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Who’s My Competition in the Office Products Channel?

Who’s My Competition in the Office Products Channel?. Presented by David J Pydlek Integrated Supply Consultants LLC. Why Develop a Business Products Vertical Market?. Business products is currently a $270B industry!

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Who’s My Competition in the Office Products Channel?

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  1. Who’s My Competition in the Office Products Channel? Presented by David J Pydlek Integrated Supply Consultants LLC

  2. Why Develop a Business Products Vertical Market? • Business products is currently a $270B industry! • All combined power channel entities (OfficeMax, Depot, Staples, CorpEx) constitute 16% ($43.8B of approximate $270B) of market share in North America • It’s still a fragmented industry • Mass merchants • Drug & food retail chains • Government • Integrated suppliers • Manufacturers direct • E-Commerce distributors

  3. Office Products Channel: Market Facts • *The fastest growing on-line product category in sales was office products • $10.3B on-line OP sales in 2005 (15% of total sales) • Total sales among top 500 was $68.9B • The category accounts for 2.2% merchants among top 500 on-line retailers • Top 500 internet retailers experience 60% sales growth on-line in this category! *Source: Internet Retailer Top 500 Guide

  4. OP Channel Fast Facts • 2005 total office products industry sales estimated at $270B overall • Includes electronics • Retail portion estimated @ $205.9B • Projected growth of ~4-5% per year for the next 5 years • *Private label is growing aggressively • >30% of sales are targets for all players *Source:The Stockwell Report

  5. *Source: Company reports and analysts projections; includes international sales ^Actually saw a overall sales decline due to divestiture of paper businesses

  6. “Consumers have responded to the new technology-driven service, thrusting office supplies retailers Office Depot Inc.; Quill’s parent, Staples Inc.; OfficeMax Inc. and CDW Corp. into the top 10 largest online retailers, according to the 2006 edition of the Internet Retailer Top 500 Guide to Retail Web Sites.” *Fast OP Channel Facts: Internet Retailer *Internet Retailer

  7. “Indeed, fulfillment has emerged for multi-channel retailers in general as one of the keys to overall success. In a study of retail fulfillment practices last year by Aberdeen Group, more than 70% of retailers said they considered it “very or extremely important” to meet customer expectations for multi-channel purchasing and delivery options. But while order fulfillment has become front and center among the concerns of many retailers—a far cry from the early days of the Internet—its cost for many merchants is rising. Aberdeen found that 46% of retailers expect order fulfillment costs to rise over the next two years, 29% expect no change and only 25% expect their fulfillment costs to decrease.” *Quotes from Internet Retailer *Internet Retailer

  8. *3 year Trends Among Big 3 *Source: Company reports, analyst’s estimates and DSN Retailing Today research

  9. *Op Private Label Trends *Source: Company reports; Industry Analysis

  10. *Burhmann/ CorpEx Facts • Smallest of the big players • $4.4B 2005 NA sales • 20.4% overall sales growth • 9% organic growth • 3 Divisions: Australia, North America, Europe • No retail • Corporate Express private label represents 25% of total sales *Source: 2005 annual report

  11. Corporate Express NA (cont’d) • 68% of sales comes through E-Way • “OneShopExpress” • One order, one invoice, one payment over multiple product lines • 40,000 OneShopExpress orders processed in 2005 • Biggest threat to T.O.P.S. single supply chain solution (still not as comprehensive) • *CorpEx: 18.3 Brand Power Rating (only one to decrease over last 3 consecutive years as reported by CoreBrand) • Use salesforce.com to manage sales team

  12. *Office Depot Facts • North American Business Solutions Division produces 30% of overall sales • 46% is retail • $4.2B internet sales (#2 overall) • 21% of total revenue • ~30% GP • 25.6% operating expenses • $273M net earnings *2005 annual report

  13. Office Depot (cont’d) • Viking mail order went away • Only in Europe • Private labels include Office Depot, Foray, Ativa, Christopher Lowell • *Brand power ratings are highest for OD @ 54.7% *Reported by CoreBrand

  14. Office Depot Websites • State-of-the art public Internet sites: • www.vikingop.com • www.officedepot.ca in Canada • www.techdepot.com • www.officetechcenter.com • www.janitation.com • www.computers4sure.com • www.solutions4sure.com • www.school.com • http://bsdnet.officedepot.com

  15. OfficeMax • Primary customer: Fortune 500 Companies • Contract segment represents $45.7M with 21.9 % GP • 9.4% increase • 19.7% operating costs • Same store retail sales flat • Store closings in unprofitable markets • * (#6 overall) • 29% of total US sales *source: 2005 annual report and Internet Retailer

  16. OfficeMax Facts (con’t) • *OfficeMax Brand Power Rating: 51.2 • OfficeMax Impress launched November 2006 • Re-branding of Document management solutions *Reported by CoreBrand

  17. *Staples Facts • #1 OP company • Projected 2006 $16.08B • 28.5%GP • North American Delivery = 3 business units • Staples Business Delivery • Quill • Staples National Advantage/ Staples Business Advantage • 11.3% 1 year sales growth • $3.8B online sales 2005 (#3 overall) • 24% of total sales • 27% increase over 2004 *source: 2005 annual report

  18. Staples Facts (cont’d) • StaplesLink is the B2B online ordering program • 70% of contract sales expected to come through StaplesLink.com B2B website ’06 • Use WebSphere Commerce version 5.4 • *Staples: 52.4 Brand Power Rating • Stock approximately 13,000 items *Reported by CoreBrand

  19. Key to Success: A True Integrated Purchase Order for all Services

  20. eQuantum Integrated PO

  21. Kramer-Smilko Integrated PO

  22. Focus for the Distributor Sales Team • You have an excellent single source, supply chain solution with your Forms & Print legacy system • Market proactively to your end user • Demo to your customer on their PC and save as Favorite • Highlight & market your private label • E.g. Innovera, Universal and Alera • Use stockless model and ride on fulfillment partner’s low operating costs to serve your customer • Market fulfillment excellence • Market the fact you sell the category as part of your service solution portfolio

  23. Conclusions & How to Compete? • Have an e-commerce solution • Have a viable private label to compete (e.g. Innovera, Universal) • Leverage low operating costs (assume distributor partner’s operating costs) • Don’t re-create the wheel and add operating costs • Brand your company (how do your customers know you?) • Market excellent fulfillment capabilities • Make the ordinary extraordinary • Margins are high enough to make money • Use a variable margin matrix

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