Essendant will remain independent, says Staples CEO

Staples CEO Sandy Douglas has told OPI that the reseller “fully intends” for Essendant to be run independently after it is acquired, including the firewalling of customer data.

Douglas – who took on the Staples CEO role in April – said that he had been aware of dealer concerns around the confidentiality of customer data once Essendant is owned by Staples.

“We want dealers to know that we fully intend for Essendant to operate independently and that there will be no interaction between Staples’ commercial operations and Essendant’s commercial operations,” he told OPI in a telephone interview, saying there would be a firewall put in place which guaranteed the security of dealers’ data.

“We can 100% guarantee to dealers that their private customer information and all the related commercial details will be strictly protected,” he stated.

Whether this type of firewall will be imposed by the regulatory authorities remains to be seen, and Douglas did not comment on the status of the ongoing FTC investigation. Nevertheless, the FTC did require Coca-Cola to put a firewall in place when it acquired its largest North American bottler in 2010. That is something that Douglas, as a former President of Coca-Cola North America, is very familiar with and he again pointed to parallels between Coke’s bottlers (which are now independently owned) and independent office products dealers, stating that the bottlers are far more competitive with the scale of the US drinks giant supporting them.

Douglas also said that Staples would allow the Essendant leadership team run the wholesaler “for the betterment of dealers”. When OPI suggested that Staples might shut down Essendant’s Vertical Markets Group – which supports dealers in bidding for national and public sector accounts, often against Staples – he said: “I can tell you very clearly that this would not be our intent. We believe that Essendant’s success will be in the way it enhances and the way it serves its dealer customers, and competition is an important part of what we’re hoping to promote and enhance. Any concerns that we would dismantle it to help Staples would be unfounded. We simply won’t do that.”

Commenting on how he saw Staples’ relationship with dealers working, Douglas said: “The interaction would be any way that we as a scaled enterprise could help dealers with costs, efficiencies, supply chain, technology and capability.

“This entire endeavour does not work unless dealers that are served by Essendant quickly see value. Hopefully, over time we can attract more dealers, but at this time we are focused on the ones that are there, and giving them quick and concrete evidence that this deal – which probably caught them by surprise – turns out to be something they see value in very quickly.”

Douglas said he hoped dealers would adopt a “wait and see” attitude to the Essendant acquisition and would give the Essendant management team the opportunity to present its proposals once the deal has been approved. He added that combining the scale of Staples with the “unique and special capabilities” of local dealers could prove to be a very compelling and competitive proposition in the market.

Douglas’ points are reinforced in a letter from himself to Essendant CEO Ric Phillips, and a letter from Phillips and Essendant’s President of Office & Facilities Harry Dochelli to the wholesalers dealer customers. Both letters are published in full below.

 

Essendant letter to customers, 25 September

Dear Valued Customer,

As you may have already seen, Staples launched their tender offer yesterday morning, allowing Essendant shareholders to begin tendering their shares to Staples and marking an important milestone toward completing our transaction.

We know many of our independent office products resellers have voiced questions about Staples’ plans for Essendant following the completion of the transaction. To that end, we want to share the attached letter we recently received from Staples’ Chief Executive Officer, Sandy Douglas, confirming our discussions with him and others at Staples and outlining the ways this transaction will enhance Essendant’s ability to efficiently deliver a strong product and solution offering at more competitive prices, which will clearly benefit independent resellers.

As you’ll read in Sandy’s letter, this transaction will allow us to benefit from Staples’ lower costs, which will be shared with our customers, and will allow us to leverage Staples’ vast product assortment to provide customers with additional product solutions. In addition, Staples has heard the concerns voiced by some of our customers about how Essendant customer data will be used after the transaction closes. Staples has committed to ensuring that the commercial operations of Essendant and Staples will remain completely separate, as they are today. Staples plans to put in place a strong, externally monitored firewall to ensure that Essendant customer data is entirely insulated from Staples’ sales team.

It is clear from Sandy’s letter that Staples appreciates the unique value proposition of Essendant’s customers and will continue to support their success in the market. We are confident that, upon closing, Essendant customers will quickly see benefits from this arrangement.

Over the coming weeks, Essendant will continue to work toward meeting the regulatory, shareholder and other conditions necessary for completion of the transaction, which we expect to close in the fourth quarter of 2018. As we’ve previously shared, your Essendant point of contact remains the same, and you can be sure that our relationship with you remains our top priority.

Thank you for your continued partnership. We look forward to sharing the benefits of this transaction, continuing to invest in the independent dealer channel, and providing your business with the products and solutions it needs to grow. We will keep you informed of further developments as appropriate, but in the meantime, please feel free to reach out with any additional questions.

Sandy Douglas letter to Ric Phillips, 24 September:

Dear Ric:

I wanted to take a moment to summarize the benefits we see from our potential transaction for Staples, Essendant and, most importantly, Essendant’s independent dealer customers.

While we understand that Essendant dealers may be uncertain about working with Staples going forward, we are hopeful they will give Essendant (powered by Staples) a chance to show them what we can do together. I am confident they will see immediate benefits and, over time, even more reasons to maintain and grow their business with us.

I recognize it may be tough for dealers to see themselves working with a company owned by Staples, who they have long viewed as a big, arrogant competitor. For example, some may be worried about Staples leveraging their customer data in competition with them. We can say unequivocally that we will put in place a strong, externally monitored firewall to preserve the integrity of Essendant dealer’s data, keeping it 100% insulated from Staples’s sales teams. Staples’ commercial operations will remain completely separate: dealers, other than the benefits they will receive from Essendant’s added capabilities, will continue to compete with Staples as they do today.

This transaction will allow Essendant to procure product from manufacturers at Staples’ lower cost and allow the combined company to negotiate even better pricing. Independent dealers have a higher cost of goods, disadvantaging them when competing with larger companies that can use their scale to obtain products at lower costs. Essendant’s lower costs, which can be passed on to dealers, will help them narrow this gap and provide additional value to their customers.

Some dealers might ask: why would Staples do this? Our market analysis and experience tells us that independent dealers win business, for the most part, because of the high touch service they provide and their close local and community relationships, while Staples earns business where price and process are deciding factors. Therefore, helping the dealers flourish will grow Essendant’s wholesale business, and the sales and profits for the combined organization.

As such, our goal in this transaction is certainly not to marginalize the dealer community Essendant serves, as this would be self-defeating. Instead, we want to help dealers grow their business and take them to new levels of sales, profits, and strength! Adding our supply chain capabilities, expanded product assortment, and e-commerce innovation to Essendant’s offering can provide dealers with even more resources to help them succeed—accelerating profitable growth for all of us!

In addition, we are working aggressively to make Staples much better at what it does and are hopeful that, by teaming up with Essendant, we can help independent dealers be more effective at what they do. In short, we believe that 1 + 1 can equal much more than 2!

Please feel free to share the contents of this letter with the dealers as you feel is appropriate. I look forward to continuing to work with you to make this transaction a reality and achieve its full promise for Essendant and your independent dealers.

Ric, on a final personal note, I am excited about the potential of working together to support your dealers. I have a personal history of working with local Coca-Cola Bottlers and have seen over and over again the growth potential of empowered local entrepreneurs and their businesses. In a world of bigger and bigger business, there is a winning place for well-connected local companies that are able to get the benefits of scale in their businesses. This is what we hope to help with for you and your dealers.

[…]

P.S. As soon as it’s appropriate, let’s have a meeting with the dealers to hear all of their questions and concerns. I know we can win their trust with our actions, but it starts with listening well.

 

Reprinted from OPI.net, click here to view the full article.