Thursday, August 17, 2006
The Oregonian

Supplies office products and furniture to businesses

12600 S.W. 68th Ave., Tigard

Web site: officeproductsnorthwest.com

Majority owner: Paul Zimmerman, president

Minority owners: Paul Heer, vice president and sales manager; Doug Key, operations manager

Employees: 22

Feng shui: The interior of the company's 11,500 square-foot headquarters was designed by a consultant seeking balance and harmony with a fountain, rich wall colors and other elements.

Slim operation: The company owns no warehouse or trucks, ordering from suppliers who fill orders in a day and contracting for delivery.

Sales force: Many of the 10-person sales force, with an average of 15.8 years experience, have brought customers with them from competitors.



An office supply company manages to stay competitive on pricing while boosting service and efficiency

Thursday, August 17, 2006
JONATHAN BRINCKMAN
The Oregonian

Paul Zimmerman has built a low-cost way of selling office supplies to businesses -- but he said he has no hope of catching up with any of the four big-box office supply stores with outposts in the Portland region.

Those stores dominate the $300 million-a-year office-supply market in the Portland area. Zimmerman said many of his potential customers assume the big-box stores have lower prices. That, he said, is no longer true.

"If we have the opportunity, we can show we are as good or better than the competition. We're not getting that opportunity, and that's a little disappointing," Zimmerman said. "The perception issue is the biggest hurdle for us."

Industry experts agree: It's not enough for local retailers or suppliers to match the national companies in product prices. They must win over customers with better service and more personal touches than the national firms can provide. They also must market themselves aggressively.

Chris Bates, president of the National Office Products Dealers Association in Virginia, said large advertising spending by big-box stores, even though intended for retail consumers, affects business buying decisions.

"The advertising that is aimed at us as retail consumers spills into our consciousness as business buyers," he said. "The perception battle is an uphill battle."

That challenge is made more difficult by the fact that for much of the last 20 years, the perception that big-box stores are cheaper was largely right, Zimmerman said. When big-box stores -- Office Depot, Staples, Office Max and Corporate Express -- moved into the Portland area after the mid-1980s they revolutionized the market, buying in high volume and giving customers more choices and lower prices.

Zimmerman, who owned a Portland office supply company from 1977 to 1996, said the big-box stores shook up what had been a high-margin line of business. "All the dealers, including myself, were pretty complacent," Zimmerman said. "We were all doing fairly well."

Five years after he got out of the office-supply business and sold his first company, Zimmerman started officeproductsnorthwest. Instead of having a warehouse and delivering to customers -- the way he used to operate -- he has no inventory or trucks. When his company gets an order it calls United Stationers -- a large wholesaler with a Portland warehouse -- which then delivers to one of two trucking companies under contract with officeproductsnorthwest.

Those truckers transport supplies to customers, usually the day after the order was placed.

The cost to customers is low, Zimmerman said, because United Stationers' huge volume -- it's 2005 sales hit $4.5 billion -- gives it low prices from manufacturers. Zimmerman buys some items from manufacturers directly, but through a Chicago-based buying group that allows him to get those items at low prices, too.

John Stirek, owner of Pacific Office Furnishings in Portland, said he realized he couldn't compete with the big-box stores and sold the office supply part of his business in 1994. Now his company sells only office furniture, specializing in Herman Miller products.

Stirek approves of what Zimmerman is doing.

"Small dealers aren't big enough" Stirek said. "They (United Stationers) can ship for you cheaper than factories will sell it to the small dealer."

Stirek also has no warehouse and arranges for factories to ship furniture directly to customers. He said it makes even more sense for office suppliers to have no inventory because, with tens of thousands of items, small dealers would have to charge very high prices.

"Zimmerman's got the right model," Stirek said. "It's a more efficient system, and efficiency is what works these days."

Zimmerman said his system gives him a competitive advantage of sales and service over big-box stores. His sales force of 10 people is deeply experienced -- averaging 15.8 years -- and has long-term relationships with many customers, he said. Those relationships mean that most of the sales force has brought customers from previous companies.

Zimmerman's sales force is paid entirely on commission. He said his sales force earns about 25 percent more than comparable performers at his big-box competitors.

The customer service staff of eight works the phones. The staff is local, which Zimmerman said customers like, and more knowledgeable about office supplies than the customer service departments of big-box competitors, which he said are often outsourced offshore.

"What separates us from our competitors is we have better customer service, local customer service," Zimmerman said. "We're a sales and service company, not a warehousing and distributing company."

Some officeproductsnorthwest customers say sales and service got them on board. For some, it's been a matter of personal loyalty to sales employees that Zimmerman has attracted, like vice president and sales manager Paul Heer. A minority owner of officeproductsnorthwest, Heer started out as a delivery person in Zimmerman's first company.

Hilda Taatjes, office administrator at Fujimi America, said she's stayed with Heer as he's worked for three companies. Tualatin-based Fujimi, a manufacturer of abrasives for the high-tech industry, employs 100 people.

"Our experience with Paul is that we can depend on him, he's quick to respond," Taatjes "We have learned to have a good trust relationship with Paul, so we're sticking with that."

Jan McBride at Rogers Machinery Company Inc., a Tigard company with 180 employees that sells industrial machinery, said she works with Heer because he will deal with small issues for her. But also, she said, she hasn't found a price difference between officeproductsnorthwest and its larger competitors.

"We have a list of products we stick with, and every five years I have let someone else come in and bid on them," McBride said. "I found they might beat Paul on a few items, but they will be higher on others."

Other customers say they use officeproductsnorthwest because they like the service it offers.

"They provide a lot of individual attention to us," said Jonelle Dean, a senior administrative assistant at the Portland office of KPFF Consulting Engineers, a Seattle-based engineering firm. "Price is not the first thing we consider."

Zimmerman may have satisfied customers, but he said he'll never be able to approach the market share of big-box competitors. He won't disclose his exact annual revenue, but he says it's around $15 million to $20 million. He said that's the largest volume of any independent office supply dealer in the region, which he estimates together post $30 million in annual sales.

That's about 10 percent of what he estimates is a total Portland market sales volume of $300 million a year.

"Independents are not my competition," Zimmerman said.

He wants to eat into the market share of big-box stores, but said their enormous advertising expenditures make that difficult.

"It's a challenge. We don't have any easy answers, other than hard work."

Jonathan Brinckman: 503-221-8190; jbrinckman@news.oregonian.com Contact Brinckman if you have a suggestion for a business to profile.