Drakeford assesses COVID-19 impact

Source: OPI.net

In a Q&A that originally appeared on the site of EO Group’s Office Power technology platform on 16 April, Simon Drakeford sheds some light onto how COVID-19 is affecting dealers and the office supplies industry as a whole.

Below is a slightly edited version of that Q&A:

Q: What has happened to trading for dealers at the beginning of April?

Simon Drakeford: Over the past few weeks, we’ve spoken with many dealers both inside and outside the Office Power community, and the feedback we’ve received varies greatly. On the whole, it seems that dealers in the north are holding up better than those down south. This is most likely because working from home is less prevalent and there is a low service company mix there.

Dealers that have a heavier weighting of SIC (standard industrial classification) customers (for example, construction) are coping, and there are others finding some success in pockets of unusual demand patterns such as the rise in PPE and packaging.

Almost every dealer we’ve spoken with has been affected by the drop in demand from their customers, as well as their teams’ shift to remote working and stock shortages in the supply chain.

Q: What’s your insight into what may happen going forward, long- and short-term?

SD: In the short term, we predict that once dealers have fulfilled the remaining demand from March’s boom, the ones that can’t immediately reduce their fixed costs will struggle. They will need to reconfigure their businesses in order to adapt to the remote workforces, disrupted supply chain and a dispersing customer base.

Dealers with drivers and warehouses will need to rethink the logistics of their situation fast and come up with more flexible ways of servicing their customers which will allow for them to de-risk their business and enable staff and customers to order online and reduce cash flow problems. On top of this, we think there will also be concerns surrounding collecting cash, and dealers will look to chase debts in order to cover immediate costs.

With many dealers furloughing large portions of their workforce, there’s likely to be increased pressure on the remaining staff across businesses to fulfil operational tasks. Because of this, many dealers will need to run the risk of deprioritising selling to keep the business going.

We’re likely to see an upturn in the use of digital channels, particularly social media, and email will enjoy a short-lived revival to appeal to the SoHo and consumer traffic. Alongside this, mobile traffic is set to increase significantly.

It’s very difficult to predict the full extent of the long-term impact of this pandemic, mainly because of unpredictable statistics and the uncertainties of how an exit from social distancing will work.

Working from home is the biggest influencer on when behaviours may normalise into new world demand patterns. It’s likely that there will be a staggered return to work which will be turned on regionally.

It’s also possible that this will be turned on and off periodically to manage the impact on mental and physical health, economic performance and pressure on public health services.

Ultimately, dealers will need to be more flexible, open to adapting their business model and technologically enabled if they are to survive this drawn-out adjustment to a new way of working and to succeed in the long-term.

Q: What are your top tips which dealers can action now to protect their businesses during this period and ensure they are still viable at the end of it?

SD: Turn as many fixed costs into variables as soon as possible (furloughing doesn’t come under this as it’s a government grant). This is critical for the current health and future success of your business.

Do some work to consider what your cost structures will look like if there is no furloughing and you only recover 80% of lost demand.

Focus on your online offering. Think about how well your functionality will hold up for a dispersed customer base who are working from anywhere and will need open pricing.

Start thinking now about how you will shift your product mix to meet and support changing working patterns.

Start to strategise about the long-term impact on deliveries. When the lockdown is eased, many employees will continue to work from home either through choice or at the request of their employers seeking lower rent of office space service costs. This will increase both the number of deliveries and the geographic area to service.

Work on checking in with as many customers as possible as frequently as possible. However, make sure you have an efficient process for actioning this.

Q: A topic that needs some clarification for dealers is the viability of deliveries to employee home addresses. Do you have any thoughts on this?

SD: Because of work from home restrictions, our industry’s non-key worker status and a significant drop in demand, many suppliers have reduced the flexibility of their delivery services. The dispersing of the workforce means that many van routes are now not able to accommodate the increase in multiple delivery locations.

Dealers are trying to accommodate this in the short term by delivering items themselves, but it’s not feasible in the long term. What’s clear is that this reduced flexibility has and will continue to lead to an increase in supplier-to-end-customer deliveries.

Dealer systems will need to be configured to manage a significant increase in number of delivery addresses per customers. Ultimately, the cost to serve this change will increase and dealers need to consider the proposition to accommodate this.

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