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Trends in the office management sector are seen as a barometer of the state of business growth in the United States. This is true in part because office supplies and services are known to be among the more discretionary investments made by commercial firms and municipal entities. For example, the volume of products or level of services procured shifts in line with expansionary efforts. In assessing the current and future state of the office management sector, three different, yet related, market-driving trends (substitutes, market fragmentation and profit trends) have been weighted.

Substitutes

  • There are substitutes for integral office management products and services
  • The popularity of substitutes has pressured vendors of traditional products and services to limit price growth
  • Some vendors are adapting by expanding their scope of service offerings or product catalog to include substitutes

Key Takeaway: Despite modest price growth for office management products and services, buyers can leverage the threat of procuring viable alternatives to obtain lower prices for traditional products and services.

Concentration

  • Key markets within the office management sector (e.g. communication and office furniture suppliers) are becoming dominated by a handful of firms
  • Concentration has risen on the back of widespread merger and acquisition activity
  • While the rising level of concentration has harmed smaller firms, it has driven competition among the top firms
  • Smaller firms are adapting by specializing in offering niche products and services

Key Takeaway: When dealing with top firms, buyers must pit vendors against one another or seek specialty vendors to obtain negotiation leverage. This practice will allow buyers to find a supplier that will offer a more acceptable price.

Profit Trends

  • Throughout the sector, the average vendor earns a moderate level of profit
  • To further drive profit margins up, operators are increasingly investing in automation machines and software to cut down wage costs

Key Takeaway: Moderate profit margins benefit buyers by giving them some leeway to negotiate on price. That said, buyers must be sure to properly research the financial health of a potential supplier before making a purchasing decision. Otherwise, buyers risk sourcing from a financially compromised operator, which could lead to a disruption of service and loss of capital invested in the contract or purchase.

Outlook

Key sector trends will continue to be favorable for buyers in the next three years. ProcurementIQ anticipates that prices for office management products and services will experience modest growth. As in recent years, substitutes will continue to be considered as viable alternatives to traditional office management products and services. In addition, price competition in the sector will further develop; vendors are expected to offer incentives to buyers for their business as they look to steal market share away from competitors. Finally, the average vendor’s profit margins are expected to increase, which will afford buyers additional room to negotiate rates for office management products and services.

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