Clover Technologies is a global powerhouse in the imaging supplies industry and is the world’s largest collector and recycler of inkjet and laser cartridges as well as cell phones. Jim Cerkleski heads this massive operation with more than $1 billion in annual revenue, and getting an interview with him is about as easy as sighting a unicorn. Thanks to a new partnership with MWAi, the donation of a Harley “Fat Bob” for raffle as part of MWAi’s annual Rolling Thunder charity ride, and the Tokyo Innovation Fair, the impossible has occurred. Join us in the SpeakEasy as we discuss strategy with Jim Cerkleski, as well as Mike Stramaglio, the CEO of MWAi.
Clover Technologies announced a major rebranding earlier this year into two divisions – the Clover Imaging Group and the Wireless Group – how is that going?
JC: We have two very large divisions of this company now. Our wireless business is growing at a fast pace and the two units are so different from each other that we wanted to clearly separate them to allow both groups to leverage their exposure in their respective markets.
Our Imaging Group is focused now on the mid-market, and we want to be known in this market. Most know Clover as a very large company that sells only to the big guys, but it’s clear to us that the growth in the business is going to be in the mid-market, and for us it’s going to mean partnering with the OEMs, and probably more importantly, it’s MPS focused. Unfortunately, some of our clients don’t seem to really understand that. They haven’t embraced MPS. They haven’t embraced the whole concept of being a full-solution provider, and they haven’t taken advantage of what we really do in terms of having a comprehensive solution when it comes to not only the toner and the ink, but also the parts and the services behind it and our Total Cost of Ownership (TCO) commitment. They haven’t found a way to take advantage of it — they remain transactional buyers that buy toner and like good quality and good pricing. There’s a lot more to this business now, and that’s the real reason for the rebranding.
You mentioned your partnerships with the OEMs, which are a key component to your strategy for the future and to MPS in particular. I was at the Konica Minolta event last February when they announced Clover would be providing an expanded distribution market for them in Latin America and Canada. Tell us a little more about what this entails.
JC: Our international presence is a factor in the rebranding and sends a message that we’re not just a U.S.-based company — we have locations in 23 different countries, we have manufacturing operations all over the world, and we can be more than just a remanufacturer to the local market. We have manufacturing in Brazil, Serbia and Vietnam, for example.
Our reach is so much greater than anybody else in the space, and we weren’t taking advantage of that. Even some of our best partnerships didn’t take advantage of that footprint that we had. The OEMs are fully taking advantage of it, and they should. It’s a lot more meaningful to them. They can have an international partner service them.
Can you talk about your strategy with MPS in North America? What do you see as the path for the mid-market that you’ve mentioned?
JC: We’ve seen 8 to 9 percent year-over-year growth in the mid-market, whereas our business in the big-box sector is flat, if not down. There is a massive opportunity in the mid-market that we have never tapped. The whole idea of rebranding, to creating the Clover Imaging Group is that, first of all, we merged MSE into our holdings. We need the marketplace to see that we are one company, that this is one group. We’ve had a really successful integration with MSE. Yes, MSE is a great company, but it’s really more — MSE is a brand.
The goal going out to the marketplace is to provide everything — premier, top-quality product that’s built a little bit differently than the rest, as well as value-priced, IP-clean product, and offering all of this with the services that are at the core of the companies that we acquired. We offer parts and maintenance and agreements on servicing their customers and providing the complete spectrum of MPS solutions for them. It’s a full service suite that the Imaging Group is now offering. We’re trying to eliminate customers having to have five accounts with us.
Would you consider your ability to offer this “one-stop shop” a strategic advantage?
JC: Yes. We’ve made a commitment on distribution. We have five or six distribution points. Now we’re stocking the whole suite of products, from soup to nuts, all throughout those distribution points. In the parts world, for example, if you can’t get products shipped out next day to your customer, you lose the order. It’s about having the products, first of all, and it’s about having it in the right warehouse. That advantage that we have for the customer is huge. We’re putting massive amounts of inventory on the shelves. We also invested in superior service levels — we are revamping the whole customer service side of the business and installing sophisticated new software to service our customers better.
We learned a lot from MSE when we merged that company into our holdings. They have great, high-touch relationships with their customers. At Clover, we were used to dealing with very large electronic orders and the focus was on our back-end technology to deliver those. As a result of the merger, we were able to deploy the best practices from both worlds — our systems technology and ability to leverage the teams that we had, and MSE’s excellent client relationships. We brought the teams together to create the best of breed, and that’s what the Imaging Group now is going out to market and executing on. It’s not lip service — we are servicing the customers significantly better than we did when we were just Clover. That learning curve represents a change in how you have to do business in the mid-market. The mid-market does not want to stock anything, they want you to do the shipping, and they want it labeled properly — they want their name on the box. They want a lot of special services. We didn’t have to do that with our large big-box relationships.
Mike – you mentioned that Clover is now officially a part of the Technology United alliance and is also partnering with MWAi on supplies fulfillment integration into your new ERP solution for the channel, FORZA. You also mentioned that the Tokyo Innovation Fair is coming up and Clover is one of the title sponsors. Can you talk a little bit more about that?
