Everything solved

California teaming with promise

29 Aug 08

I first met Bob Mairena, the chief of Office Solutions (OS) at the SPRichards Advantage conference in San Diego last month. I heard about the rapid progress of this Orange County dealer when enquiring about the progressive members of the TriMega group. I asked if I could visit to do a Proficiency Profile on his company and at first, he wasn't keen on the publicity.

I'm glad I persisted and in mid-August, I went along to their Yorba Linda facility to meet the VP of sales and marketing Mary Greenwood. I was delighted to discover that OS are a tremendous example of the new eco-productivity provider model, I have been banging on about for many years. OS bore an uncanny resemblance to the new breed of best practice PROPS (Providers of Office Productivity Solutions) that are rapidly emerging in the new office productivity industry.

OS are a $30m in sales, stockless dealer established in 1984 serving the Southern California market south of LA. They are first call with United Stationers and are members of the TriMega buying group. The have grown rapidly in recent years to employ 90 employees  mainly engaged in sales and distribution. They have just opened new offices and a distribution point in San Diego  to create a stronger base in the region. 2008 has been their slowest year to date, hit badly by the real estate and credit crunch in California.

We discussed the key market differentials of OS. Greenwood was clear:

• Sustainability and environmental practices
• Personalized customer service
• Single source of a wide category of products
• Customer service that is measurable.

 Sustainability

OS offer a complete recycling service for their customers. They collect packaging, computer hardware/TV's, cell-phones/chargers, printer cartridges and batteries, then sort by recycler when items are returned. OS campaign to reduce carbon emissions and provide information to enable customers to measure their carbon footprint and how to reduce emissions in their everyday workings.

In their ethical drive OS works closely with local communities and charities. Bob Mariena was one of the initial founders  and first president of META (Making Education The Answer) mentoring Hispanic youth in SoCal. Bob also serves on the board of St. Joseph's Ballet a nonprofit dance academy for low income youths. OS also supports the City of Hope, the biomedical research and treatment institute;

Personalized customer service

OS organise dedicated customer service teams with the 25 outside sales representatives backed up by 9 customer service reps and 19 truck drivers. They provide specialist service in office supplies, IT consumables, furniture and interiors, FM supplies and print management,

Single Source Systems

OS has expanded its portfolio of products and can offer 30,000 items backed by knowledgeable local service teams and United's LA RDC. One local source of a wide source of original branded products, complete with next day delivery and eco-collection service gives OS a massive advantage in Southern California v. big-box players.

OS has just upgraded its webstore to a new generation version and now receives 40% of sales online. This is a major advance and promises to drive increased sales volume and order size.

OS has also upgraded its marketing and promotional programs since Greenwood's arrival and they now work closely with manufacturers directly to co-ordinate the best user offer and incentive programs for users and salespeople.

Customer service measurements

They are passionate about customer service and target and monitor anything they can be measured and proved: telephone answering time e.g. 6 seconds to reach a human contact, voicemail return time, query turnaround time and next day delivery reliability.

OS conduct customer surveys every 2 years and do individual service performance reviews with customers on a quarterly basis.

This is high touch strategy is not new but the comprehensiveness of the follow through is impressive and up there with best practice in the industry. Whilst other top performers boast $400,000 sales/employee ratios, OS has invested more in customer service which has lowered their productivity.

The Future

OS will be investing in CRM systems and emarketing programmes to drive more users to the new webstore. The OS teams commitment to providing personalized service across an expanding portfolio of office productivity services is a winning formula. Add to this the genuine sustainability drive and we can see Office Solutions becoming the #1 Office Productivity provider in Southern California.

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BuyOnlineNow tops US productivity league

The high ticket…
high growth performer

The rapidly emerging search marketer
and original brand champion

25 Jul 08

What is it with the State of Minnesota and leading US companies? There are 19 Fortune 500 companies there including retail leaders Best Buy and Target. In the fast growth health sector Medtronic, United Health and Ecolab and financial powerhouses Ameriprise, Travelers and US Bancorp. In OP manufacturing the mighty 3M and Smead. In OP superdealer community S&T Office, Innovative Office Solutions , Bertelsons…and now BuyOnlineNow.

