*NEWS*NEW ZEALAND OFFICE MARKET,VIBRANT
*NEWS*NEW ZEALAND OFFICE MARKET,VIBRANT
2005-01-15 at 10:37:00 am #11299perfectly formed
The New Zealand office products market might not be the biggest, but it is as competitive and vibrant as anywhere in the world
In many ways, the New Zealand office products market is a microcosm of many typical OP markets in developed countries.
Many of the challenges, trends, peaks and troughs are not so different from markets such as the US and the UK – ie the rise of SOHO, the emergence of China, the growth of IT. These are all issues that affect the New Zealand OP market as much as anyone else.
With fierce competition at all levels and channels, the continued erosion of margins affects vendors and resellers alike, as companies continue to drive down prices to maintain market share.
Arguably, it is oversupplied for such a relatively small market and consequently, the trend towards consolidation has continued apace within the distribution channel, as larger players such as Boise Cascade and Corporate Express Australia (CEA) look to increase market share through acquisition.
The key difference, of course, is one of scale. The population of the entire country is that of a medium-sized US city, but with a land area the size of Colorado. You might think that this provides its own logistical challenges, but with 80 per cent of New Zealanders living in the cities, it is not too much of an obstacle in the great scheme of things.
The last authoritative research carried out on the New Zealand OP market was carried out in 2001. Then, BIS Shrapnel valued the market at NZ$2 billion ($1.4 billion), and forecast 9 per cent growth going forward to 2004.
In reality, says Office Products Depot (OPD) CEO Rob MacGregor, growth has been smaller, in the 3-5 per cent region, with technology playing a large part in the rise.
Three years ago, BIS said that the SME and SOHO sectors represented the fastest growing customer segments, and this remains true.
The OP market is essentially dominated by four players – Boise Cascade, OPD, CEA and the leading OP retailer Warehouse Stationery.
By far the biggest player in New Zealand is contract stationer Boise, under the stewardship of David Kelly. With head offices in Auckland, and warehouses serving Auckland, Wellington and Christchurch, it boasts a 70-80 per cent share of the market and employs some 1,000 members of staff. Under the Boise umbrella are such brands as Whitcoulls Office Products, OTC Workplace Partners, Hollands Office Furniture, and perhaps the most famous name – Blue Star Office Products.
Competing head-to-head with Boise for the top-end of the volume market is CEA, although it does not enjoy the same sort of powerbase that it has in Australia.
The main player battling in the flourishing SME sector is the country’s leading independent dealer group, OPD.
The independent dealer network is well established within New Zealand, with approximately 70 dealers of note operating across the two islands, and 40 of them belonging in the ranks of OPD. This number has not increased over the past three years.
“We hold a healthy market share position behind Boise,” reports MacGregor. “Independent dealers have significantly improved their purchasing strength to enable them to compete with Boise and Corporate Express on a relatively even basis and continue to explore innovative business propositions that maintain market relativity with the power channels.”
MacGregor concedes Boise’s leading position in New Zealand, but insists it does not have it all its own way. “Boise holds a significant share relative to CEA and OPD,” says MacGregor, “but it is not utterly dominant and has recently lost market share to CEA and OPD which have raised their market presence respectively through direct selling and market campaigns.”
On the retail front, the biggest national players are Paper Plus, Whitcoulls and The Warehouse Group. The latter predominantly operates on a franchise basis, aimed at the home user. While it is a general stationery store – also stocking a wide range of books, magazines, cards and gifts – it still offers a wide selection of office products for the SOHO user, as well as a printer cartridge refilling service which is currently in roll-out mode.
The Paper Plus group comprises three retail brands. There are 86 independently-owned Paper Plus stores across the country, and 70 Take Note stores, which offer a similar product offering but on a smaller format.
The third brand, Paperplus Book, has just opened in Christchurch and North City Porirua, offering everything that Paper Plus does – but more books.
Whitcoulls, which was sold three years ago by Boise/Blue Star to WH Smith and is not to be confused with Whitcoulls Office Products, offers a similarly wide product mix.
The largest OP retailer, indeed the largest retailer in New Zealand, is publicly-listed The Warehouse Group (TWG) – boasting annual sales of NZ$2.24 billion. TWG is split into three operating units – The Warehouse Australia, The Warehouse New Zealand, and Warehouse Stationery, more commonly known after their store livery – Yellow Sheds, Red Sheds and Blue Sheds respectively.
The Blue Sheds are currently providing TWG with its largest growth levels. For the year ended 1 August 2004, sales were up 21 per cent to NZ$199.1 million, although recently it has felt a negative impact on margins due to a “difficult trading margin for business machines”. There are 42 Warehouse Stationery stores on the islands serving both the SOHO and B2B channels, and in December 2003 it successfully launched the new larger Mega store format in Whangarei.
And in the words of founder Stephen Tindall, this new concept is “the most important development in Warehouse Stationery since the launch of the B2B channel”, stocking a new range of products such new ranges such as children’s early learning, health and safety, specialty papers, books and magazines, and a range of technology products.
As for a big international OP superstore company opening up in New Zealand, Warehouse Stationery’s general manager Robert Smith feels it is unlikely. He says: “The New Zealand market for international opportunities such as Staples and Office Depot is relatively small, and while we would never discount these operators coming to this country, there are far bigger opportunities for these people in Europe and North America.”
Indeed, the pioneer of the OP superstore concept in New Zealand appears to be Warehouse Stationery itself with its Mega store, although Smith insists the experiment is still too much in its infancy to draw any conclusions yet. “It is still very much in its trial stage,” he says “and requires further refinement before further expansion through the country.”
As for the manufacturing side, there are not many OP manufacturers with production facilities in New Zealand, so the market is predominantly served by imported products. What manufacturing there is suffers from pressure from imports from Asia, where improving quality combined with the traditional cheap price, are proving to be a winning combination.
Ultimately, however, while possessing many of its own nuances, the New Zealand OP industry is no different than that of other developed OP industries. As MacGregor says: “New Zealand customers have the same expectations as most other countries across the world.
“Direct face to face selling remains a key element in the sales process, with relationships holding the key to current business success and customer retention. Internet selling is fast becoming a preferred way of doing business with the larger customers.”
And not surprisingly, the New Zealand OP industry maintains many ties across the Tasmanian Sea. Indeed, the top four players who battle it out in New Zealand, are competitors in Australia as well, with OPD most recently entering the fray after signing a joint agreement with Office National a year ago (see ‘two to tango’, OPI December 2003, page 41). TWG also has a significant presence in Australia, although its stationery stores have yet to make the journey, perhaps not quite ready to do battle with the established Officeworks chain.
Smith says: “We believe we can continue to grow further. However, our focus is very much on New Zealand and enhancing the current offer in this country.”