Diversification and AI - A perfect storm?

This article first appeared in the July edition of Workplace360 magazine.

Having gone through the first four stages of a typical ‘bereavement’ process when it comes to all things AI – Shock, Anger, Denial, Apathy – I decided several weeks ago to embrace the next stage - Acceptance - by taking myself off to seminars and various on-line forums from AI experts. The thinking was not to become an AI expert myself (heaven forbid) but to understand what it meant to (a) me, my TSP colleagues and my/our profession, and (b) our clients and their businesses. As I say ‘meaning’.

A start point for me was deciding on which LLM (Large Language Model – get me!) was going to be my LLM of choice to start the practical process of using AI. I settled on Gemini from Google after discussing the options with far more intelligent people than me. LLM’s, as I have learned and experienced, are fabulous yet (presently) imperfect tools that rely on unimaginable levels of data that rely on patterns and statistical correlations from the data they access. They don’t (yet!) understand language in the same way humans do but boy do they understand data. (by the way, they are learning human language and emotion already).

Fear not, this is not a clumsy attempt by me to position myself as an AI guru (even Gemini said ‘get real Nap…you?’) but, I think more importantly, to get to the meaning of what it can do for those of you to make the most of the opportunities a diversified model creates. Because I think it is huge. Genuinely game-changing.

One of the seminars I attended was a panel of expert speakers which allowed the opportunity for Q&A’s. The panel were unequivocal in their view that LLM’s are unmatched in answering any question with incredible speed and as much content as you could possibly need but the accuracy of the reply, and therefore it’s usefulness, only happens if they are asked the right question in the first place.

I asked Gemini a couple of questions to get the ball rolling –

‘Gemini, why is the traditional office supplies industry in decline?”

(I’m not being lazy here in getting Gemini to write some of my article, but I wanted to sense-check what gazillions of data sources would say when asked some key questions we are all considering as we ponder or drive diversification).

Here are some excerpts of what came back…

“The office supply distribution industry is facing a period of significant change. Traditional… sales are declining…..customer expectations are evolving rapidly. To thrive in this dynamic landscape, office supply distributors must embrace diversification, moving beyond a reliance on conventional sales methods and exploring new revenue streams.”

“What are the key challenges facing office supplies distributors?”

• Declining Traditional Sales: The shift towards digital workflows and remote work has reduced the demand for traditional office supplies, impacting sales through physical stores and catalogues.

• E-commerce Competition: Online marketplaces and large e-commerce platforms offer a vast selection of products at competitive prices, squeezing margins for traditional distributors.

• Changing Customer Needs: Customers are increasingly seeking personalized solutions, bundled services, and sustainable product options.

“What are the opportunities?”

“Despite these challenges, significant opportunities exist for distributors who can adapt and innovate:

• Expanding Product Lines: Diversifying into related product categories like technology accessories, janitorial supplies, and break-room essentials can attract new customers and increase revenue per customer.

• Offering Value-Added Services: Providing services such as managed print solutions, office design consulting, and furniture installation can differentiate distributors from competitors and build stronger customer relationships.

• Targeting Niche Markets: Focusing on specific industries or customer segments, such as healthcare, education, or government, can allow distributors to tailor their offerings and build specialised expertise.

• Leveraging E-commerce and Digital Marketing: Establishing a strong online presence and utilising digital marketing techniques can expand reach and attract new customers.

• Building Data-Driven Insights: Harnessing data analytics to understand customer behaviour, optimise pricing, and improve inventory management can enhance profitability and efficiency.

“How can AI successfully drive diversification?”

“AI can address the challenges and capitalise on the opportunities outlined above by enabling distributors to:

• Personalise Customer Experiences: AI-powered recommendation engines can analyse customer data to suggest relevant products and services, increasing sales and customer satisfaction.

• Optimise Pricing and Promotions: AI algorithms can dynamically adjust prices based on market conditions, competitor pricing, and customer demand, maximising revenue and profitability.

• Automate Sales Processes: AI-powered chatbots and virtual assistants can handle routine inquiries, freeing up sales staff to focus on more complex tasks and building relationships.

• Identify New Sales Opportunities: AI algorithms can analyse market trends and customer data to identify new product categories, services, and target markets for diversification.