BuyOnlineNow.com (BON) exploded onto the scene this year. Until recently many of the OP industry's leading manufacturers were not aware of the pure internet player from Rochester (MN) that relied primarily on the wholesale services of United Stationers and SPRichards. That is about to change BIG time as they realise what a powerful OEM brand ally they can now partner with…when all the market talk has been about own brand.

BON came to my notice this year when I read a profile in Simon De Groot's Independent Dealer ezine. I was impressed with their rapid growth and wanted to find out more. Bob Herman (pic above) is the CEO, an ex-technology professional who started the business back in 2000. His inspiration was the legendary Irwin Helford and he wanted to create a special company with the same degree of marketing prowess he interpreted from Viking's huge success in direct marketing.

BON recorded sales of $18M in 2007 and this year is on course to achieve $30m…up a massive 66%. Sales per employee the basic productivity measure (including an add back adjustment for truck drivers) is $578,000…the best we have recorded in the USA. So how do they do it? What makes them different? What are their measures of success?

The first thing I was struck by in speaking with Bob over the telephone, was his grasp of the numbers; his strong sense of customer orientation and making it easy for them to 'buy online now'. In other words to make the 'browse and buy' web experience as simple as possible.

A power of a specialist

BON has 50,000 active customers with furniture unusually 43%/sales, equipment 14%/sales and office supplies relatively low at 35%. New areas of development include breakroom and jan-san supplies which has risen rapidly to 8%/sales.

This specialist reputation is growing and being rewarded in BON's high average order values (AOV's). The AOV's of most  internet OP resellers is in the region $100-$150. BON' AOV is $200+ reflecting the higher ticket merchandise. Interestingly, a quarter of customers place orders via telephone, and here customers spend an AOV of $500+. Moreover, repeat customers…2 orders plus who represented a third of total sales placed AOV's of $1100.

This is a great endorsement for the power of the human touch on high ticket items. Taking a leaf out of the irwin's 'personalisation' playbook, even though you don't meet the customer face-to-face, create the next best thing via an easy 'personal' touch via the experience on the telephone or the web.

BON partners with some of the great brand names of our industry. These include: HON, 3M, Fellowes, Global, Safco, Acco Brands and Avery. Intersetingly, it also supports innovative manufacturers who may not be getting enough market exposure e,g, Lion Office Products. There are up to 20 manufacturing partners at the moment and this is expected to rise rapidly now that they realise that Bob is indeed an original brand champion.

In fact, commodity products, like paper and ink cartridges, are only a small percentage of overall sales with the clear focus on being a specialist office solutions source rather than a regular OP reseller.

The business philosophy is simple. Create an easy, simple 'browse and buy' experience that 'you would wish to enjoy yourself'. No distractions, no switch sells, no accessories…just make it easy to find what the shopper is looking for, with the proper supporting information in user friendly language to reassure the shopper…and then speed to the check out. Pricing is positioned competitively.

Technology edge

BON's key market differential is facilitated by a fast and highly functional webstore design. Bob employs a team of 9 IT developers to ensure that he maintains this cutting edge. This is a key advantage which we feel will be progressively realised as they continuously upgrade the user experience going forward.

BON has made rapid strides with its highly focused specialist model and plans for this to continue at the same rapid pace. Bob is targetting $100m by 2011…even a supreme optimist like me will be impressed, but not surprised if he pulls it off.

When we discussed key measures of the BON business Average Order Value and customer service reliability were paramount in Bob's mind. They track execution from acknowledgement to dispatch to delivery keeping customer informed at each stage. At the webstore browsers can see straight away the 5 Star Customer Rating Service continuously updated rates BON an impressive 4.8/5.

***Manufacturers pay attention…tap into your new brand champion, but make sure your end user marketing message resonates and captures the imagination of users. Too many ads fail to entice, engage or are simply not memorable…the important link from airport poster ad to web browsing.

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The inside story on the
BREAKTHROUGH UK Marketer of 2008

Eco-Champion Commercial

A living laboratory of eco-productivity

16 July 08

Last week we travelled to meet the #1 brother and sister business partnership in the UK OP industry, Arthur Hindmarch and Simone Mann at the burgeoning superdealer Commercial Group of Cheltenham in beautiful Gloucestershire.

