Earlier this month, OT Group’s CEO, Andrew Jones, spoke to OPI about Spicers’ return to the wholesale market after a two year hiatus, what sets us apart in the industry, and what lies ahead for us as an organisation.
There has been an interesting development in the UK business products market with the news that OT Wholesale has rebranded as Spicers, reviving the iconic name two years after the SPOT Group went into administration.
Andrew Jones, CEO of Spicers’ parent company OT Group answered OPI’s questions about the ‘new’ Spicers and why it will fare better under the ownership of Paragon.
OPI: What has the reaction been in the market since you officially announced the return of Spicers?
Andrew Jones: We consulted with a wide range of dealers and key industry leaders before making the change and received an overwhelmingly positive response to the return of the Spicers brand into the wholesale market. It was always planned that we would change the name of our wholesale division to Spicers, but we were conscious that it needed to be the right time – and now certainly feels like the right time.
OPI: How will the ‘new’ Spicers be different from the previous iteration?
AJ: Our redefined Spicers proposition centres around the customer experience: getting the right products, at the right price and delivered on time – which really is what a wholesaler should be focusing on. The core focus for Spicers is being easy to do business with and putting our customers at the heart of what we do; listening to our customers and striving to deliver what they need: a stable and reliable product range and distribution platform.
Since Paragon’s acquisition, a seven-figure sum has been invested into the business and the evolution of our dealer provision. This funding has fuelled the digital transformation of our finance, operations and sales order processes across the group and we go live with our new fully integrated ERP system later on this year. This will provide a great front-end platform for our dealers and enables us to streamline and integrate our business processes, which in turn allows us to be more cost effective.
The new Spicers is a more straightforward and transactional model which strips away any costs that are deemed to be unnecessary or of little value to a dealer. Based on streamlining operations in a digitally first world, we are able to provide a low-cost model, without the need for complex agreements and additional marketing costs – which, in effect, every dealer paid for regardless of whether the marketing resource was used or not. The lines between wholesalers and dealer groups had become very blurred, with wholesalers competing with dealer groups to sell a variety of publications and ‘value-add’ marketing services. Our proposition aims to keep price, service and product range front of mind.
We have exciting plans on the horizon to help fuel dealer growth too. Further investment is planned to provide dealers with access to over one million products through our extended range initiative, with an overall target of three million by the end of 2023. This will give dealers the opportunity to empower their customers to find anything they may require within a dealers’ webstore, rather than using other online sites such as Amazon to purchase their ad-hoc products or items that a ‘traditional’ dealer might not be able to supply.
OPI: An ongoing challenge in the UK wholesaling market has been to operate a profitable business model, or at least one that achieves satisfactory returns. What makes you confident that Spicers will be profitable?
AJ: The new model is based on a low-cost, competitive price file across the full range of products, rather than the old core list of products at competitive pricing with the remainder at ‘trade less’ pricing. The old model led to dealers being forced to split spend to remain competitive in the market, while at the same time, the wholesaler’s cost base was increasing against a backdrop of declining sales.
For example, the cost of the overnight key drop delivery was in excess of £8 million a year in the old company and was something that had to be reflected in the cost of the goods. The redefined Spicers, while also not having the huge cost base of the old company, is very streamlined: dealers are able to interact through EDI, our online platform Smartpad, or our team of customer service agents. Over 90% of our orders come to us electronically, which allows much greater efficiency for us as a business and enables us to keep our costs down.
OPI: How robust is your supply chain given that you work with 3PL partners? Given that a basic service of a wholesaler is to ‘shift boxes’, you operate a model where the actual box shifting is largely out of your control….
AJ: One of the main discussions with dealers we have been talking to over the pandemic and now during high inflationary times, is how to move as much of their cost base from fixed cost to variable cost. One of the key areas a dealer can influence is to move as much as possible to a direct delivery model. It would therefore seem counter intuitive for us to bring back the costs of a fully owned delivery fleet and have to factor these back into our pricing structure.
We chose Menzies as our distribution partner as they can provide us with a variety of different delivery options we can offer to our dealer partners in the future. To aid with this, we brought on Phil Roberts, a Quality Director from the automotive industry, to focus on ‘Right First Time’.
We’re just completing the full implementation phase of this project, and the move to our new ERP closes off our implementation of our 3PL solution, with the introduction of a fully integrated transport management system. Once we have our new ERP live at the end of this year, we can include options such as desktop deliveries, timed options, electric fleet, etc. This will further empower dealers to consider this solution as a viable alternative to their own van costs.
OPI: Along the same lines, delivery of furniture has always been something of a challenge. Are there any things within this category that you are doing differently, or better?
AJ: We’re constantly looking at how we can expand into other areas to provide dealers with additional categories they can purchase via Spicers, including furniture. Currently, we’re reviewing how we can look to provide a viable offering, alongside other areas such as print and managed print services.
OPI: How will you ensure that your dealer customers are able to offer the right products to their end user customers? One perceived weakness of the OP wholesale channel is that resellers are restricted by their wholesalers as to what they can sell, and it’s the wholesalers that control the product offering as opposed to it being market driven.