“How can AI be best used to deliver sales growth? Give me examples”

“Here are some specific examples of how AI can be applied to drive sales diversification in the office supply distribution industry:

A. Personalised Product Recommendations:

• Challenge: Customers are often overwhelmed by the vast selection of products available, making it difficult for them to find what they need.

• AI Solution: Implement a recommendation engine that analyses customer purchase history, browsing behaviour, and demographic data to suggest relevant products and services.

• Example: A customer who frequently purchases office chairs could be recommended ergonomic accessories.

B. Dynamic Pricing Optimisation:

• Challenge: Setting optimal prices is complex, requiring consideration of market conditions, competitor pricing, and customer demand.

• AI Solution: Utilise an AI-powered pricing engine that dynamically adjusts prices based on real-time data and market trends.

• Example: The pricing engine might automatically lower prices on certain products to match competitor offers or increase prices on high-demand items during peak seasons.

C. Predictive Inventory Management:

• Challenge: Maintaining optimal inventory levels is crucial to avoid stockouts and minimise carrying costs.

• AI Solution: Implement an AI-driven forecasting model that predicts demand based on historical sales data, seasonal trends, and external factors.

• Example: The forecasting model might predict increased demand for specific products during back-to-school season, allowing the distributor to adjust inventory levels accordingly.

D. AI-Powered Chatbots and Virtual Assistants:

• Challenge: Sales staff spend a significant amount of time answering routine inquiries and providing basic customer support.

• AI Solution: Deploy AI-powered chatbots and virtual assistants to handle routine inquiries, provide product information, and assist with order processing.

• Example: A chatbot could answer questions about product availability, shipping times, or return policies, freeing up sales staff to focus on more complex tasks.

E. Market Basket Analysis for Cross-Selling and Upselling:

• Challenge: Identifying opportunities to cross-sell and up-sell products to existing customers.

• AI Solution: Use market basket analysis to identify products that are frequently purchased together and develop targeted cross-selling and upselling strategies.

• Example: If customers who purchase ergonomic chairs also frequently purchase adjustable desks and monitor arms, the distributor could offer bundled discounts or targeted promotions to encourage the purchase of these related products.

F. Lead Scoring and Prioritisation:

• Challenge: Identifying and prioritizing the most promising sales leads.

• AI Solution: Implement a lead scoring system that analyses lead data to identify the leads that are most likely to convert into customers.

• Example: The lead scoring system might assign higher scores to leads who have visited the distributor's website, downloaded product brochures, or requested a quote.”

G. Identifying New Product and Service Opportunities:

• Challenge: Staying ahead of the competition and identifying new opportunities for diversification.

• AI Solution: Use AI algorithms to analyse market trends, customer data, and competitor offerings to identify unmet needs and emerging opportunities.

• Example: AI algorithms can identify a growing demand for sustainable office supplies or managed print services, prompting the distributor to expand its offerings in these areas”.

This is me writing now. Wow! If nothing else, doesn’t this confirm what we all know already (or fear)? The traditional market is in decline. Customer expectations are evolving rapidly. Significant opportunities exist.

One of the questions I asked the panel at one of the seminars was ‘who wins most in this new AI world? Which types of businesses will see the most benefit?’

The whole panel agreed – SME’s. This really excited me.

They explained that SME’s are in a fantastic position to capitalise on technology and customer-related access / data that they couldn’t before. In other words, they can get noticed by those customers that were previously out of reach. More new business opportunities basically. The examples they gave were how the SME can penetrate larger customer opportunities as they could now (a) find that customer/decision-maker easier (b) position themselves as a viable and credible solution to those potential customers that possibly wouldn’t consider them before.

I will admit, this didn’t excite me so much. Not because I don’t like and recognise the benefit of winning new larger customers, but because being a credible solution for a larger customer doesn’t, for me, address some of the associated challenges that come with it – the main one being the customer themselves taking the risk on me as a provider (rather than a ‘large’ or ‘larger’ business like them -people still tend to mirror themselves when making the final decision). I do think pitching and winning large customers, even when we do win them, brings with it its own set of challenges around resource, time, cashflow, reliance/exposure (and the resulting risk for the future), and should be considered carefully.

