The Great Office Supplies Caper

It's difficult to escape the general sense of gloom in the office products and supplies industry. We've entered a period of great change that's creating uncertainty which, in turn, is unsettling even the largest players, and further contributing to the general malaise. In this article I'm going to explore some of the failings of the industry to embrace the digital environment we now operate in, and how important addressing these failings are, in order to improve its future outlook.

I sense there's a feeling harbored by the manufacturers and distributors, that the smaller independent resellers kind of deserve the difficulties they're experiencing, believing they [the resellers] are solely responsible for their situation and, in failing to keep up with the changing requirements of the market, have no one to blame for their difficulties but themselves.

In some respects this is true. Every business, large or small, has to accept responsibility for its own performance. However, the success of the three components of the value chain in the office products and supplies industry, (the manufacturer, the distributor, and the reseller), are inter-dependent. In other words, in order for the manufacturers and distributors to be successful, they must rely on the success of the resellers as, the more successful the resellers are, then the more successful the manufacturers and distributors will eventually be.

The irony is that the manufacturers and distributors have failed themselves and, in failing themselves, have failed the resellers!

In failing to do more to position their independent resellers for success in the modern digital environment, the foundation for my argument is established. The manufacturers, the distributors, and the buying groups, in failing to digitize their own businesses, are collectively more responsible for the challenging conditions faced by the resellers today, than the individual resellers themselves are.

The History:

1. There's a mature business model in place revolving around manufacturers selling to resellers who are big enough to buy direct, while selling in parallel to national wholesalers (distributors) such as Essendant & SP Richards, in order to enable smaller resellers competitive access to smaller order quantities from nearby distribution centers.
2. Financially, there's been an established system of volume based pricing, volume based back-end rebates, marketing development funds, etc. that provide incentives for resellers to stay loyal to the cross section of products made available from the Tier-1 manufacturers and distributors.
3. The Buying Groups, such as BTA, Tri-Mega, IBPI, & Office Partners (collectively with 1,700 members of so), have negotiated price lists from manufacturers and distributors for their individual members to take advantage of.

This mature system is the core of the problem. It's been in place for 30 years or more, remaining substantially unchanged while the market itself has radically changed. The world has transitioned from analog to digital and the office products industry has been left behind leaving resellers unable to compete effectively.

Resellers have remained analog businesses in large part because the manufacturers and the distributors have remained analog businesses. In failing to digitize, and in sticking with increasingly obsolete elements of their business model, the manufacturers and distributors have failed their resellers.

The volume rebates, market development funds, etc. have been used to prop up margins rather than invested in helping transform resellers from their analog platforms to digital. Now that business volumes are decreasing, everyone in this value chain is, in fact, losing.

If you invest in a brick and mortar store, you need visitors to come into the store. They need to like what they see, they need to like you, and, for you to be successful, they need to buy from you. A website is no different, if there's no strategy to develop traffic, then why even bother to go to the time and expense of putting one up? 

The Evidence:

There are a number of compelling performance metrics I'm presenting in the following set of tables to support my argument that the industry leadership (manufacturers, distributors and buying groups) has failed to provide their resellers with the necessary support for accomplishing digital transformations. The metrics I'm highlighting include web traffic, web site quality, domain authority, and backlinks.

Before I explore all the aftermarket shortcomings, take a look at Table 1 and Table 2 and the examples they contain demonstrating how the job should be done.

These blue chip global enterprises have leveraged each of the important metrics into websites that successfully attract traffic. They have strong domain authority (95/100), their website quality grades well at 77/100, they have large numbers of high-quality backlinks and, they all have high web traffic rankings. (Note, lower numbers are better - IBM with a global rank of 610 means there are only 609 websites in the world that have more traffic than IBM).

The two primary resellers of office products have also done a good job, developing strong domain authority (86/100), a decent website grade (60/100) and large numbers of high-quality backlinks. They are also both highly ranked in terms of daily traffic volumes.

Examples of the industry shortcomings are shown in the following set of six additional tables.

