Changes at Spicers as 'the former UK no.1' struggles to hold sales

First Post By: Insider Guy

2008-09-29 18:10:41

A few significant losses this year to the newly invigorated VOW mean tough times ahead. Long term Spicers dealers have moved their wholesale business at a stroke - dealers who were amongst the early stockless adopters as well as more traditional type of stock led dealers. GB Office? Fenns? Even Bluefish are rumoured to be unhappy and not much of Spicers business can seem safe to them today. These guys would collectively spend well over £100 million over the next 4-5 years - and that's a good chunk of the bottom line profit gone at a stroke.

Why are dealers moving? Well certainly some had enough of the DDC problems earlier in the year and that gave VOW an opening. Next the Spicers team seemed distant and unapproachable to those disaffected dealers. Finally, given the chance, VOW weighed in with sharp pricing and pretty tempting prebates - advance rebates in the hundreds rather than tens of thousands for long term commitment. Having lost that business and finding customers tied up on long term contracts, that business ain't coming back anytime soon. It must be a debate in VOW whether it's cheaper to buy Spicers or buy the business - at least with the latter there's no integration or closure costs.

Don't by any means count them as down and out, what we're talking about is how well they take a punch and recover. The departure of Richard Cook - nice chap, impossible role - goes down as a failed experiment. Leadership comes from the top or from a group of skilled executives for whom customer rapport and intimate market knowledge are second to none - and if you're Spicers, certainly not second to VOW. If Spicers have those skills, they haven't been visible in the UK market for some time. In the 'old days' if a dealer threatened to switch, Bill Armstrong would get in his car and go calling. He would take each threat seriously and each loss personally - but always ensure that the door was open.

So if you're a dealer, what do you think the future is for you? Do you reckon you are getting a good deal and do you reckon that you'll stick with your current wholesale arrangements? As the credit crunch continues to bite, could wholesalers be forced to cut credit lines as insurers pressure them to reduce debt exposure - and if so what then Mr. Dealer?

As an employee of a wholesaler, what do YOU think is happening to and in your business. And as a manufacturer (well OK, brand owner who buys everything out of China) how hard are you being pressurised as Chinese production costs soar, the £ dips and wholesalers press for price stability and increased soft money?

Anon

2008-09-30 18:38:03

The decay at Spicers started over a decade ago and it's only been these last few years which have demonstrated clearly the weaknesses in the Spicers model. Failure to take cost out, political in-fighting, vendor alienation, indecisiveness over their EOS strategy, lecturing dealers and vendors on cost reduction whilst taking no action on their own cost base, European expansion (in some cases loss-making), employee demotivation and, in some areas, a jurassic management approach. Sadly, Spicers have lost that magic touch that Bill Armstrong championed and have not been able to regenerate the concept of a 21st century wholesaler. VOW have led the way over the last 5 years and it's easy to see why dealers are jumping ship. (Examples: cost base reduction and the fact they embraced EOS at the start). Is Spicers retrievable? Well yes, but much has to happen first: DS Smith to sell Spicers to a more synergistic parent/partner, impactful management restructuring and a 'blank page' approach to creating the new generation of wholesaler that the UK market deserves.

ouside-inside-view

2008-10-06 14:00:13

I think it is too romantic and nostalgic to state that all of Spicers woes might have been averted if the aforementioned exCEO had somehow stayed at the helm. Perhaps he was the architect of how things panned out? During his latter years of stewardship, the wholsesaler's UK future was unwittingly undermined by a succession of senior level appointments, internal and external that were just not good enough...added to that, a serious lack of investment in the UK structure and business model has bought about their stagnation. At this very same time Spicers march into Europe arguably took valuable focus and resources in a different direction. This was at a time of their main UK competitor investing in their future albeit having to go through their own growing pains. Anyone dealer comparing the DDC to Arrow could not fail to see the gulf. There was a culture of cost cutting and penny pinching sent down from the top , an autocratic ethos and an outdated confrontational approach to supplier dealings whilst resting on bygone laurels instead of investment in good people, IT sysytems and facilities. Spicers (then) refused to believe that anyone could dislodge them from the no1 perch that they felt was theirs for ever. There were(are?) many in Spicers that talk a good game but have never woken up to the fact that it's not the 80's or 90's any more! The trade needs two good wholsealers (it used to have four) not one mega-one who just happens to sell direct as well!!!

Anon

2008-10-06 19:17:49

End of the day, speculation is one thing, but cold hard facts cannot be denied. The last reported figures for both VOW and Spicers revealed only one thing, SPICERS were growiing at 12%, and VOW at 8%. As Spicers had a larger base to start with, it is diffiicult to understand how a business with a debt of around £250m, would be in a position to buy anything, let alone anyone. If VOW are buying business, then they are clearly using the CASH MARGIN they have generated through the business the RETAIL DIVISION, Supplies Team, have been winning from the Dealers as well as COntract Stationers. If I was a VOW dealer, I would want to know where my cheque was to secure my business, god knows you guys are funding them!

Anon

2008-10-14 11:06:24

Vow sell direct at very low prices through Supplies Team, Spicers dont (as far as I know) I have no problem with Spicers from a supply or support viewpoint and their credit policy suits me fine.Their EOS prices can be beaten but not by VOW. Why should I move to VOW other than to support their funding of Supplies Team - unless Supplies Team give me the same prices they give to schools. For those I will move anywhere

anon

2008-10-18 11:01:18

I guess it will be interesting to see how VOW fare in the forthcoming economic downturn given they are leveraged to the hilt and need to continue to grow. I have to say as a customer of theirs (albeit not a very big one) I am growing increasingly worried about their viability in the medium term. Am I alone in this?

RAP

2008-11-05 19:27:40

I have to take issue with the Anon who says that Spicers had a larger base to start with. THe facts are that Spicers UK operation is around £280m and VOW is over £440m including their retail arm, £350m without it. (Supplies Team I understand is under £100m now). The other reason for Spicers growth, by their own admition, is them actually entering the EOS market properly for the first time in the last 12 months which I am sure will have hit an already poor profitability figure in the UK. In my opinion the two main reasons for the decline of Spicers and VOW's emergance was down to a logistic model which was much more cost effective than Spicers and their Commercial Approach was and still is way ahead of Spicers in terms of responsiveness. (although they have lost one or two good people and not replaced them with the same quality IMO) I could not give two hoots about their parent company having a direct arm. If they did not own Supplies Team someone else would. The independant dealer holds the aces in terms of service over all the Contract boys and Supplies Team is no different. My advice would be to get on with looking after your own businesses, treat Supplies Team like any other competitor, invest and re-invest in your business and let them worry about the Independant channel as a whole not us worry about them.