Heike Dieckmann from OPI speaks to sales and marketing agency Highlands CEO Bob O’Gara and Gordon Christiansen, Partner of Highlands, about the challenges that exist and how the company is addressing them.
In line with the evolving nature of the business supplies sector, the role of manufacturer rep groups is changing. OPI has been following their progress over the years. But while outsourced sales reps continue to play an integral part in our sector and nowhere more so than in the US, the pressures facing both the manufacturing as well as reseller communities have taken their toll and highlighted some of the perceived cost/benefit challenges that exist.
US-based Highlands is arguably the best-known sales and marketing agency in the global business supplies market, with a strong nationwide presence in the US and a solid footing in the UK, with developing plans for the rest of Europe.
OPI: The business supplies sector is changing massively and, by default, so are manufacturer rep groups I believe?
Bob O’Gara: Yes, absolutely. If you talk about manufacturer rep groups, or a sales and marketing agency as we at Highlands prefer to be viewed as, you need to consider the macro environment and what’s happening in the broader industry.
Consolidation is happening at both supplier and reseller level and that’s inevitably going to impact rep groups. We’re still in the early stages of this consolidation which is largely driven by the decline in traditional office products. The resulting margin pressure affects independent rep groups the most, as these manufacturers are struggling with overcapacity and need to assess how much money they can afford to spend and on what specific sales and marketing activities.
On the reseller side, scale matters now more than ever before. To be an effective B2B service provider you need to have scale, invest in websites and all manners of technology to drive your business. And you need to have a partner that is familiar with that technology and can help you with that.
It’s a challenging time to be in this space, but I think there’s still plenty of opportunity because many of our legacy suppliers are actually in greater need of these types of services.
OPI: Can you give an example?
Bob: A great example would be assisting suppliers with the creation of digital marketing assets. We have a number of clients that use Highlands as a marketing resource as well as a sales resource. Everyone knows that to maximise sales you need great copy, great product images and great videos. It’s not one-size-fits-all. For those suppliers that don’t have the internal resources to create great digital content, Highlands can step in.
Another example is diversification of markets. Manufacturers accept that if they’re only selling into companies like Office Depot, Staples, SP Richards, Essendant and the large OP independents of this world, it is becoming ever more difficult to achieve significant growth. The question is: How can we as a sales and marketing agency assist those suppliers in terms of penetrating mass market channels, the MRO sector or the education vertical? How can we spread their business out into other channels to help them find other paths to growth?
Gordon Christiansen: We are in the same boat. At Highlands, we’re diversifying in terms of the types of accounts that we service and how we service them. This diversification is happening in three specific areas. The first one is different distribution channels, as Bob mentioned.
Then there are new product categories that we represent, such as jan/san. This now puts us into the same boat as other resellers and wholesalers. Like them, we need to broaden our scope in terms of the brands we represent and into what channels we represent them.
Third – services. Yes, field representation is still a critical part of what we do, but we also need to provide a wider range of services including technology. This will greatly help brands increase their channel penetration and volume.
OPI: Where do you see the greatest traction in your manufacturer relationships?
Bob: Again, its not one size fits all. Highlands is built to allow manufacturers to work with us in a variety of ways, based on their unique set of needs. That said, some of our most effective engagements are deeply strategic. We work with clients to help them to shape their strategy and product development, and then map out the best and most cost-effective paths to market right through to the end user. It’s a completely different type of engagement than we had in the past.
OPI: The channels you outline mass market, MRO sector, education…Are these within the realms of a manufacturer rep groups generally? I assume size matters here as well?
Bob: In the US and Canada there are reps working in all of these channels. Generally, these groups focus exclusively on only one channel and are regionally focused. With respect to office, facilities and MRO, we are seeing increasing overlap that will present challenges for suppliers and agencies.
In a blurring marketplace, what is the distinction between a jan/san dealer and an office products dealer? Generally, the suppliers of janitorial products hire groups on a national basis to service the office channel. This should give those groups an advantage over the regional rivals in other janitorial and MRO markets.
OPI: Amazon, do you have a relationship with them through the brands you represent?
Bob: We do. We have a robust online business. But it’s not all about Amazon. What’s unique about Highlands is that we serve the totality of the e-tail marketplace, rather than Amazon only or Overstock only. This is important as it involves managing the interplay between these accounts that lets you maximise online sales.
With respect to Amazon, this is not a relationship company but rather an analytics company that prefers to do things over email. Plus, it has a high staff rotation, so you never see vendor managers in the same seat for very long.
We are effective with Amazon because we’re really good at the technical part. We have a team of people that really understands how to promote and maximise our suppliers’ product exposure, how to manage the e-tail marketplace, how to work with the complex pricing algorithms” and in the process drive considerable growth for our partners in that marketplace.
OPI: You have a unique advantage in that you are very well known through your international presence?
Bob: We have derived great benefits from being in multiple markets. We have significant opportunities coming to the US business based on our Canadian and European presence and this has worked in the opposite direction too.
The best part is that we are discovering new suppliers to drive incremental business not just for Highlands, but for all of the customers we sell to across all of the markets served.
OPI: You now have a solid presence in the UK I believe, representing a variety of brands including RB very successfully. What about continental Europe” what’s your experience there?
Gordon: Europe is very much on our radar and we are well-positioned to make it a success. We have the expertise to help brands from the US, for example, that have no experience in the European markets to introduce them to the key resellers and wholesalers across the continent as well as help with product information and promotional activities.
That said, it’s not been easy. There are a couple of manufacturers, British and US-based, that would like to have some representation in Germany, for example. The challenge is pure economics. You can’t just do it for one or two manufacturers, you need ten to make it economically viable. We don’t quite have the traction we need yet and maybe the model in continental Europe will need to be adapted somewhat, away from a pure field sales model.
We currently represent a number of brands across the whole of Europe and helping them sell into German resellers, pan-European wholesalers and online marketplaces. The office channel for them is an exciting place to grow and we believe we’re the ideal partner to help them do that.
By the same token, having a European presence provided us with the opportunity to help manufacturers from that geography be more successful in the US. Having a footprint on both sides of the pond has really worked for us because of the interactivity between the US and Europe, and many manufacturers wanting to move both ways.
OPI: In our recent article in OPI we talked about commission-only agents that are still pretty prevalent in some parts of Europe and also the associated cost that comes with dealing with a company like Highlands. What’s your view?
Gordon: I think there’s always going to be a market for the commission-only concept. For some manufacturers that works well because it’s a relatively low-cost, low-investment model.
Our model is different. We tend to represent large brands that are well known in the marketplace. It’s about creating a point of differentiation for the reseller to incentivise them to focus on the brand we represent rather than a competitive one.