The View From The Top: A State Of The Industry Overview Integra National Conference 20th September 2018 Martin Wilde: MD, Martin Wilde Associates Ltd

Martin Wilde Associates Established 2006 by Martin Wilde, who has been researching the global OP market since 1993 Specialise in researching the OP and associated industries Adhoc research: Market size & structure studies Market access research Customer perception/needs research Due diligence work Published research reports (in conjunction with OPI)

Recent MWA/OPI Published Reports Swimming With Piranha (2014): survey of UK OP buyers The Spider Report (2016): survey of UK online OP buyers The Phoenix Report (2016): survey of UK OP dealers Piranha Business (2017): survey of US Amazon Business customers The State Of The OP Industry (2018): survey of global OP company CEOs

State Of The Industry Report Annual in-depth telephone and internet survey of OP industry CEOs Fifth edition published in March 2018 Aims to summarise the OP market perceptions of ‘the key people that know’ in major manufacturer and distributor organisations in: Australia Benelux Canada France Germany UK USA 66 interviews carried out for 2018 study

Key Data This is data from the UK chapter only

Change In UK Core OP Market Value 2015-18 Predicted For 2018 Reported For 2017 Reported For 2016 Reported For 2015   Increase by 6-10% 0% 15% Increase by 3-5% 10% 8% Increase by 1-2% 20% Unchanged 5% 13% Decrease by 1-2% 19% Decrease by 3-5% 25% 38% Decrease by 6-10% Don't know 6% TOTAL 100% Base 20 13 16 All of those who believed that the UK core OP market had declined attributed this to the negative effects of digitisation. a couple were keen to point out that there were some ameliorating factors, such as inflation and the growth of demand for furniture: Another pointed out that demand for ink and toner had been negatively affected by growth in MPS: The minority of respondents who believed that the core OP market had increased attributed this to the above declines being more than offset by to inflation, growth in demand for furniture (and other high-ticket items) and even strong regional growth in the South of England market “Core OP” = traditional stationery, paper, ink and toner and office furniture

Market Value Estimates The value of the UK core OP market value at end-user prices was estimated by respondents to be £5.1bn on average in 2017. The most frequently-cited valuation of the UK addressable FM supplies market was £5bn, of which: Catering/breakroom supplies was estimated to be £1-2bn. Cleaning/janitorial supplies was estimated to be £1.3-3bn.

Change In UK Respondents’ Sales 2016-18 Predicted For 2018 Reported For 2017 Reported For 2016 Increase by more than 20% 10% 0% Increase by 16-20% Increase by 11-15% Increase by 6-10% 5% 15% Increase by 3-5% 35% Increase by 1-2% 23% Unchanged 20% 8% Decrease by 1-2% Decrease by 3-5% Decrease by 6-10% Decrease by 11-15% Decrease by 16-20% Don't know TOTAL 100% Base 20 13 The main reason given by the respondents who were expecting an increase in sales in 2018 was market share gains, often accompanied by the development of new product categories The respondents who predicted a shrinkage in sales in 2018 mainly explained that this was due to losing key accounts, worsened by the continued negative effects of digitisation

Change In UK Respondents’ Gross Margins 2016-18 Predicted For 2018 Reported For 2017 Reported For 2016 Increase 55% 30% 33% Unchanged 36% Decrease 9% 40% TOTAL 100% Base 11 10 6 Distributor Average Gross Margins In The UK 2017 were 26.5% The respondents who reported that margins had declined blamed this on product mix, winning lower margin accounts, a decline in the value of sterling and general price competition, especially from Amazon: All of the respondents who claimed that their margins had increased in 2017 claimed that this was partly a result of removing low margin customers from their business The respondents who believed that margins would increase attributed this to improvements in product mix and/or customer mixes The one respondent who believed that margins would decrease attributed this to inflation and price competition:

Fastest-Growing UK Product Categories 2016-18 Product Category Predicted For 2018 Reported For 2017 Reported For 2016 Catering/breakroom supplies 65% 75% 69% Cleaning/janitorial supplies 70% 46% PPE/workwear/signage products 60% Ergonomic & wellbeing products 40% 35% 38% Office furniture 62% Business gifts/promotional products 20% 8% Mailroom & packaging supplies 15% 0%

Fastest-Declining UK Product Categories 2016-18 Product Category Predicted For 2018 Reported For 2017 Reported For 2016 Traditional stationery products 79% 75% 62% Cut office paper 63% 55% 54% Printer/IT consumables and accessories 47% 50% PCs and printers 16% 10% 23% Mailroom & packaging supplies 11% 0% Tablets/iPads & accessories 5% Business gifts/promotional products 15% 8%

Average Share Of UK Distributor Sales 2017-18 Category Predicted For 2018 Reported For 2017 Base Janitorial/cleaning supplies 8.2% 6.8% 5 Breakroom/catering products 7.4% 5.6% Workwear/PPE/signage products 4.8% 3.4% Business gifts/promotional products 2.7% 2.2% 6 Wellbeing/ergonomic products 2.6% 2.0% Managed print services (MPS) 2.5% 4 almost all of these categories are expected to take a larger share of these respondents’ businesses in 2018

Fastest-Growing UK Distribution Channels 2016-18 Predicted For 2018 Reported For 2017 Reported For 2016 Amazon/Amazon Business 84% 90% 77% Large independent OP dealers/resellers 68% 60% 31% Other internet-only OP resellers 47% 55% 69% eBay 26% 20% 23% Facilities supplies specialists 16% 15% Education sector specialists 5% 8%

Estimated UK Share Of Amazon 2017 Indicator Reported For 2017 Average 16.3% Maximum 30.0% Minimum 2.0% Base 12

Fastest-Declining UK Distribution Channels 2016-18 Predicted For 2018 Reported For 2017 Reported For 2016 National contract stationers 58% 60% 85% Small independent OP dealers/resellers 47% 45% 54% OP wholesalers 40% 46% OP (B2B) superstores 26% 30% 38% Paper merchants 21% 20% 15% Consumer mass market (B2C) retailers 16% 8%

Average Share Of Private Label In UK 2017-18 Indicator Predicted For 2018 Reported For 2017 Average 12.6% 11.8% Base 10

Acquisition Intentions 2017-18 Predicted For 2018 Predicted For 2017 Yes, definitely 30% 8% Yes, possibly 38% No 20% 54% Don’t know 0% TOTAL 100% Base 20 13

What Will Be Acquired In 2018? Intention Predicted For 2018 OP specialists 42% Furniture specialist 17% IT/consumables specialist Breakroom/catering specialist PPE/safetry products specialist Other 33% Don’t know TOTAL 100% Base 12

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