$100 Million and Counting: The Rise of the Independent Dealer

Office World News, Dec 2004 by Self, Kevin

it was less than 10 years ago - the same time the "Big Box" players hit the scene - that the independent dealer was considered by some to be a thing of the past. Some looked at the dwindling numbers and quickly concluded the independent was all but extinct. The skeptics were wrong. Here we are in the 21st Century and the landscape of the office products industry is quite different. Although the Big Box players are formidable competitors, the industry is currently witnessing a change in the tides - the rise of the independent.

Many factors have contributed to the shift in momentum toward the independent; among them the emergence of teaming arrangements and buying groups. But no one factor can be attributed to the success of the independent more so than the fighting spirit of the dealers themselves.

The backbone of our industry has and always will be the independent dealer. Small and nimble with a focus on customer service, today's independent dealer is the epitome of the American small business.

A recent study conducted by MPA International and Office Products International illustrates the advancements made by independents. According to the study, independents account for 65 percent of sales in the office products wholesaler channel. Although progress has been made, there is still work to be done. The study also showed that independents only account for 13 percent of the total office products market share, compared to approximately 40 percent for Big Box players.

Despite the numbers, the entry of the Big Box competitors to the market was nothing but a wake up call. Those independents thriving in today's market have evolved into a leaner and meaner force.

Perhaps no single market in the office products industry better illustrates the progress made by independents than the government arena. Thanks to a new, unified independent front and leadership from the industry association NOPA, independent dealers are making headway and are looking to 2005 for greater penetration into the government sector.

Lobbying Power

Part of the recent success for independents comes from their presence on Capitol Hill. NOPA has become the voice of the independent dealer in Washington, D.C. Although NOPA dealers are located throughout the country, the regulations that have an impact on small businesses or the procurement process start and end in Washington.

The largest victory to date for independents in the federal government market came earlier this year when the U.S. Department of the Army awarded its estimated $100 million Blanket Purchase Agreement (BPA) for office supplies to independent dealers - completely eliminating the Big Box players from contention.

In October 2002, the Army originally awarded 12 BPAs for office products, eight of which were small businesses and four that were Big Box players. The original BPA, however, was structured specifically for Big Box players and 63 percent of sales for the BPA in Fiscal-Year 2003 went to the Big Box players.

After taking the battle to Washington, it took almost two years to see results, but they were; well worth it. Today, the Army BPA is serviced entirely by 15 independent dealers (four for toner/inkjet supplies only) and two dealer consortia - composed of over 250 independent dealers. The hope when the lobbying efforts began was to level the playing field and give independents a fair chance to compete for the Army's business. The end result was even better, offering the Army BPA exclusively to independents.

"This is a huge win for independent dealers," snid Paul Miller, director of Government Affairs for NOPA. "The Army BPA was the first major government contract awarded entirely to independent dealers. The Army should be commended for seeing past the illusion that Big Box players were a better solution for its needs. It is our hope that other government agencies see what the Army has done and at least open the door for independents to prove themselves."

Stepping Stone

Let's put the Army BPA victory into perspective. Although that particular win for independents certainly merits a small celebration, in the big picture, the Army BPA is only a small portion of the total dollars spent by the federal government in a single year - and the Big Box players still hold the majority of government contracts.

"The Army BPA was very big in that independents were not only able to participate, but they were able to get the entire contract set-aside for small business," said Mike Tucker, president of George W. Alien Co. Tucker, a long-time veteran of the government sector, is familiar with the efforts involved with the Army BPA contact, having been awarded one of the original BPAs in 2002. He warns, however, that it is premature to call one major victory a trend in favor of independents.

"It was a good success and the first one is always the toughest. Hopefully the Army will be satisfied with the independents' performance under this contract. We can then take the victory to other agencies - the Postal Service, the Air Force or Health and Human Services (HHS) - or any agency that is considering what the ramifications their contract awards will have on the small business community," said Tucker.