendors, developing an execution plan, setting pricing strategies and really promoting a category needs to be replicated in FSC for dealers to be truly successful.

THE VALUE OF BUY DIRECT SELL BRANDS

Independent dealers are always stronger together, and that is most evident in the area of merchandising. Going back to my point about buying direct, recently, under the guidance of our CEO, ISG kicked off its Buy Direct Sell Brands initiative. It aligns with our fundamental purpose and encourages our membership to promote and buy direct from the suppliers that support the group with rebates and other programmes. The vendor community has recognised the strength of ISG and directed their customers to become members of ISG over the past year to join us and take full advantage of these direct buy initiatives. In FSC specifically, where the average product case is physically bigger and has a higher average dollar price, dealers that succeed are usually the ones to have taken control of their inventory through direct purchasing. The road to becoming better at selling this category starts with inventory prioritisation, standardisation and rationalising of their offering. It takes some time, but a little effort upfront can mean immediate margin dollars in their pockets. As much as 30% margin gains can be had in products bought direct versus wholesale in FSC. The wholesalers, of course, are in a tough position. Trying to run an inventory of just-in-time products while attempting to predict the future in uncertain market conditions is difficult. The objective behind Buy Direct Sell Brands is to give members greater control over their own destiny. There is this belief in business whereby “I buy wholesale to keep from sitting on product because, if I buy direct, I must tie up my money with large amounts of inventory”. It’s a myth. The adoption of a just-in-time inventory programme at dealer level must be holistic and include leadership, purchasing, inventory and, yes, even sales. Leadership has to be involved to determine what initiatives allow for back-end profitability. Purchasing will need to show trends on product movements, while inventory personnel must add input on how to keep and move the products. Finally, sales is often the most overlooked part of an inventory strategy. This component needs to liaise with the end user to properly set expectations. Communication is key and it must travel both ways. Customers’ ability to receive Frank Hoard inventory in a different manner may be a solution if there are reasons to do so. These reasons for end users could be a better price, guaranteed products or simply peace of mind.