Look at the aftermarket manufacturing industry listed in Table 3. Although they've had plenty of time (average domain age 13 years) to work on their website strategies and performance, based on these metrics, their accomplishments are poor. With an average domain authority of 32/100, a website quality grade of 52/100, no backlinks to speak of, and minimal traffic volumes, there's no evidence of a successful leadership strategy for their resellers to follow.

The Tier-1 IT Distributors listed in Table 4, have decent domain authority averaging 62/100, a below average website quality grade of 51/100 and, much lower volumes of backlinks than should be expected of enterprises of this stature. Ingram and Tech Data have decent traffic volumes with the average for the group being dragged down by the poor performance of Synnex.

The Tier-1 Office Product distributors in Table 5 have very poor domain authority (34/100), average website quality grades of 57/100, no backlinks to speak of, and modest traffic volumes.

As a group, the Tier-2 Office Supplies distributors listed in Table 6 fail on all of the key performance indicators, inadequate domain authority (18/100), poor quality sites, 34/100, no backlinks, and virtually no web traffic.

The Buying Groups shown in Table 7 also fail on each of the metrics with the lowest quality websites and the weakest traffic numbers beside those of the Tier-2 distributors.

Finally, the media outlets, the "youngest" group (in terms of domain age) of the industry components I've analyzed but, nevertheless still with an average age of 9 years. Unfortunately, they have very low domain authority averaging 28/100, poor website quality with an average grade of 37/100, no backlinks and very weak traffic volumes.

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Conclusions:

With the average domain "age" of these six aftermarket categories shown in Tables 2 - 8 being in the region of 15 years, there's been plenty of time for each of these enterprises to achieve the following minimum performance standards:

1. Domain Authority - 55
2. Website Quality Grade - 70
3. Backlinks - 750
4. Global Traffic Rank - 250,000

In failing to achieve these minimum standards, the industry leadership has failed to build a model for its own success and, in so doing, has failed to provide an example for the resellers to follow.

Had the industry leaders achieved these minimum standards and, had they [for example] adjusted their incentive programs and provided tools to help motivate and educate their resellers to achieve similar performance standards, then we would be looking at a very different industry profile to the one we currently see.

1. Consider for a moment these twenty-nine aftermarket companies [listed in Tables 2 - 8] with 750 backlinks each and forming an aggregated total of nearly 22,000 compared to the less than 5,000 that exist today. These backlinks would go a long way toward improving the mission-critical domain authority rankings that are vitally important for decent search result rankings.
2. Furthermore, let's assume for a moment, that a global traffic ranking of 250,000 equates to 5,000 unique monthly visitors. This would aggregate to monthly traffic volume of 145,000 visitors compared to less than 10,000 taking place today.
3. By restructuring manufacturer rebates and designing them [for example] to incentivize resellers to develop web traffic, backlinks, and relevant social audiences, then increased business volume would have followed. Unfortunately, as shown in the tables above, none of the aftermarket industry leadership appears to know how to accomplish this for themselves, let alone their customers.
4. Finally, just imagine for a moment, if 2,000 resellers had accomplished similar performance metrics as the targets I've shown! We'd now have 1.5 million industry backlinks and 10 million unique monthly visits to reseller sites. Just imagine all these sites populated with high-quality educational content, fine tuned to provide answers to the 80% of buyers who research and qualify potential vendors (i.e. resellers) before the reseller even heard of them. As I've said before, this kind of aggregated scale can move the needle for the collective benefit of the aftermarket industry and its consumers. For sure, the OEM's and Tier-1 resellers would be having to fight a lot harder to preserve their currently dominant market shares.

Unfortunately, it's too much to expect of 2,000 smaller independent resellers to individually try and figure out how to achieve these performance parameters. If they were able, then they would have already done so. Unfortunately, most don't know where to start and, without strong initiatives from those with the resources to help them, they will continue to flounder in the obsolescence of the analog world.

If you missed my eight-part series on the aftermarket tipping point, please check out my new eBook, it's just published, it's FREE, and it contains a thorough examination of the office supplies industry and a path to the $20 billion growth opportunity for independent resellers.