gavin ward big interview

OPI Magazine | April 201614

Big Interview | Gavin Ward

OPI speaks to Gavin Ward about dealers in Oz, the need for scale and for embracing technology,

and – of course – Staples and its future…

AUSTRALIAN dealer group Office Brands

has been around for about 15 years, but it’s seen plenty of upheaval in that time, much of it to do with restructuring and branding.

Overall, it’s been a relatively steady four-year reign of current CEO Gavin Ward. But beneath the surface of that stability lies a huge amount of effort and investment – time and cost-wise – by Ward and his team to make sure the group’s dealer members are as prepared as they can be for the changes that are happening – and will continue to happen – in the business supplies sector.

The good news is that many are doing very well indeed and the opportunities outnumber the challenges for those that are in tune with market developments.

Following the Yellow Brick Road

by Heike [email protected]

www.opi.net | OPI Magazine 15

Office Brands | Big Interview

the overall Office Brands umbrella, with a combined revenue of around A$350 million (US$263 million). Administratively, we have 21 staff here in Sydney.

As a general rule, the distribution of members across the country matches the overall population distribution, so we’re well covered across Australia.

More than 90% of our dealers are commercial B2B operators. They have a store, but it’s a warehouse-type setup and not really a retail proposition. It’s a little different in the regions where there’s a bit of retail, but the trend is certainly away from retail, particularly in metropolitan areas, and towards B2B.

OPI: Can you explain a bit more about your tiered membership? GW: We operate two premium brands which are higher-value, larger service level brands. So we have almost 100 dealers operating under the Office National brand and a further 30 members operating under the Office Products Depot brand which we license out of New Zealand. In another tier, we have the O-Net group, about 30 smaller stores that are unbranded. Dealers in that group typically have revenues under A$1 million.

Then in October of last year, we acquired the Office Power group and we support 30 members under that brand, also predominantly in the A$500,000-A$1 million turnover range. Lastly, we also license our brand to Africa, so there is Office National Africa, but it’s an independent body.

Our branded members receive the most comprehensive range of services and get the largest amount of support from the group. That is reflected in their annual fees.

“There was a fear back then that Corporate

Express Australia

was going to come into the market

and wipe out the dealer

community. The solution: band together

and get some scale”

OPI: You’ve been with Office Brands for almost four years now – what brought you to an office products dealer group?GW: Going back a fair way, I worked for a Japanese firm called Akai Electronics for ten years, running its Australian and New Zealand operation. I then got involved in a company called Leading Edge, which was a retail-based buying group and franchise operation for home electronics products.

After doing that for 22 years and growing 11 different buying group businesses under Leading Edge, I felt I needed a change. So I got out, took some time off and learned to fly a plane before deciding to get back into something. I contacted Office Brands to talk about potentially doing some consultancy work for them. They ultimately said they didn’t need any consultancy work, but they did need a new CEO as Andrew Boath had left a year earlier and did I want to apply. I did and here I am still, almost four years later.

So while the office products industry was pretty new to me at the time, the concept of trying to bring together large groups of members to develop the tools they need to succeed is pretty common to what I’ve been doing over the years.

OPI: We last talked to your predecessor Andrew Boath back in 2009, two years before he left the group, and following some major restructuring and rebranding. Could you give me a quick rundown of Office Brands and how it has evolved?GW: Sure. As you know, the group was formed about 15 years ago and it was the collation of three groups. One was called Office Force, which had 37 members; there was Office Network with 63 members; and then we had the business machines business under the APT brand with 28 dealers. All these were brought together to form Office National.

The principal objective of the combined group at that time was clear: it needed to achieve scale, partially to be able to compete with the likes of Corporate Express [now Staples] when it came to Australia, and to cost-effectively deliver the kind of services that customers were considering as base-level support, like large comprehensive catalogues and, ultimately, websites.

There was a fear back then that Corporate Express Australia was going to come into the market and wipe out the dealer community. The solution: band together and get some scale. That principle is still very valid today.

The group make-up of what is now Office Brands has changed substantially over the years. We’ve got 185 members under

OPI Magazine | April 201616

Big Interview | Gavin Ward

OPI: Before we talk about dealer performance specifically, how would you say the industry has changed in Australia over the past few years?GW: I think the sector globally is changing very rapidly. We know there’s a systemic decline in the industry of around 3-7% depending on who you talk to and which country you’re in. A lot of that is centred around core stationery. By example, there has been a notable drop-off in filing products and associated merchandise. As such, the need to develop diverse products and embrace categories like furniture, fit-outs, education, workwear, and occupational health and safety is absolutely essential.

