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Big Box Bullies

The printing industry has gotten tougher. Have you?

By Rebecca Trela

These smart, assertive sellers offer customized printing, business consumables and web-to-print solutions. And they are your competition.

Who are these phantom rivals—large national distributorships? Direct-selling manufacturers? Vista­Print and other web-to-print hubs? Try office supply superstores, the national giants such as Office Max, Office Depot, Staples and their industry cousin, FedEx/Kinkos. For nearly a decade, these businesses, trapped with commoditized inventory, have been investigating the profitability of print and its related solutions as ways to expand on the office products model.

News comes trickling in: Staples buys 5,000 Xerox machines for in-store print centers. FedEx/Kinko’s makes a deal with Adobe. Office Max installs countertop VistaPrint kiosks. And still, many traditional trade sellers write them off, failing to see the ways in which business relationships are changing in the printing industry.
“These people are salesmen like anybody else, and the ones I’m working with [at Office Max] really know what they’re talking about,” says Brad Thompson, president of EM Print Group, Elyria, Ohio. An office supply store is unlikely to take away a distributor’s long-time customer, but they do have bulk pricing and national distribution. They can capitalize on other assets, such as a growth plan, access to education, an aggressive hiring strategy and industry prognostications.
Is the competition stifling your business or stimulating it? Below, a few myths small business owners hold about big box stores:

Myth 1:
Office superstores target different customers.
Some distributors think that big box stores don’t compete for the same customers because the superstores mainly target unsophisticated buyers who buy commodity products through the internet. Distributors believe their expertise is essential to purchasing custom or complicated printing. “Their customers buy things through the internet, and anything that requires guidance at all has to be done with an expert offline,” says Stephen Hosler, a rep at Mehco Custom Printing, Cleveland. “That’s why I don’t fear the big box market.” However, web-to-print portals and online ordering are commonplace these days. End users may not value a distributor’s expertise as much as they value the convenience of online ordering. Even distributors who manage complicated print projects need to offer services online or risk losing customers to other distributors or big box stores, which constantly are expanding their capabilities.

Big box stores mainly target novice buyers, but the idea that these superstores can’t produce sophisticated print jobs is simplistic. Small distributors might have missed it, but superstores are adding many custom printing resources that could attract even a seasoned print buyer’s attention. A quick survey of superstores shows that the standard products they offer are complemented by a growing suite of elaborate, customized products. Here’s a smattering of products anyone can buy from Staples.com: checks, labels, Post-it notes, cards, stamps, envelopes, business cards, stationery, magnets, gift certificates, continuous forms, prescription pads, signs, banners, binders, holiday cards and promotional products. The process to buy custom pieces through big box stores is bound to become easier each year. Distributors and big box stores often do compete for the same customers, but successful distributors offer a problem-solving approach to their customers’ businesses needs.

“A lot of distributors and manufacturers out there are burying their heads in the sand, not realizing the speed with which the market is changing,” says Steve Reiss, president of Business Stationery Inc., Cleveland. “Technology, to a large degree, is helping these guys more than it’s helping small sellers.” Because many traditional print sales reps aren’t familiar with the office products market, they don’t realize the resources available to a superstore, Reiss says.
Trade printer business partners also think of these stores as your competition. They sell to both superstores and distributors, which disqualifies printers from the “trade only” label, distributors protest.

David Pydlek disagrees with the distributors: “Are big box stores resellers of print? Absolutely!” the print industry consultant says. “That’s a fair claim to make.”
Also, printers must keep the presses running. “Business is different nowadays, and that’s old school thinking,” Reiss says about immutable channel divisions. Printers and distributors make sales calls together. Distributors own digital printing equipment. The sale has changed from an order to a program.

Myth 2:
Reps at office superstores don’t have the printing expertise I do.
The print and service quality is poor from superstores, many claim. Customers don’t want to pay the shipping and handling costs. But these factors will be mitigated by improvements in digital printing and the falling price of color. “Technology can supplant the need for distributors,” Reiss warns, if a seller can’t continually demonstrate new value. “This is a shrinking market, and the smart will survive.” BSI’s parent company, Identity Group, has an agreement to sell some products through Staples.

Although representatives from Office Max, Staples and Office Depot declined to comment for this article, all three companies confirmed a growing and knowledgeable direct sales force, many of them focused on program sales.

“And even if they didn’t have it,” Reiss adds, “don’t you think they’d just buy a smart company and all its print talent?”

Myth 3: There’s enough business to go around.
Although obvious gaps and omissions dot the office supply offering thus far, the big box stores will continue to expand their product offerings, and end users will become more familiar with what’s available as well as online ordering.

“There will always be work,” Thompson says, but clarifies the type. EM Print’s web capabilities, utilized by Office Max, aren’t designed for custom or niche jobs but rather giant runs of products like business cards. Most distributors won’t prospect for business card orders. Will that commoditization extend to other custom products? And how soon?

“Let’s say this,” Reiss says, “They don’t make manual typewriters anymore. We’re in a declining market, which is encouraging commoditized product, shorter runs, variability/personalization and more variety from a given seller. That’s not just print; it’s how automobiles are sold now, too.”

It’s not easy to sell customized print through the traditional big box business model, Pydlek says. That’s why those companies are changing their business models. “Right now, it’s easy for distributors to jump into this, so they have a slight advantage,” he says. “But there’s danger in underestimating your competitor. For someone to make the assumption that they’re not good at print management and variable print…well, that’s not a good assumption.”

Fact: Service braces the print sales model today.

One of Charles Griffin’s largest clients, a 25-year business partner, was approached by Staples several years ago for computer/copy paper, ribbons and toner—about 20 percent of the account. “It was bad,” says Griffin, a distributor in Mobile, Ala. “I had to negotiate with the customer. I had to negotiate with the vendor, and get creative with my ordering schedule. I still have the business, but I had to reduce my margin considerably,” he says. Are big box stores a threat to his business? Sure, but he’s managed to hold his own.

One of the key factors to keeping the business was his customer service, he says. “It was about five years ago that I had a problem with this same customer.” The client has 17 sites, and Moore Wallace offered to serve all of them centrally for a much lower price. “I was out of that account for a year and a half,” he says, but Moore Wallace didn’t know Griffin had been making weekly inventory visits for more than two decades. The customer’s ordering system was thrown off, and they asked Griffin if he could match Moore Wallace’s lower price. He said no.

“But customer service really does matter,” Griffin says. The customer agreed his higher price was more than worth the personal service, and he’s back with the account. The same practices that have always kept his clients loyal will continue to work in the face of big box office supply stores.

The print marketplace, Reiss muses, is in an interesting dilemma facing some social friction about the changing channel model. The distributor/ trade printer model is still viable, he contends—“A lot of days, I’d much rather deal with a distributor who knows what he’s doing and knows the market than a big store with a lot of buying power.”

But as Business Stationery looks to expand in the future, it will encompass more web-to-print solutions and different types of customers. “Much more of what we’re being challenged with is managing transaction-type data, which is fast and accurate and touchless. That takes a different level of expertise to manage and maintain its value.” In other words, he’s looking for a distributor who’s delighted, not discouraged, with new competition.

Rebecca Trela is assistant editor at Print Solutions magazine. Email comments to rtrela@psda.org.