Back-To-School Opportunities

Office World News, Jan/Feb 2004 by Lisle, Kit

WiLh school spending levels of approximately $45 billion annually, the market for this single category of products may be sizable enough and important enough to warrant investigating opportunities for your business. Surprisingly, most school supply expenditures occur at the college and university level. The market for children ages 6 to 17 is around $14 billion while the college market is nearly $26 billion. This exceptionally large market presents plenty of opportunities for suppliers and retailers alike. And, as we have observed through our research and consulting work, there are some interesting lessons to be learned as well.

School supplies include three major categories of products: consumables such as paper and pencils; instructional materials such as books and learning software; and equipment/fixtures and furniture, which includes (lie assets of llu: school ranging from desk» to football stadiums.

The National School Supplies and Equipment Association ( NSSKA) and The School, I Ionic, and (JfI ice Products Association (SUUPA) »re the two major industry trade associations for the school supplies market. NSSKA views the industry from the institutional, or school side of the equation, while SHOPA looks at the industry from the perspective of the retailer side.

White NSSKA and SHUPA each have tended to overlook the other's market in assessing size and trends, analysis of NSSKA's recent Market Definition Study and SHOPA's latest Distribution Trends Report reveals a total market sixe at the end-purchaser level of approximately $45 hillion, with the following breakdown among distribution channels:

STRATEGIC RECOMMENDATIONS FOR SUPPLIERS

1. be careful with direct distribution. Suppliers must be careful as they pursue direct distribution. Rapid consolidation among dealers may convince several suppliers to sell through direct channels. Growth in selling direct is not necessarily outpacing growth in the industry overall. Dealers anticipate thattheir suppliers will sell through direct channels to a certain extent; however, they do not expect their suppliers to deceive them. Some suppliers have been tempted to send one of their reps into a district and sell a "package deal" to an institution thattheir dealer may typically serve. If dealers discover this is happening, they may need to discontinue their relationship with that supplier.

2. Improve shipping efficiency and control. Several dealers complained that suppliers generally should strive to provide more timely shipping. Only a small percentage of suppliers are able to track orders and offer interim reporting on order status. Dealers appreciate this communication as it facilitates better relationships with their customers.

3. Expand sales and marketing support. Years ago, suppliers offered field support for dealers. To the extent possible today, dealers should look for support from suppliers in the form of information, access and guidance on sales and marketing. With increasing competition and faster evolution of the e-commerce channel, industry participants feel that multi-channel suppliers will be successful in the future. One of the main reasons for companies to expand beyond their traditional distribution channel is to leverage their existing customer base and attract new consumer/enduser segments related to their core competency.

4. Consider the broad mass and mass specialty retail market. As suppliers look for additional channels to sell through, they may wish to consider mass and mass specialty retail. The opportunities here are greater for school suppliers than at any previous time in history as parents are more interested than ever in fostering childhood development through learning tools and materials.

5. Explore mergers, acquisitions, alliances, and partnerships. Industry participants believe that timely synergistic acquisition would prove a sustainable competitive advantage by expanding products, access to customers and access to suppliers for the players in the institutional channel. Obtaining cost savings at an operational level is a key for survival.

6. Consider IT services, software, and hardware supply and distribution for e-learning. Timely involvement in the e-learning arena will be increasingly important over the next decade. Suppliers should gain the competence in hardware, software and services necessary for e-learning.

STRATEGIC RECOMMENDATIONS FOR RETAILERS

1. Reduce the need for suppliers to sell direct. Many companies have grown large by selling products with no distribution options other than selling direct. The utilization of direct channels by suppliers is expected and understood; however, dealers can certainly avoid practices which would motivate suppliers to utilize direct channels more than they normally would.

Examples include:

a. Carry a broader range of products. With readily available inventory at the dealer level, schools are less likely to see a need to order directly from the supplier.

b. Form buying groups. To purchase in breadth and depth from suppliers (perhaps for discounts), invest in technology and inventory control systems which could facilitate improved efficiency for suppliers.