Janitorial and kitchen supplies used to be ‘nice to haves’ and dealers have done reasonably well with these over many years, but now they are another essential component – you have to get into these new categories.

OPI: So overall, how is Office Brands doing as a group right now? GW: That’s quite a tricky one to answer. We have been fortunate to have had like-for-like growth over the past two years of around 4%.

It’s common to get industry commentators who say: “Well, we as a group are up 1%” or “We as a group are down 2%”. While that might be true overall, it suggests that the industry is relatively stable, but under closer examination the picture is very different.

I would say that just under 50% of our members have really embraced the changes we’re facing and have taken on the challenges, expanding their furniture business, getting into education, janitorial and kitchen, etc. The majority of these members are experiencing growth. We have quite a few dealers strongly up – 10%, 15% or even 20%.

At the other end of the spectrum, we have dealers that are having difficulty embracing new technologies or categories and they can be down as much as 15% and 20%. This takes away their ability to compete, they’re struggling to get back on top of their business and they find it difficult to have the time and money to invest in these growth areas. Then, in the middle somewhere, with flattish sales and coping but not excelling, are the remaining dealers which account for about 40% of our members.

Of course, there are always local issues which also take effect, but these merchandise challenges are core to all dealers.

It’s this investing in the future of your business and helping dealers keep up with the constant innovation, especially in technology terms, that has been one of the most compelling tasks over the past four years. We need to drive the change that’s happening and provide the tools – and products – to our members to be able to create growth in their markets, with minimum effort and investment so those aren’t barriers for them.

OPI: How much of a headache has the Australian economy, and in particular the value of the dollar, been for your dealers? GW: Clearly, we’ve been in a market of consistent price increases for the past 2-3 years, particularly in the past 18 months or so when the currency has declined virtually 30%. I think the majority of customers accept that prices are going to have to go up if the currency changes by 30%.

I’m extremely grateful that we took the time and effort to develop our pricing matrix tool which prices all our products, scans websites, takes in competitive data, etc. It shows us the margins that we’re making and, as all these price increases come through, it can help us by suggesting new ones on the basis of structured and dynamic parameters. At all times, we can run models against actual sales and unit numbers to ensure we are maintaining and growing margin for our members.

If we didn’t have that kind of facility, it would be much more difficult to manage the business and to make sure that we’re not negatively affecting our members.

OPI: You reported some excellent rebates at your dealer expo last October, I believe. GW: I did. I’m not sure I should share the total quantum of rebates, but what I can say is that our annual payments to members have grown over the past four years by about A$1 million.

That’s very encouraging from two points of view: of course, it’s nice for members to get bigger cheques, but what it has also meant

“We need to drive the

change that’s happening

and provide the tools – and

products – to our members to be able to

create growth in their

markets”



is more members are doing more compliant sales with the suppliers. We’re really trying to match our members’ businesses better and are dealing with more categories that are important to them.

For example, we’re up 35% in furniture, partly because we’re dealing with more suppliers. It’s the same with education: more revenues, more new suppliers, more rebates. And we are expecting the rebate pool to grow again this year, driving more support back to our preferred suppliers.

OPI: Who are your ‘rivals’?GW: We’re a group of local operators and a lot of our market is within geo zones close to our members. Our core target customers are small businesses with 5-150 white-collar workers – they make up more than 90% of our entire business. The other operators that are playing in this market are Office Choice and the ASA group, so they form our most direct competition.

But there’s no doubt that the dominant player in Australia is Officeworks. In fact, if I look at what’s happening in Europe and the US I think Officeworks is probably the leading stationery retailer in the world right now.

They absolutely dominate the B2C and the micro market, ie businesses with fewer than five employees. But they are mostly retail-focused and also do a fair bit online – about 14% of total turnover – so we’re not clashing on many occasions.

They haven’t typically been very strong at the SME account market, however, nor have Staples, OfficeMax or Lyreco in Australia. Lyreco is virtually a non-entity here, and OfficeMax and Staples – as well as Complete Office Solutions – are predominantly focused on the corporate sector.

These players have the scale and the systems to go for that very high-end business. And they seem happy to sell at well below cost price on a basket of goods during the tender process and then work over the next 2-3 years to claw that money back.

All of them – including Officeworks – are looking at the SME market and have been doing that for the past 18 months or so. The reality is that they haven’t got the personal service, the commitment and the relationships that our members have with their customers – that is the key difference. Their model just doesn’t work as well in the SME environment.