Commercial Group won the BREAKTHROUGH UK Marketer of the Year Award for 2008 and the following is an updated profile on the progress of the UK's best practice example of an office productivity dealer in action.

About 10 years ago, Dudley Stationery/US Office Products met with the  Commercial  team with a view to a takeover. Their clumsy approach proved to be the inspiration that drove the partnership, Arthur, Simone and technology chief Alastair Adams to create the UK's leading and most progressive office productivity dealer.

Goal: The complete office productivity solution'

Commercial started business about 18 years ago and focused primarily on direct telephone stationery sales in the south west midlands region. The Dudley approach caused the inexperienced team to check out what it would take to build a Dudley equivalent themselves. They studied the OP market hard and set about creating a new model in an intelligent way. They questioned all the basic tenets and called upon all the experience help available to them. Arthur's father Michael provided invaluable help during this phase drawing on his extensive knowledge and stationery dealer experience.

They decided early on that providing  'the complete office productivity solution' was the ultimate goal and set about achieving this step by step. Early on in the planning stages it was decided that Simone, the ex-Olympic standard backstroke swimmer, would lead the development of the office supplies division.

Building on a foundation of SMB/SME (10-500 employees) customers serviced by outbound teleservice Simone started to look seriously at how to win contract stationery business. One major block was their heavy dependence on the use of wholesalers. How could they compete buying at wholesale prices?

Stockless stars

Commercial's main wholesaler at the time was Kingfield, so they consulted with the then chief Alan Hickman about how to tackle the contract stationery market together."We decided to compete aggressively, share cost information, establish the winning market price and share the margin…a true partnership approach" explained Arthur.

"It was all new business for Commercial and Kingfield (hereafter referred to as Vow) so there was little to be lost and much experience and knowledge to be gained. We developed better presentation methods, slick matrix pricing models, improved supplies management systems and custom reporting. We were on a steep learning curve." stated Simone.

"We then set about streamlining and automating logistics. We sub-contracted the stocking and warehousing to Vow. Vow deliver to our warehouse in Cheltenham or direct to our clients. When they deliver on our behalf the vans, the drivers and the delivery documentation take on the Commercial brand image," said Simone.

We carry minimal stock and have involved Vow as our partners in all aspects of our growth and development. This has created a number of innovations which has enabled Vow to introduce new services to their dealer network e.g PACT contract pricing, the Rapide direct delivery service and the OPIPS internet solution.

Commercial tops £25M ($50M) in sales

Commercial has grown rapidly over recent years and now services 300 'contract' clients on a national basis plus 1000 SME customers. Office supplies sales have grown rapidly to £19M. What is more the stockless model has boosted productivity to £217,000 ($435,000) per employee. Total group sales are now £25M ($50M)  with 75% of orders processed online further boosting productivity performance.

"Simone has done a terrific job in driving the office supplies division to new heights each year. Our excellent service and deep relationships with our contract system clients means that we can reach beyond the buyer to introduce new ideas and services which help their executives focus productively. We conduct regular business reviews with customers which allows freer communications and trust which proves invaluable when defending attacks from the power channel players", enthused Arthur.

Bluecare monitoring

Arthur himself, a true entrepreneur like his father, also excels in the sporting life and is a keen water-skier. Arthur focuses on innovation and development projects, helping Simone to improve the Vow service model and establishing the business interiors service currently a modest £750,000 business. "Simone is the real sales and marketing champion" says Arthur, "I focus on the investments going forward".

Commercial's office technology and servicing division was established 18 years ago under the leadership of director, Alastair Adams. The division is now a £6M business including Sharp copiers, Citrix and Appsense technology solutions.

A new feature which really sets Commercial apart from most office dealers is their network solutions and technology monitoring service.

The new control centre provides a technology monitoring service branded Bluecare. Here systems installations made by Commercial plus many more customers own systems are continuously checked to avoid downtime, identify faults together with remotely controlled remedial action. A true innovation which has enhanced customer's confidence in Commercial way beyond the supply of paperclips.

The living laboratory of eco-productivity

Commercial provides  a real insight into the future model of an office productivity dealer…the PROP (Provider of Office Productivity – full details in Office Megatrends 2008). The investment in smart offices, fitness and refreshment areas, up to the minute business interior environments and of course the "space-age" Bluecare control centre (see below) make Commercial a living laboratory of office productivity.

