By Bob Smith - Canadian Office Product Association
With no growth in most traditional products, the office product industry is now focusing on new product areas with existing customers. The janitorial/sanitation and break room product category is the new saviour for most office product resellers. Dealers who have embraced the Jan/San and break room category are expecting 10-20% of their total sales from this category in the next few years.
Despite the efforts to ensure the traditional office supply chain gets full value from the category, there is still a nagging feeling that the opportunity isn’t being fully grasped with both hands.
Office product resellers have a number of competitive advantages and new opportunities in this inefficient, multi-layered industry.
The already crowded cleaning and sanitation industry is in turmoil with resource based giants, niche players and resellers of every breed fighting for market share. What does the near future hold for this industry?
A DESTRUCTIVE PRICE WAR WHERE EVERYONE LOSES?
OR
WILL CLEANING AND SANITATION PRODUCTS BE THE FIRST CATEGORY OF GREEN PRODUCTS TO SEIZE MARKET SHARE AND BE MORE PROFITABLE THAN THEIR PREDECESSOR?
Janitorial and Sanitation (Jan/San) products and services, like most businesses, have their challenges in today’s economic environment; sales are flat. But, unlike other office product groups that have been devastated by technology, growth will rebound with the economy, increased activities in office building construction, and growing investments in health care and education.
Defining the Janitorial and Sanitation market is the biggest problem. Does the market include products, services and equipment? Does the market include exports which, in the case of Canada, are over 50% of the production? Government numbers (Stats Canada) are not helpful as cleaning products include other products with no additional breakdown.
Various Estimates:
Global clean industry forecast to grow to $3 trillion by 2020
U.S. demand for janitorial equipment and supplies (excluding chemical products?) is forecasted to reach $7.2 billion by 2017
The U.S. specialty household cleaners market is expected to reach USD 7.9 billion by 2018
The strong growth in Canada resulted in a $9 billion industry in 2010. (Products, services and equipment?)
Regardless of the actual size or current challenges, the category holds enormous opportunities for office products resellers. Jan/San and break room categories are expected to be the fastest growing category for the coming years.
Inefficient Supply Chain
The market is crowded with multiple layers.
The players in this market range from multi-national chemical companies to consumer goods companies to custom packagers (private label) and industry specialists in the food, medical, hospitality and janitorial industries.
The Jan/San industry operates as many industries did 30 years ago, with each player passing on the product in smaller and smaller quantities, adding and blending their special ingredients, until the product reaches the consumer.
With wholesalers and brokers at every step, the final price is loaded with profits on profits and handling fees.
The office products industry has the experience and size to bring manufacturers and resellers closer together.
Logistics and Delivery Capabilities
Janitorial and Sanitation products (Jan/ San) offer OP resellers a chance to capitalize on their investment in stores, on-line sales, logistics, and delivery services.
"If I desperately want something, I can go to a store. If it’s too bulky or heavy I can buy a smaller size at a higher unit cost or have it delivered. If I’m going to have it delivered, I might as well order on-line."
Grocery stores and Amazon are struggling with same-day delivery of perishable food products. Both retailers include cleaning products in their same day service. The cost and customers misgivings about buying perishable food unseen may prove to be a costly experiment. The alternative is to fall back to same service as office products. Jan/San products aren’t perishable and you can still get in your car if there is an emergency.
The lowest total cost to the customer by combining bulk purchases with a cost efficient delivery and on-line ordering system may be the winning formula.
A Product Category Made for Commercial Sales
How do you find the person who is responsible for the Jan/San, facility and safety products in the back of the warehouse? 
Households buy sanitation products at grocery stores and more recently at general stores, pharmacies, and home improvement retailers but there is no clear choice for businesses.
Office buildings comprise the largest segment (31.6% worldwide) of the cleaning industry.
Large corporations with a mature purchasing/strategic sourcing group don’t buy Jan/San products. The responsibility usually falls to real estate/premises departments who, perhaps innocently and with little thought or analysis, contracted these responsibilities to building or cleaning service companies.
What appears to be an unassailable chain of contractors and sub-contractors is open for business (Owner – Tenants – Facilities Management – Cleaning Service).
Office Cleaning is either part of the office lease or charged extra. Tenants may be required to use the building cleaning service or contract for their own cleaning. Regardless of the terms, when the cost goes up, there is a negotiation. Office product suppliers need to be part of that conversation.
Sourcing groups are struggling to provide new savings and justify their existence. Expanding their scope to include cleaning products and services is opportunity to provide new savings.
Tenants and landlords know that you can’t cut costs at the bottom of the food chain (Fig.1 above). Workers already make minimum wage or less in mom and pop operations, so, how do you cut costs and add value?
Landlords, building management need to compete against the new eco-friendly, energy efficient building which have come online in the last few years.
The tenant, who eventually pays the bills, wants to discuss ecology, electricity and water consumption, health concerns allergies and odor control. The tenant wants a proposal to go 100% green. (Note: This is currently impossible.)
Who can landlords or tenants talk to: the guy with the mop, the grocery store or the chairman of Dow Chemicals? Who has the commercial relationships or feet on the ground: grocery stores, Wal-Mart, Amazon?
The commercial sales group of office product retailers have been working with senior staff in the office environment and have the skills to put together a proposal and demonstrate savings to senior level management.
What is the lead product; paper or cleaning products? Who is the traditional commercial client for office supply companies?
How will the customer profiles change if 20% of sales go to Jan/San and break room products?
...........continued next week
1 comment:
Wonderful blog & good post.Its really helpful for me, awaiting for more new post. Keep Blogging!
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