That’s not to say that they will never get it right, but at the moment it’s not working well for them and when we come across an Officeworks customer, it will be one of the easiest to convert to one of our dealers.

But they’re such a pull-through organisation: they promote really well, they’re excellent content marketers and they’ve got three key strong messages – price, range and service.

Our smartest members, with the help of the services we provide to them, can compete with all of that. So Officeworks is not only one of our biggest competitors, it’s also our biggest opportunity. We just need to get a foot in the door and talk to their customers.

OPI: Are you also after the corporate business of the big players ? GW: We secured inclusion on the Queensland Government Local Buy panel in 2013 and we’ve recently secured a position on the New South Wales Government secondary furniture panel that is now starting to generate regular business. Our Northern Territory (NT) members also picked up a position on the NT Government panel. So, we are picking up elements, but compared to our overall business, it’s peripheral and certainly not core.

Of course, as much as the likes of Staples and ‘Max are pushing down, we’re pushing up. But neither party is particularly good at infringing on each other’s territories. Let’s say it’s a growth opportunity for us.

OPI: Talking about Staples and ‘Max, the favourite subject for many months now has been will they or won’t they merge? What’s your opinion? The deal has already been approved in Australia, of course. GW: There’s no doubt that the topic has caused some instability at Staples here in Australia. But I believe Staples has actually turned a bit of a corner and is performing better than it has over the past five years.

OfficeMax’s performance has been more problematic and we’ve picked up a lot of business from them, particularly in

“Officeworks is not only one of our

biggest competitors,

it’s also our biggest

opportunity”



the education category where they have historically been very strong. This was due in part to ‘Max restructuring its sales force, taking it off the road and putting it into call centres.

Any change creates opportunities, so if the merger went ahead I’m sure we would gain business out of the process. How long for? I don’t know. And it won’t substantially change the competition in our sector. If anything, it creates another opportunity because with one less competitor in the public tender business, we could feasibly be another contender to make up a competitive panel.

OPI: How difficult is it to run a dealer group in a country as big as Australia?GW: It’s problematic. Firstly, our members in the more regional areas need to carry more stock because customers by and large want the same service wherever they are. These members are also using the same promotional tools than those in, say, metropolitan areas, and they want the products at the same price.

Getting deliveries to remote locations is expensive and can be a loss-making exercise.

OPI: Apart from GNS, which mainly supports newsagents, there are no real nationwide wholesalers in the country, are there? That’s always been an Australian peculiarity. GW: Yes, there’s GNS Wholesale Stationers which is also the predominant supplier to the Office Choice group.

Office Brands uses a network of regional wholesalers and they are an important part of our business. It would be very difficult for our members to survive and to provide a reasonable service without that wholesale support. We meet regularly with the independent wholesalers and share our marketing and strategic objectives.

OPI: You mentioned some kind of consolidated warehousing among your members a while ago? GW: We’re still looking at that. It could take the shape of a number of members in the Sydney area buying a warehouse and relinquishing their own facility, for example. These members would then effectively have sales offices, but operate out of a centralised operation with aggregated costs to give them better buying power, faster deliveries and basically all the scale that you need to make a warehouse work really efficiently. It’s a great idea in theory, but it definitely requires a lot of commitment.

Another way is for large dealer members to outsource part of their warehouses to

“Office Brands uses a network of regional

wholesalers and they are an important part of our business”

For more exclusive content from the interview, such as progress on new buying group collaboration OPANZ and Office Brands’ ongoing relationship with BPGI, please visit opi.net.

other members. We’ve got one dealer like that in Western Australia. It’s an extra business for them whereby they do all deliveries, invoicing, etc for other members.

It works very well for them, but it’s a completely different mindset for those members that now don’t have a warehouse anymore, have far fewer employees and different systems in place, etc.

OPI: What does the rest of this year hold for Office Brands? GW: Well, we’ve spent the past 18 months ‘re-engineering’ the group, putting structures in place with technology solutions like the price matrix, endless aisle CRM, automated marketing, and so on. This year is about settling down and making sure that we deliver best practice within all that technology.

If I can say to you in 12 months’ time that we are the best practice provider in digital marketing, I will be a really happy man.

OPI: Lastly, how do you see the future for independent dealers in Australasia?GW: Consolidation is inevitable – among our members as well as independents worldwide. Ramping up scale and maintaining efficiency so that we’re relevant to suppliers is vital. At the same time, we need to allow them to maintain their profitability because suppliers can only support us in everything we’re doing from a healthy base.

If we can work together and create that scale, we can all be really important parts of the future business supplies community.

gavin ward big interview

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