Growing opportunities in a shrinking market - the next phase for the independent office products dealer

The office products industry is currently characterised by a number of global trends, which are placing increased pressure on all but the largest players. Much of this pressure can be attributed to market consolidation, but there are other forces at work such as price deflation and commoditisation, the effect of the internet and the rise of the 'power channel'.

In 2007, the total UK stationery market was worth over £2.56bn at manufacturers' selling prices (msp), a rise of 0.9% on 2006. The market is forecast to increase during the next five years up to 2012, except for a moderate 1% decline in real terms expected for 2010. The market is expected to continue to be characterised by strong price competition, as a result of the changes in the distribution channels used, such as supermarkets diversifying in the stationery sector. Furthermore the increased use of e-commerce in the stationery distribution market is expected to continue to exert a downward pressure on the value development of the market. Moreover, imports from low cost countries, in particular from China, are expected to continue to gain an increased share of the market, restricting a stronger value development.

Consolidation
Increased competition is leading to a number of global giants who dominate the distribution channel via retail outlets, contract delivery, mail order catalogues and the use of key resellers known as 'the power channel'. For evidence of this consolidation, one need only look at the acquisition by Staples Inc of superstore chain Office World from its Swiss parent, or management buyouts (MBOs) at both Kingfield Heath and OyezStraker, plus a string of acquisitions by Dudley Inkwell.

Perhaps most disturbing to independent dealers is the movement among some customers, particularly large offices, regional and national corporations, and government entities, to reduce the number of suppliers. The single-source idea is based on the notion that independents can't match these giants' product and delivery capabilities.

Shrinking Margins
As consolidation takes hold, the office products market is becoming increasingly commoditised. Europe has come under pressure from Asia flooding the market with private label imports, which could account for up to 50% of products sold in the UK by 2015 according to Office Products International. This is driving prices down and loyalty away in the sector and the major players are adapting to this new world, increasingly competing on price in 'e-auctions', and using the power channel to drive mid market sales.

So what is independent dealer's answer to this increasing pressure? Quite simply, they must be more aggressive in going after new business and solidifying existing business. Many mid sized operators are already widening their product offering in an attempt to attract new customers and stop existing ones from straying, but without effective sales management this may create more problems than it solves.

The Vecta Approach
For the beleaguered sales team, more product lines with which to familiarise themselves means more work. Only when they have the tools with which to keep up to date with the opportunities and competitive threats within their widening customer base, will they bring together the logistical power of the wholesaler with the strong local relationships of the independent.

Recently, a new breed of out-of-the-box sales technology, known as sales intelligence, has emerged which provides just such a tool. Designed specially for sales professionals working in wholesale and distribution, sales intelligence solutions are able to take information from existing back office and accounting systems and deliver insight into customer buying patterns by proactively keeping the sales team informed of sales opportunities or potential problems with drifting business.

The leader in this field is VECTA Sales Intelligence, which also incorporates those elements of CRM that are relevant to distributors and wholesalers such as contact, diary and activity management. It automatically delivers critical information about customer buying patterns that translates into real sales opportunities. It is able to identify potential up-sell, cross-sell or switch-sell opportunities, in addition to highlighting customer drift, without relying on an operator to perform complex data analysis.

The key difference in the VECTA approach is that it does not require the level of investment, both in terms of time and money, as that of traditional customer relationship management (CRM) or traditional business intelligence (BI) solutions. VECTA delivers actionable sales intelligence, out-of-the-box. There is no need to build data warehouses and dashboards using toolkits like many BI solutions, and crucially, unlike CRM, salespeople don't have to enter data before they get useful information back, so end user adoption is almost guaranteed.

Utilising Sales Intelligence
One of VECTA's many customers in the office products market is OfficeXpress, a specialist distributor of electronic office supplies offering a full range of computer related consumables and peripherals. Despite tough market conditions the company had aggressive plans for growth and realised that improving telesales performance was the key to achieving full potential.

Success for OfficeXpress
The sales team at OfficeXpress faced a number of challenges including difficulties in identifying drifting customers and add-on sales opportunities, and in order to address these problems the company invested in a company wide rollout of VECTA Sales Intelligence software "The decision to roll-out VECTA was driven by a desire to stimulate sales growth through the OfficeXpress direct telesales team and help the management to direct sales strategy in line with company profit objectives," explains OfficeXpress sales director, Stephen O'Brien.

"Our existing systems made it difficult to spot missed sales opportunities. We started using VECTA in one section of our telesales operation and saw a significant improvement in the performance of the VECTA users compared to those who were not using the VECTA solution. We measured the increase in sales to prove the business benefits that VECTA provided and were delighted with the results."

In addition, OfficeXpress was also able to quantify the reduction of drifting accounts. The company identified 460 customers that had reduced spending in the July-August period when compared to the May-June period. During the September-October period, £21,755 of additional profit was regained from these accounts using sales Intelligence.

By using sales intelligence software, the management team at OfficeXpress now has total visibility over sales performance and opportunity. "Lost customers have been identified and targeted and are now beginning to return," says O'Brien. "The average monthly uplift in sales per VECTA user is close to £1,000. This far outweighs the average monthly cost per VECTA seat. We've seen net monthly gains of more than £17,000."

Success stories such as OfficeXpress are typical among VECTA's office products customers. The real advantage that sales intelligence brings to the office products market is that it is designed to provide insight into the profitability of both customers and the product lines they buy. This means sales professionals can focus their valuable selling time on the highest margin opportunities, and avoid customers that cherry pick and only buy discounted lines. Sales intelligence also provides an effective means of recovering business through the reactivation of lost or dormant accounts that might have gone unnoticed. Sales intelligence software shows exactly what needs to be done each day to achieve more revenue from existing customers.

In an industry where huge global players are attempting to push the independent dealers out of the market, it has never been more critical for those dealers to reinforce their position with their customers. Stationery and office products represent a relatively small proportion of any organisation's total expenditure, and as such, cost savings do not heavily impact the bottom line. Ever shrinking margins mean that the last battleground will be for relationships, not price, and those independents who survive will do so by focusing on the local market and adding value to the service.

Key Pressures:

IT decisions are being made in the boardroom not by IT departments.

ROI justifications are becoming more sophisticated.

Customers demanding flexible pricing models.