AJ: This question, which has been levelled at wholesalers for some time, is a very fair one. With the previous high cost-base, it was difficult for wholesalers to be as agile as they needed to be. This, combined with supplier lead times to source direct, often meant the wholesaler had missed the peak opportunity: by the time the product was on the shelf, dealers had found alternative sources which they were reluctant to change.
With our extended range, the plan is to offer most things any dealer would want without the need for Spicers to actually stock every line. We will constantly review the data and, as we identify fast selling lines, we will then look to bring them into our stocked range and therefore lower the lead times in future. We have to let the dealers, and the data, shape our product range in future as this will be key to our mutual success.
One of the benefits of operating both a wholesale and contract division within the group is that we are able to see the requirements of end users first-hand. Their needs are constantly changing, particularly over the past 18 months where we’ve seen different ways of working, from homeworking to hybrid, to a full return to the office.
We’ve also seen an increase in the types of products end users now wish to purchase through a single source and we’re seeing a shift again into ‘new world’ products that you wouldn’t usually associate with the business supplies market. This research and business intel provides us with a good foundation to build our wholesale product offering over the coming months. Our aim is to have over one million SKUs online by the end of 2022, with 95% of these being drop-ship products – which will widely open up the opportunities for Spicers dealers. Product ranges we’re looking to include are white goods, electrical components, tools, and catering, medical and educational supplies, to name just a few.
OPI: Who are you targeting as customers? I assume that independent dealers will be an important group, but to what extent are you looking beyond them, in the retail, e-tail channels, for example?
AJ: The independent dealer community is still very strong and we believe it can have a great future which we want to help them realise. We are seeing a number of dealers selling now on Amazon, eBay and other platforms as well as using their own web stores as they move into different markets and expand their reach. There are, of course, online digital stockless customers today that are using Spicers as their preferred, or an additional, supplier. Our new low-cost model can support any channel as the focus is on right product, right price, right service. Therefore, an omnichannel approach is very much part of our strategy for growth.
OPI: The ‘old’ Spicers had some exclusive agreements with dealer groups – which subsequently went to Exertis. To what extent are you working to rekindle these relationships?
AJ: As previously mentioned, the wholesalers really started to impinge on the dealer groups by selling publications and marketing services, pulling revenue away from the groups while also stating they supported them. Our model is clear: we will focus on product, price and service and work with any dealer group that wishes to engage with us to help our dealers grow their business.
While we’ve already started the process of re-engaging with the dealer groups, we’ve been hesitant to undertake an aggressive approach until we are confident we can provide a stable and reliable service. Now we are at the end of our implementation and digital transformation journey, you’ll see our efforts in this area significantly increase.
OPI: The new logo incorporates elements of the 5 Star brand. What are your plans for 5 Star?
AJ: Our intention for 5 Star is to develop what is already a comprehensive range across all of our core categories. There is a planned range expansion, with a strategic focus on environmentally friendly products, linked to Responsible Business.
Also, with many of our end-user customers planning to incorporate elements of homeworking into their overall strategy, hybrid working is here to stay. Therefore, we are looking at options around smaller pack sizes to fit this new way of working. This will provide enhancements to margin opportunity for dealers to branded equivalents.
OPI: What have you been adding in terms of staffing resources?
AJ: We are very lean team, keeping costs very tightly controlled, as – ultimately – the dealers need a profitable long-term wholesaler partner they can rely on. Most of our staff have been with us since launch and worked for the old company.
Spicers has more customer service people within it than any other OT Group department and this is very deliberate. We do not want to be a faceless, almost dehumanised, company to deal with. However, we also realise the new generation would prefer to communicate via email or live chat, so we want to be available via any medium a dealer may wish to communicate with us. We want Spicers to be a friendly, approachable and knowledgeable team and, as we grow as a business, we will continue to invest in the people and look to further expand.
You will obviously have heard about our appointment of Martin Weedall as Group Operations Director. Martin brings with him a wealth of knowledge and experience of dealer requirements to enhance and expand our logistical offering to our dealer partners.
We have also bolstered our team with two new senior recruits: Paulene Samuels has joined our team as Head of Digital Solutions to define the digital roadmap for our dealer online offering; and Emma Foster has been appointed as Business Solutions Manager to spearhead the charge to take our online product range to its three million SKU ambition by the end of 2023. These appointments are critical for our wholesale channel and will be vital to the future enhancements and innovations we deliver to our dealers.
OPI: You’ve got dealer open days planned for the UK and Ireland. What do you hope to achieve with these?
AJ: We’re excited to show our dealers just how far our Spicers business has come. Since the launch of OT Wholesale back in May 2020, we’ve been working tirelessly behind the scenes to overcome the challenges we’ve faced; learning the lessons from the old company – good and bad – and feeding this into a newly defined proposition that is relevant for today’s market.
For those dealers that are attending our UK open day, they can look forward to seeing the fantastic site at our Ashton HQ, to use this as a tool to go out and help win new business. Our Irish dealers will also get to tour the fully revamped Citywest site, which is now a shared facility with our other Paragon businesses; on the day they will be able to see additional products and services that are available from within the group.
Dealers will get to hear about our vision and plans to help them drive growth within their businesses, and we’ll also be using this as a forum to discover what they require from a wholesaler. With the name change back to Spicers, this seems like the perfect opportunity and we hope to see many dealers there