Print Solutions Magazine

Pens, pencils, paper clips and note pads aren’t the first products most print distributors think about when looking to diversify. “The perception of office products is that they’re low margin and not worth going after,” says Dave Pydlek, channel manager for forms and print at United Stationers Inc., Des Plaines, Ill. “In fact, distributors can enjoy margins in the low 20s to upper 30s. There’s a learning curve, though, because most salespeople need to sell a process and not a product.”

In other words, distributors acting as single-source suppliers stand to gain the most business from their clients. United Stationers and Reno, Nev.-based software supplier e-Quantum have made it easier for distributors to do just that. The companies’ supply-chain partnership allows distributors to process orders seamlessly through an e-commerce platform accessed by end users. “There really is no focus on paper clips, etc.,” Pydlek says. “Those are product code numbers that go through an electronic model. It’s that combined with everything else bought from the distributor that truly makes it valuable to the end user.”

e-Quantum offers an e-commerce platform through its Quantum Net (Q-Net) software system. Q-Net allows distributors to sell products to end users through a custom web-based portal. When end users log onto the web site to place an order, they can choose from different categories of products, such as forms, promotional products, business cards and banners. The partnership between e-Quantum and United Stationers led to the addition of an office products category. When an end user buys office products from participating distributors, the order is sent to United Stationers, which drop ships products directly to the customer with the distributor’s label. In the past, distributors often received the client’s order and then manually reentered it as a purchase order to the vendor.

End users and distributors are pressured to streamline operations, reduce costs and improve efficiency. To end users, this means reducing the number of vendors with whom they work. For distributors, it means offering a complete set of business print, promotional and office product solutions while still turning a profit. “In our industry, you’ve got a transaction-intensive product that really lends itself to an integrated model,” Pydlek says. “If you tried to sell pens and pencils, inks and toners, by themselves and not through an electronic model, it would be hard to make any money.”

An e-commerce solution not only makes selling office product profitable, it increases distributors’ value to their customers, which makes it easier to retain the account. “What we’re trying to do is allow distributors to have strong technology relationships with their client base,” says Ross Barker, CEO of e-Quantum. “That will allow them to be the power broker in their client bases, as opposed to their competition.”

Golden Pacific Systems serves as an example of how businesses can benefit from supply-chain partnerships. Before e-Quantum offered office products as a category to be sold through its e-commerce system, the Petaluma, Calif.-based distributorship used a separate web-based interface to collect orders. Staff then manually re-entered the orders into their back-end software system. The integration with e-Quantum and United Stationers’ technology eliminated the extra step. As a result, Golden Pacific Systems saved time and reduced the cost of handling office product orders. “If we didn’t have an internet solution, we would not [sell office products],” says Cal Popken, CFC, principal at Golden Pacific Systems. “I think it’s a given that you must have an internet presence to be in that industry.”

The primary advantage to selling office products through an e-commerce site is more business with minimal investment. Golden Pacific Systems has acquired new accounts and increased sales with existing customers by offering the technology. “The greatest value of this solution is that one can grow without adding personnel,” Popken says.

Popken admits that there’s a learning curve associated with selling office products: “The model that United Stationers has set up is that they have a market basket of probably 20 to 30 items that everybody uses. You might actually take a loss on those products in order to be competitive. The concept is that the customer will order many other items than those common 20 and that overall you should achieve a margin in the 25 to 30 percent range.”

As the print industry continues to evolve, successful companies in the independent segment must cooperate with members of the supply chain. Distributors who don’t form relationships with vendors, and vendors without ties to suppliers will be at a disadvantage in the future. “The major thing in our industry is that we’re independent, so we need to ensure that we can be as efficient as any direct sources to which the client may go and offer our traditional strength—service,” Barker says.

Shared technology is one step toward adding value for end users. “When you look at what United Stationers is doing with office products in the forms management industry, they eliminate redundancy in the supply chain,” Pydlek says. “That is, United Stationers is the stocking and distribution entity. The distributor is the sales and marketing organization, and in combination that provides a very effective and efficient supply chain.”

Andrew Brown is assistant editor at Print Solutions. Darin Painter is managing editor. Send email to bholt@printsolutionsmag.com.

Perhaps one of the most popular business structures for distributors is partnerships: Two sales reps leave a large direct-selling company and forge a path on their own. A husband and wife launch a small business out of their home; he handles sales, while she oversees the books. Some partnerships eventually incorporate, and others dissolve. But there are distinct advantages—and disadvantages—to partnerships.

A partnership is defined as “an association of two or more persons to carry on as co-owners in a business for profit” by the Uniform Partnership Act. (The UPA, originally developed in 1914, has been revised numerous times.) There are two main types of business partnerships: general partnerships and limited partnerships. The primary benefit of a general partnership is that you have someone with whom to share the business burden. In most cases, general partnerships cost less and require less paperwork to set up than a corporation. You may need to file a partnership certificate and obtain a business license, although requirements vary by state within different localities. Experts encourage partners to draft a formal partnership agreement, although it’s not required by law. A written contract dictates each partner’s rights and responsibilities. Without a contract, partnerships are governed by the Uniform Partnership Act, which, according to experts, allows for little flexibility or protection in events such as one partner leaving the company.

Each year, partnerships must file information with the IRS revealing how much the company earned or lost and how those gains or losses will be divided among the partners. Partnerships do not pay taxes. Rather, the partners pay taxes on their share of the personal returns, similar to a sole proprietorship. In addition, according to the Uniform Partnership Act, partnerships lack “continuity of existence.” If one partner leaves the company or dies, the partnership is dissolved.

One disadvantage of a partnership is that each partner is personally responsible for the other partner’s business liabilities. So, for instance, if one partner signs a contract, the other partner is legally bound to that agreement, even if he or she was not consulted. Similarly, each partner is liable for injuries caused by one partner on company business. If one partner causes a car accident while delivering products to a customer, all partnership assets and each partner’s personal assets are at risk. (A partnership can protect itself against such risks by carrying proper insurance, of course.)

Limited partnerships are most frequently set up by companies interested in financing an expansion. Combining many of the benefits of partnerships and corporations, limited partnerships allow for small businesses to raise money without taking on new partners, forming a corporation or issuing stock. Limited partnerships must have one or more general partners, who have the same responsibilities and liability restrictions as they would in a general partnership. In addition, there are one or more limited partners, typically investors not involved in the everyday activities of the company.

Unlike general partners, limited partners aren’t personally liable for the partnership’s debts. Their liability is limited to their total capital contribution. However, limited partners get the same tax advantages as general partners. Limited partners have notable restrictions. For example, in most cases they can’t manage the company. (Doing so would make them personally liable for the partnership’s debts.)

Unlike a general partnership, forming a limited partnership can be complex and costly. Experts advise people to hire an attorney to assist them in conforming to the filing requirements. Limited partnerships are dissolved if a general partner withdraws, dies or is expelled, or if the partnership goes bankrupt.