In February 2007 the company embarked on an ambitious three-year plan to reduce its total annual emissions of 1,078 tonnes of greenhouse gases by 75%. Accomplishing that means tackling its fleet of 54 company cars, 12 vans and 13 grey-fleet vehicles. Including commuting mileage, transport accounted for an astonishing 89% of Commercial Group's emissions. The Commercial  fleet was switched to run on waste vegetable oilbased biodiesel - 'it's not an agrofuel, but made from products that would have been destined for landfill,' Simone adds - and the company installed a bunkered fuelling station at its Cheltenham headquarters which is supplied with locally sourced biodiesel.

The group is aiming to cut over 700 tonnes of CO2 emissions from its fleet operations by 2010 and one year following its green fleet review,
'We have invested to do this. New vehicles and facilities cost money. But I believe that within the three-year programme we will see our investment back with a profit. I believe we will see savings to the tune of around £50,000 per annum' stated Simone.
Open House
All customers are encouraged to visit and experience the wonderful hospitality and enjoy an insight into how offices will look going forward. The people are buzzing in an open environment as Arthur proudly shows visitors around…pausing to ask pointed questions and introduce everybody.

One thing visiting customers won't see is office supplies stock…apart from a couple of pallets of paper there is none…a far cry from the stocking imperative of yesteryear when customers were taken round boring warehouses to see stock on shelves. Commercial introduces customers to the people… the real service providers…the living solution not the process.

Yes, Commercial is an exceptional example of tomorrow's dealer...a mini-model version version to match strides with the trailblazing WBMason in the USA (see previous profile).

peter@proficiencyindex.com

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Sargent Simplicity

Fascinating interview with the
OP industry's most admired CEO

19 June 08

Last Thursday, I was privileged to visit the chief of the OP world's most admired reseller…Ron Sargent of Staples. My sense of timing was immaculate and coincidental. The day before Staples had inked the deal to acquire Corporate Express for $4.8Bn (inc debt).

The new combo will bring sales in 2008 to around $28Bn…$16Bn in delivery, making the 'retailer' tag the minority share of sales for the first time. My purpose was to enquire about his philosophies, his mantra, the driving forces, the current and future trends in what we both agreed is a fantastic marketplace.

A native of Fort Thomas, Kentucky, he was educated at Harvard and received an MBA in Business Administration.

Sargent is the son of a mechanic who ran his cars to reach 100,000 miles before changing. Out of respect to his father he purchased a Camry in 1993 and decided to run it for 200,000…today the mileage is rapidly approaching that mark at 190,000+ and Ron has a decision to make.

People…people…people

We discussed the Staples advantages in the marketplace today and moving forward:

First on the list was a fanatical focus on the customer.  Everything starts and ends with the customer. Considerable energy and research continues to be invested in understanding what they want…then gearing everything to achieve customer satisfaction.

The #1 KPI that Sargent monitors by store or by service location is the Customer Service Index or 'CSat report' which measures fulfilment, after service queries. "If CSat performance ratios are high, sales and profitability generally look after themselves" said Sargent.

Secondly, developing and nurturing talented people is crucial. "We have a great blend of youth and experience in the team. In fact, the top 50 executives in Staples have been with the company for an average of 12 of its 23 year history.

Prominent leaders like Mike Miles the COO, Joe Doody head of the delivery business, Jay Baitler the contract business chief, and  John Mahoney the CFO have all served as hands-on examples for over 12 years in what is a remarkably successful business.

We talked briefly about the turnaround in Europe and particularly the UK. As is his self critical nature, Sargent admitted that "we got it wrong". Up until last year, we struggled to make money and the OfficeWorld integration took much longer than planned.

Last year we took on Peter Birks to head up UK Retail, after he had departed Office Depot. The effect has been fantastic with double digit growth and major steps taken towards our 7.5%/sales profit goal.

Philosophy

Most leaders have philosophies that become guiding principles in determining success. Sargent's quickly stated that 'simplicity' and 'making it easy for customers to get what they want' light the way forward for Staples.