The panel also then explained that, aside from being able to find and pitch for bigger wins, SME’s are in the BEST position to further mine their existing customers through selling a broader product range, bringing their wider offering to the customers attention that their customer didn’t associate with them before. SME’s also have the advantage of being more agile, flexible, able to embrace it quicker (take early advantage) and have close customer relationships.

I was much more excited about this. This is the core benefit, in my opinion, of a diversified offering we have been talking about. The other upside I took from The Rise of the SME (my words) was the indirect benefit the independent office supplies company could see – growth in their traditional customers; as their SME customer base grows, demand grows.

Some of the things that Gemini said need re-visiting:

‘Customer expectations are evolving rapidly’

‘Customers are increasingly seeking personalised solutions, bundled services, and sustainable product options’.

‘Customers are often overwhelmed by the vast selection of products available, making it difficult for them to find what they need’

‘Office supply distributors must embrace diversification, moving beyond a reliance on conventional sales methods and exploring new revenue streams.’

This is what we need. We need customers who need us. The kind of customer who values that single source of supply from a trusted provider that can provide not just every product they need but can provide clarity, advice, guidance and expertise in an ever-changing world. And now we can access the technology that allows us to prove it.

Now What?

I am satisfied that I have learned enough to satisfy step 5 of my bereavement curve – Meaning. The combination of a diversified customer solution and technology can be fully exploited as a result of this quantum leap in technological advances.

The final step of the bereavement curve - Integration. What do we do? How do we start to make the most of this. I was going to say ‘when do we start?’ but, for me, the answer is pretty obvious - tomorrow.

‘Gemini, I don’t have an AI solution today, where do I start?’

“Implementing AI successfully requires a strategic approach:

1. Define Clear Objectives: Identify specific business goals that AI can help achieve, such as increasing sales, improving customer satisfaction, or reducing costs.

2. Assess Data Readiness: Evaluate the quality and availability of data needed to train and deploy AI models. Clean and consolidate data from disparate sources to create a unified view of the customer.

3. Choose the Right AI Tools and Technologies: Select AI tools and technologies that are appropriate for the specific use cases and business requirements. Consider factors such as cost, scalability, and ease of integration.

4. Build a Cross-Functional Team: Assemble a team of experts from different departments, including sales, marketing, IT, and data science, to collaborate on AI initiatives.

5. Start Small and Iterate: Begin with pilot projects to test and refine AI models before deploying them across the entire organisation. Continuously monitor performance and make adjustments as needed.

6. Focus on User Adoption: Ensure that sales staff and other employees are properly trained on how to use AI-powered tools and technologies. Emphasize the benefits of AI and address any concerns or resistance to change.

7. Ensure Ethical and Responsible AI Implementation: Prioritise data privacy and security, and ensure that AI models are fair, transparent, and unbiased.”

“Finally Gemini, if I do all of this what does the future look like for the office supplies sector?”

“The role of AI in office supply distribution will continue to expand in the years to come. We can expect to see:

• More sophisticated AI models: AI models will become more accurate and sophisticated, enabling even more personalised and effective sales strategies.

• Greater integration of AI into existing systems: AI will be seamlessly integrated into existing CRM, ERP, and e-commerce systems, making it easier for distributors to leverage its power.

• Increased use of AI for predictive analytics: AI will be used to predict future trends and anticipate customer needs, allowing distributors to proactively adapt to changing market conditions.

• The rise of autonomous sales: AI-powered virtual assistants will be able to handle increasingly complex sales tasks, potentially leading to the automation of entire sales processes.

“And in summary please?”

“AI offers a powerful and transformative tool for office supply distributors seeking to diversify their sales solutions and thrive in a rapidly evolving market. By embracing AI, distributors can personalise customer experiences, optimise pricing, improve inventory management, automate sales processes, and identify new sales opportunities. To succeed, distributors must develop a strategic AI roadmap, invest in the right technologies, and build a culture of innovation. The future of office supply distribution belongs to those who can harness the power of AI to create a more efficient, customer-centric, and diversified sales organisation”

This could be a GREAT time to be a diversified office supplies provider. Couldn’t it?

Gary Naphtali has enjoyed a 30-year career in sales and sales leadership roles and led businesses and teams from start-up to mutli-channel organisaitons. Gary has advised businesses and organisations at a regional, national and international level, and coached, mentored and trained individuals - from trainee to board level - in more than a 100 businesses.