The Biggest Theme You Didn't SEE at NeoCon 2018

by Amanda Schneider

Respitalty, Scandinavian design, biophilia, and height adjustability are all trends we've heard a lot about since NeoCon 2018. Their inspiring influences were seen throughout the show, and design principles are following these evolving trends ... but lurking in the corner was a subtle underlier that seemed to be ever-present at the show, yet perhaps under-discussed. The rippling effect of recent acquisitions has caused many industry constituents to take a step back and examine how these changes will affect the way we do business. Steelcase has partnered with West Elm, soon will acquire Smith Systems, and has officially joined forces with Belgian outdoor furniture manufacturer Extremis. (A complete list of Steelcase partnerships can be found here.) Herman Miller has recently announced formal relationships with Hay, and Framery and Maars set up a new partnership. The list is expansive and seems to be setting the stage for our industry's new norm.

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What's driving the change? Dave Bloch, President of INDEAL, an Independent Dealer Association for the contract office furniture industry, believes the sheer number of acquisitions is the response to a larger industry shift. “These recent acquisitions clearly indicate that the majors have recognized the need to diversify their product offering to address the changing product mix,” shares Bloch. As ancillary becomes a bigger piece of the floorplate, many majors are acquiring to be more inclusive one-stop shops.

This statement was echoed by Chris Cole, VP Space Solutions with Forward Space, a leading Steelcase dealer in Chicago. He said, “the recent acquisitions and partnerships allow for a streamlined delivery model that offers our clients convenient access to what is becoming the industry's largest network of makers and creators of products for the workplace, all delivered on one truck. Clients may also benefit from aligned finish palettes and surface materials. Sometimes the client gains financial advantage since their spend with the main vendor may reach higher discount tiers. For us, this has reduced the in-house workload and has greatly improved our complete and on-time project metrics.”

Changing the Process for Key Players

What many may not understand is the chaos caused in the independent rep community when one of these lines is acquired. These small, independent business owners often have pioneered these lines by building key relationships and brand awareness around smaller brands that previously had little to no awareness. Then, with each acquisition, the rep's whole business shifts overnight. Printed literature now is obsolete, website changes are needed, and communication to dealers and the A&D community can be time consuming. There's also a need to rebuild the line package to be more complete. What looks like a small ripple can become a tidal wave to the independent rep community affected.

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Sid Meadows, Founder of Embark CCT, an in-industry coaching, consulting, and training company that focuses on small to mid-sized businesses says, “it's possible that the biggest impact of these types of acquisitions will be on the dealer. The majors are broadening their reach into the market and growing beyond their typical product offering – all to drive a single source solution. At some point, we should expect that they will push their distribution even harder to be sure that 90 percent or more of their offering is from [the major line], thus, creating a distribution model that does not have room for small- to mid-sized manufacturers, unless they have truly unique products.”

Partnerships are Expanding Opportunities

Navigating change often leaves us uneasy, but many industry players are seeing these emerging relationships as opportunities. Sean Cronan, President of manufacturing rep firm Cronan & Associates, shares that while these partnerships have not had a direct effect on his business, there have been ripple effects. “Most of these acquisitions have actually created opportunity for us,” shares Cronan. “When one of these companies is bought by, or partner with a major manufacturer, those manufacturers often overlook those dealers that are not aligned with them. Those dealers who often were key in building the business that they are acquiring. The manufacturer making the acquisition typically sends the message that 'nothing will change,' just to calm fears and keep orders coming in. In some acquisitions by major manufacturers, those non-aligned dealers were looking for alternatives the minute the announcement took place, because they know that it is only a matter of time before that major line will cut them off and only make that product available to their aligned dealers. That creates tremendous opportunity for us to go into an account that was consistently buying those products. Many of the major manufacturers often overvalue their brand. What they often overlook, is the independent dealers brand, and the independent rep's influence in the selling process.”

These changes will affect unique players in the industry differently, but holistically, many believe these changes are for the better. Speaking to those that may see this change as detrimental, Cronan says, “for those negatively affected, they need to understand that there is always opportunity. Even when you lose a line, you can look at the loss of that income stream as a negative. But, almost always, when that has happened to us, we have ended up in a better place as a result. If you are doing a good job, manufacturers find you...or vice-versa.”

Image Credit Steelcase.jpg

There are lots of opportunities for process change in our industry, and Bloch believes these new partnerships may be a step in the right direction. He adds, “most European manufacturers have distribution systems in place that are difficult to manage from a dealer's perspective (long lead times, poor financial terms, limited service and support, no local representation, limited commercial discounts, etc). We, as an industry, need to get back to purchasing product from reliable, financially feasible distribution partners. These acquisitions and partnerships can help drive that.”

Inviting Innovation & Entrepreneurship

Several commenters on this topic brought up the message this sends to our industry as a whole. While, overall, we recognize we are an aging industry that may struggle more than most to attract young talent, perhaps this all sends an incredibly positive message about the entrepreneurial opportunity within contract interiors today. Meadows says, “I'm a huge advocate of small businesses, and this type of change impacts them on multiple levels. We need small businesses, their ideas, their designs, their products, and their passion. All of us need to embrace these entrepreneurs and do what we can, each and every day, to help them grow and prosper.”

Cronan agrees, and believes these partnerships are helping to attract younger talent to our waning industry. “Being able to create a business then sell it in a matter of years is a great entrepreneurial story,” explains Cronan. “Our industry needs more of that. We have a tremendous shortage of young people, and these stories can only attract them. We are competing with sexier, more appealing industries than office furniture. For a young person to see the industry producing millionaires is not a bad thing.”