The 'That was easy' tagline has worked marvellously in communicating with customers and with employees. It is a classic line which captures the emotion of satisfied customers and provides a simple mission statement for employees. Brilliant, and something that creative agencies would do well to note, rather then the nebulous stuff they often come out with.

The "Easy" button which sits on customers desks and when pressed responds with a "That was easy" squawk has been a revelation. Over 3 million have been sold at $5 each, with the proceeds going to the Boys and Girls Clubs of the USA.

"Move forward 20 miles/day…keep making progress" that's our relentless mentality

The future is bright

We discussed the OP market and future trends.

Sargent believed there would be more consolidation in the industry at manufacturer and distribution level. The takeover of CXP from 1 July would mean that Staples would be closing on $30Bn in sales during 2009, twice the level of Office Depot, and given their downward spiral, almost 4x OfficeMax's sales.

Sargent wouldn't comment on my prediction that he should follow up with the acquisition of Lyreco, now that it was clear they were for sale with a $2.5Bn price tag. I still feel it will happen though, once they have digested CXP in Europe.

The second trend that Staples was majoring was the development of own brand. This had been a major success story with sales in excess of 30%/total mix. Not only were Staples covering the everyday brands, they were investing heavily in sub premium brands, like the new 'M' brand. This range will cover stylish stationery, filing accessories and luggage.

In answer to the inevitable question of conflict and competition with its major suppliers, Sargent was clear: "We will always support innovative manufacturers…we will not squeeze space in favour of our own brands… we monitor sales returns/square foot on merchandising space and discuss solutions with our manufacturing partners" were just some of his responses.

Mastering Information technology was Sargent's third trend. I took this as technology in embracing ecommerce developments and product developments in terms of gaining productivity in the office. Certainly Staples position as the #2 internet site behind Amazon has proven Staples ability to keep pace with ease of use IT with their webstore which in the delivery business represented 77% of volume in Q1'08 or $5.6Bn in total in 2007.

In addition we reported on Staples investment in warehouse handling robots to improve speed and accuracy in order processing.

In answer to my question about the future of the independent dealer Sargent was positive. He related the story about the widespread view in the 90's that dealers were dead or dying. Yes there was a fall from 14000 dealers in the USA in the 80's down to 5000 in the late 90's. Today of course, that number has increased slightly and dealers are showing a renewed energy to grow. Sargent added a crucial rider: "Dealers will thrive if they embrace ecommerce and open webstores".

Jack Miller at Quill the US mail order house, who were acquired in the early 2000's was a tremendous force too. Jack has now retired, but his extended family lives on in Quill, now Staples most profitable business. Also in mail order of course, Sargent fully appreciated the genius of Irwin Helford at Viking.

In the manufacturing community, Sargent was very respectful of the innovators and gave special mention to Jamie Fellowes at Fellowes…Mr. Integrity and the legendary Jess Baum at Avery Dennison.

Outside influences include Jim Collins author of best sellers 'Built to Last' and motre recently 'Good to Great'.

We got Soul
Another example os Staples innovation and pulling things together into a cohesive whole is the Soul programme. "It reflects our commitment to corporate responsibility. It's a holistic approach to business that recognizes the close connection between our financial success and our desire to make a positive impact on our associates, communities, and the planet by joining together the following areas: diversity, the environment, our community, and ethics. It's how we do business—that's Staples Soul." described Sargent.

These eco and ethical initiatives are trail blazing and best encapsulated in their commitment to this programme.

CRM the key to success

One of main features of Sargent's quarterly webcasts is his reference to "share of wallet" when referring to progress with the delivery businesses. He recalled the early days when customer relationship management (CRM) was introduced as a means of driving new category sales with existing accounts.

Tom Stemberg and he were discussing ways of communicating more effectively with B2B customers and decided the most effective means was via databased marketing...building profiles, identifying gaps by determining potential spends in each product category.

"Most definitely one of the keys to Staples success" enthused Sargent. What gets measured gets done!

We discussed integration options…again this was a topic under priority review, and therefore "no comment". We have expressed the view that apart from CXP's huge presence in Australia and New Zealand, the smart move would be to overlay the highly respected Staples brand asap in Europe and USA.
Boomtown Boston