Office Supply and Paper Distribution
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Industry Overview
The wholesale and retail distribution of office paper and other office products generates annual sales of about $55 billion in the US. Large companies include Office Depot, Staples, OfficeMax, Unisource, and the distribution arms of large paper manufacturers. The industry includes "contract stationers," wholesale-retail chains, small dealers, and mail order companies that sell through catalogs or the Internet. The industry has become concentrated: the 50 largest wholesalers hold about 70 percent of the market. A large regional distributor has annual revenue close to $30 million.
Competitive Landscape
Demand is closely tied to the level of business activity. The profitability of individual companies depends on merchandising and an efficient delivery system. Big companies have economies of scale in distribution because they can supply a wide range of products to the same customer. Small companies can compete successfully by distributing specialty products or providing superior customer service. Operations are highly automated. Within the wholesale segment of the industry, annual revenue per employee is about $300,000.
Products, Operations & Technology
The industry distributes general office supplies, technology products, and office furniture. Paper and paper forms and envelopes account for about 35 percent of wholesale revenue. Technology products include personal computers and software, printers, calculators, telephones, etc. Toners and ink cartridges account for 10 percent of revenue.
Big chains, like Office Depot, buy products directly from manufacturers, but also buy specialty items from big wholesalers. Office Depot stocks 13,000 items at its customer service centers. A large wholesaler like United Stationers may buy from 500 manufacturers, stock 40,000 items, and distribute to 20,000 resellers. Local retail outlets usually buy products from several wholesalers. Small retailers are increasingly being squeezed out by the superstore chains, which can undercut prices on most items. To remain competitive, many small retailers maintain and repair computers and other office equipment, and sell other consumer merchandise.
Large customers are usually serviced by contract stationers, while small, medium, and consumer customers are served by retail stores, catalogs, and the Internet. Many wholesalers service several different market segments, selling to big contract customers, big non-contract customers, and smaller companies. Contract stationer sales are usually discounted substantially from manufacturers’ list prices. Contracts typically last several years. Operations for all suppliers are dominated by the logistics of moving large numbers of items to many customers. End-use customers expect rapid delivery, usually the next day, requiring distributors to maintain large inventories and operate a large delivery fleet.
Distributors must fill and track orders for many items, from many customers, and manage their own inventory levels. Orders are received via telephone, fax, mail, and electronically. United Stationers receives 90 percent of its orders electronically. To achieve next-day delivery, national distributors have large warehouse networks that can usually distribute efficiently within a 400-mile radius.
Companies rely heavily on sophisticated computer systems that provide a direct link to suppliers, and on automated warehouse systems. Electronic data interchange (EDI) systems between customers and suppliers are common and Internet ordering systems are becoming more important.