Phil Jones MBE, managing director of ICT solutions’ provider Brother UK, discusses the challenges facing the channel and how firms need to become more service-led and adaptable in order to change
It’s well-documented and discussed that the current climate is a challenging one to be operating in. The unpredictable political landscape over the last year has created economic headwinds for importers, resulting in squeezed margins across the office products sector. Lingering uncertainty has also affected buying decisions as organisations increasingly look for predictability in an uncertain business environment.
In a bid to remain profitable, with a real prospect to grow, some vanguards in the channel have recently invested in upskilling their staff, implementing new IT systems, changing business models and designing new processes. For those that haven’t, there are choppy waters ahead. Firms need to overcome issues like pinched profit margins and customers demanding greater value at the same time as addressing long term issues like the sector’s ageing workforce. Resellers becoming more adaptable is key to meeting such challenges.
Profit margins are feeling the pinch
The weak pound has forced the cost of imported goods to rise – much to the dismay of firms locked into supply contracts. Those with a ‘box-shifting’ business model are experiencing eroding margins, with some even making a loss on their largest contracts due to fixed annualised pricing contracts. Distributor stock purchased at pre-Brexit prices has almost all gone, so higher prices are the norm on imported goods.
This puts intense pressure on business models in the channel as retained gross profit erodes. The search to find new categories, products and services is intensifying in order to lift gross margin levels whilst also finding a reason to start new discussions with customers.
While the current economic climate is different from 2008 there are parallels between how customers are behaving now and how they were at the time of the financial crisis. They want to hear how we can help them do more with less and they are increasingly looking for added value. What’s more, they often want to secure ROI within twelve months, not in the next few years.
Earlier this year at Brother we commissioned a report into office productivity and found that UK SMEs could save around five million working hours every week by fixing everyday IT problems. Meanwhile, a fifth of senior leaders in SME businesses were found to believe that solving printer problems is one of the top things wasting employee time. These findings show how well-placed our sector is to help businesses fix problems to improve productivity.
Resellers need to be shouting about the small wins customers can achieve. For example, if a customer were to buy printers transactionally it could cost them more in raising orders to buy consumables and pay invoices. Better value could be reaped via a tailored MPS solution, which is less time and capital-intensive and can yield more immediate results in terms of time and cost savings, leading to greater productivity.
Customers want more value
The bigger players in the channel have tackled this issue by adapting to provide services which can secure them long-term revenue and help safeguard profit margins.
However, changing to become more service-orientated does not happen overnight; at Brother this is a journey we’ve been on for some years, and one we will make further ground in during 2018. It’s mainly a matter of investing in the right skills, plus systems, and drafting in relevant expertise to deliver services. Doing this sooner rather than later will allow resellers to adopt viable business models which are more resilient to economic shocks and relevant for the future.
The channel needs more young talent
Another challenge facing the office product sector is that it has an ageing workforce and is struggling to attract young, emerging talent. At Brother we’ve safeguarded the future of our business through the introduction of an apprenticeship scheme. Five per cent of our workforce is now made up of apprentices who are all learning on the job while building experience in the sector.
Many young people are highly aspirational and our offering as an employer must hold its own against a range of competing sectors looking for talent. Brother has responded to this by investing in its Greater Manchester HQ in recent years to create a more engaging and collaborative workspace which is helping us attract and retain top talent, whilst also reviewing our reward and recognition systems.
These are tactics resellers need to consider to attract the talent of the future – vital for plugging digital skills gaps and offering firms the competencies needed to adapt.
Improving the workplace culture doesn’t have to mean splashing out on a ping pong table or having people bring their dogs to work. Rather, firms can become more people-focused and make small wins like flexible working, career progression plans and dynamic workgroups. Initiatives like these can help businesses achieve big gains in attracting new talent.
Time to adapt
There is a feeling that firms have been complacent for some time; however, we’re facing a period where adaptability is critical. Now resellers should make long-overdue investment in training staff, evolving business models and hiring fresh talent to tackle the issues ahead, while helping the sector to grow.
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