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Industry Overview: Searching for the Easy Button

Explore the macroeconomics and secular trends of the industry, focusing on the Big 3 traditional OP manufacturers, wholesalers, and independent dealers. Discover what the concept of an "easy button" means in this context.

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Industry Overview: Searching for the Easy Button

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  1. Industry OverviewHas anyone seen my Easy Button?

  2. Macroeconomics of the Industry Secular trends of the industry Big 3 Traditional OP manufacturers Wholesalers Independent Dealers – “What it Means to Me”

  3. Some People Think They Found the Easy Button.

  4. Office Supply Industry vs. ODP, SPLS, and OMX
  5. Macro Environment Prolonged Unemployment GDP Growth of < 2% Deficit reductions will take away from GDP White collar employment growing at 60% of employment increases. High growth sectors – manufacturing, energy, health care. Slow growth – financial services, public sector. Broken correlation to GDP drives analysts concerns.
  6. Secular Trends Secular Trends away from core products are dramatic. Paper and toner led secular decline which alone will reduce industry by 2.0% and growing. Other categories being effected include filing, storage & binding. Where OP products are being bought has and will continue to change dramatically. Better economy won’t make it better, only less worse. New competitors are here to stay and from multiple directions.
  7. OSS Staples Reduction in square footage. Closure of 30 stores and reduce footprint in 45. Tripled online assortment to 100k, looking to go to 300k. Looking to benefit from OMX – ODP merger. Jan – San becoming an increasing component of contract business.
  8. OSS OMX – ODP Merger. Merger? Is it? Will pass government approval. Driven by Chart. No Leadership team or location. Combined synergies of 400 – 600 million. Significant execution risks. Risks of secular trends eating away at synergies. Closing of stores and IT enhancements are great. Analysts believe industry erosion (3%) could eat into synergies. 2 billion in sales will be displaced over three years.
  9. ODP 3 Month Stock History
  10. Manufacturer Life Core supplies, secular trends in deep decline. Disintermediation of product sales gaining momentum. Private Label continuing to expand. SKU count at retail will have dramatic impact. Looking for brand champions and early adapters of new products. Positive from alternate channels is breadth and less price pressure.
  11. Wholesalers Trying to win from the middle. Losing sales in core categories – product secular decline. Growing in non – traditional supplies. Alternate channel substantial at USSCO and growing at SP Richards. Breadth is driving alternate channel business model. Both are going over the line in support of the Independent Dealer. Need to be prepared to do more when consolidation occurs. Latest moves driven by broken correlation to GDP. Latest structural changes are around product sales.
  12. Independent Dealer What it means to me? Same macroeconomic environment. Secular trends, new channel competitive issues same as the others. Reactions of Big Three could pose threat or opportunity. Closure of stores, move to private label, consolidation confusion, quickness to react. Need to be nimble on new product introductions and a brand champion. It is absolutely imperative to broaden your offering of product categories now. Both wholesalers and buying groups are very supportive of Independent Dealers efforts but should increase this support over the next three years. Sell Product.
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