MS: We’re very honored to have Clover as a sponsor of the outstanding annual Tokyo Innovation Fair. In addition, we’re really proud of the integration components between Clover and MWAi that we’re building now on the FORZA SAP Business One platform. Lastly, I must give kudos to Jim and his team — I organize a motorcycle ride every year for charity, and I happened to visit Clover in June and saw the Clover Harley motorcycle in the lobby. This was the first time I had ever met Jim and he very quickly, without hesitation, said they would love to be involved. That’s how the donation of the Clover “Fat Bob” Harley to the Jillian Fund charity ride came about.
JC: Clover just didn’t have the exposure to the BTA channel — we didn’t understand this channel and this market. Mike opened our eyes to it. It’s a shame that we weren’t involved in this channel earlier, because I think we’ve been missing some serious opportunities. Recently I have been going out and personally meeting the dealers in this channel. I’m having a ball! I love meeting the executives that are running these entrepreneurial businesses. It’s exactly what I used to do. I used to have a copier dealership. I look at it and say to myself, “man, I used to love this.” You get a better connection with the owners. It’s not all business. You get to talk about your children and families. It’s a different world. It’s not all about just, “What can you do for me?”
That’s what I really enjoy and I look forward to growing it in 2016. We’re going to go out and tell our story, and provide solutions to these companies that they didn’t even know we had. I stepped out of actively managing the imaging business for an entire year to build up the wireless side, trying to build a strong executive team to run that side of the business because it’s growing so fast — it is approaching $400 million already. It’s huge. We have more than 13,000 people just on the wireless side of the business now that are repairing phones. My goal is to have an executive team in place that takes the wireless division to the next level so that I can now focus on the imaging side, because I really miss the imaging side.
Mike, could you talk a little bit about the partnership with Clover and the integration with supplies fulfillment and parts delivery and some of the goals for your group at the Tokyo Innovation Fair?
MS: It’s a great opportunity for MWAi to work with Jim’s team and Clover. The marketplace is transforming at an accelerated rate. Clearly, the combination of print media and mobility, wireless, the Internet of Things, auto procurement — everything is happening at such an unbelievable pace. MWAi can help Clover navigate this new and constantly changing landscape; this open architecture nature of a world without borders.
Connecting the dots with the OEMs in Japan is a clear and distinct advantage, because in combination with Clover, MWAi can connect the machines into an open architecture platform and serve up auto procurement. All of the bidirectional communication with the machines is no longer a reverse engineering problem with all the high costs and time that go with that. We’re getting the necessary data freely from the OEMs now, which is an accelerator affording us lightning speed. Simply bolting on various applications is not going to give you the speed and visibility you need nowadays to run your business. The faster MWAi can get the marketplaces to adopt the open architecture nature of a product like FORZA SAP Business One, the better off the channel is going to be long-term.
The significant reality is that everybody at the OEM level is using either an Oracle or SAP platform. Our product automatically integrates into their heavy enterprise back end. Any dealer that decides to utilize an SAP FORZA product is going to be able to easily integrate into their own dealership and ultimately into the OEM. That moves things faster. So through our new partnership, anyone who buys a Clover product is going to be in a full auto procurement mode with just a push of a button or simply through the intelligence of the machine. That’s just one component. I think Jim and I have a phenomenal opportunity to break the marketplace loose in a way that no one else really can, because we’re going to replace the infrastructure of the industry. The OEMs want it, which is a big differentiator — before they would fight us, and now they’re pushing us. I think it’s a great opportunity, great timing, and our biggest responsibility is to ensure we map our business strategies together at a highly collaborative pace.
Jim, what do you see as your biggest challenge in the next couple of years on the imaging side?
JC: I think our biggest challenge is the same challenge that we’ve been faced with for the past two or three years, and it’s the clones coming into the marketplace. U.S. Customs and the OEMs claim that they’re going to shut it down, but they really have not been able to make any discernible impact. I think that the challenge is going to be whether they truly can shut it down in a timely fashion before the legitimate players are taken out of business, because it’s really scary. I am in constant communication with the OEMs about this issue and that’s one of the reasons why I want to partner with the OEMs. I want the OEMs to know that the legitimate remanufacturers are not the bad guys, it’s the blatant and disrespectful clone manufacturers that have no respect for IP at all. They’re getting away with destroying an entire industry. I see it in my empties collection — I collect more empties than anybody in the world, and my reverse logistics business is massive. It’s costing me millions and millions of dollars a year to take back product that is worthless to us and everyone else. Because Clover is a certified environmental company, we have to discard the useless IP-infringing cores responsibly and it is very expensive to do this.
Part of the strategy for combatting this is partnering with the OEMs and helping them by educating them on what we are seeing out there in the market.
MS: The Tokyo Innovation Fair is a fantastic opportunity to get with the executive powers at all the OEMs, at the highest level of corporate management. I think this kind of opportunity with Clover in Japan will shortcut a lot of conversation and push that education forward quickly. The OEMs have branches and subsidiaries around the world. They are firmly in the imaging supplies business globally. If they’re going to be in this business, then they should be in business with companies that have respectable business models and highly respected products. I think Clover is in the right place.