To: Norman Hoffmann
From: Brian NnadiSubject: Staples and Office Depot Memo
Date: October 10, 2018
Office Depot and Staples are both businesses that sell office supplies. They compete in the office supply retailing industry. Office depot made an arrangement with FedEx so that its customers could use any FedEx service and solution options in any OfficeMax and Office Depot store. These include FedEx express, FedEx ground, Express, International ground, and FedEx international priority. At the Staples Company, Ronald Sargent retired as the President and Chief executive officer. Then someone named Shira Goodman took over that role and said she was excited about going forward with the company. Staples had a 20/20 strategy that will speed up the growth with mid-market customers in North America. It made an arrangement with a company called Workbar that will provide better work areas for people in remodeled Staples stores. These spaces have a cafe, a phone section, and a quiet working space. It also has a section where people can print some documents. If you have many documents to print out then you would have to go to staples and print them there.
Office Depot and Staples have consumer segments that they serve. Staples has stores in North America, Canada, and The District of Columbia.(Staples Segments.2018) Its retail operations focus on serving the needs of small businesses and power users.(Staples Segments.2018) The strategy for the stores in North America is to: offer a store environment that’s easy to shop in, with quality products that are available and easy to find, fast checkout and helpful, knowledgeable sales associates.(Staples Segments.2018) It has a delivery segment that is divided into three business units: Staples Business Delivery, Quill Corporation, and its contract stationer business that goes under the names “Staples National Advantage and “Staples Business Advantage”. Staples Business Delivery is for the small business, home offices, and power users that want to have “next business day” deliveries for orders over $50. The delivery orders come from its delivery fulfilment centers and sent out through delivery hubs. In some of the markets, the orders can come straight from the retail stores.(Staples Segments.2018) Quill Corporation is a direct catalog business with a goal of serving the business needs of over a million small and medium sized businesses in the United States.(Staples Segments.2018) It also sells office products on its website quill.com. Quill attracts and retains customers by providing great customer service and superior brand products. The contract stationer operations focuses on servicing the medium sized to large businesses, that need more service than what is normally given by a regular retail or mail order business. It offers customized pricing, payment terms, usage reporting, the stocking of certain proprietary items, and full service account management. Staples National Advantage is a nationwide contract stationer business that sells to large multi-regional businesses. (Staples Segments.2018) Staples Business Advantage mostly sells to medium sized and large regional companies and can also handle smaller accounts.
Stephen Dougherty, Patrick Sher, and Jack Kopkin opened their first Office Depot store in Lakes Mall in Lauderdale Lakes, FL on October in 1986. Then Office Depot became a public company and expanded to the west coast in 1988, when they bought Office Club. International operations began in 1994 because they expanded in Mexico and had licensing agreements with Poland, Israel, and Columbia. In 1995, its 500th North American store was opened and its first ecommerce website was started in 1996.
Office Depot has a business level strategy that will guide them to future success. It found a number of opportunities to increase sales in the contract channel by improving the penetration into close categories, and increasing the share of the wallet with existing customers. One opportunity involves them offering an expanded collection of products so they can maintain its relationship with customers. The market for these products is still large so the potential for Office Depot to grow is there. In 2014 Office Depot started a U.S. Retail Store Optimization plan. The first part of that plan was finished in the second quarter of 2016. This resulted in 400 stores being closed with sales transfer rates as well as its 30% stated target, leading to 100 million ongoing benefits. Office Depot will move on to close 300 more stores in the next 3 years. The company wants to continue its early success with the future format by expanding the original program to 24 stores by the end of 2016 along with 100 stores in 2017. This format has a 15,000 square feet footprint and is designed to give its customers an upgraded shopping experience with a curated collection of products and services. Office Depot has a plan to cut costs in its business. It involves the use of a better customer coverage model, lowering the procurement costs, reducing the overall general and administrative costs, and coming to terms with the benefits from the expanded retail store optimization program. All of this will bring over 250 million annual benefits in the end of 2018. It seems like Office Depot wants to reinvent themselves in a way because they want to close down stores, open new ones and remodel some existing ones. I think this will turn out to be a huge success with all the new things that the stores will have to offer.
The Staples business level strategy is about 3 strategic priorities that will move the company forward. These include: keeping the profitability in the North American Stores, doing everything necessary to reduce costs and drive efficiency across the company, and bringing the geographic focus to North America by looking for strategic options for its European operations. The 20/20 strategy that Staples has will have the transition of a product focus to a customer focus, a retail culture to a delivery culture, a high/low pricing strategy to an everyday value pricing, and shifting from a products company to a products and services company. Staples shut down the stores that were losing money and kept the ones that were bringing in a decent amount of profit. It has a differentiated approach when it comes to serving mid-market customers that involves innovation and technology. What it will do is combine the contributions of its salesforce with digital selling tools and information on customer preferences and behaviors. What sets Staples apart from everyone else is its huge selection of products, competitive pricing, and quick delivery. Its 2nd quarter mid-market sales improved from what it was in the previous year because of the double digit growth in items beyond office supplies. An increasing percentage of its customers are using the membership program which gives them discounts and excellent levels of service. This is creating more revenue and customer loyalty. Staples wants to use acquisitions and mergers as growth incentives. With everything that it is doing, it will cut costs on services, saving money in general, and bringing in more money. I think its strategy will take them far.
The five forces model has an impact on the performance of Staples. When it comes to “Rivalry among existing competitors”, it pushes them to collaborate with their competitors so they can increase the market size. (Staples. Inc.) This would involve sharing ideas and services that each company provides. The threat of substitute products or services, will make it focus more on the needs of the customer and providing excellent service. Having a large amount of customers will help when it comes to bargaining power of buyers. It can build on that by having membership programs that give discounts on certain items to create customer loyalty. Bargaining power of suppliers will make it want to have more than one supplier. If other businesses depend on your company to sell its items, then it give you an opportunity to make more money and stay in business. For the threat of new entrants, they would have to come up with more innovative ideas, products, and services so that more people will continue to come to them.
Walmart, Target, and Costco Wholesale are the most threatening competitors for Staples.(Owler.com, 2018) Target has an annual revenue of 67.7 billion, Costco Wholesale has 90.9 billion, and Walmart has 509.2 billion annual revenue.(Owler.com, 2018) Best Buy, Kmart, and Innovative Office Solutions are the most threatening competitors for Office Depot.(Owler.com, 2018) Innovative Office Solutions has an annual revenue of 118.1 million, Kmart has 14.7 billion, and Best Buy has 36.7 billion in annual revenue.(Owler.com, 2018)
A key competitive challenge for Office Depot and Staples would have to be Amazon.(Yates, 2013) Amazon just launched a website called “AmazonSupply.com” last year, where you can buy office materials and supplies.(Yates, 2013) Other challenges come from Apple and Microsoft.(Yates, 2013) Apple is already coming out with new products, but the one thing that it already sells in the IPad.(Yates, 2013) With the IPad, people have very little reason to print out anything.(Yates, 2013) The resources, capabilities, and competitive advantage that Staples has developed over the history of its operation would be its store-within a store section that it released in 2005. This was available in Stop and Shop Supermarkets, Giant Foods, and Tops Friendly Markets. Office Depot bought Viking Office Products in 1998. Viking Office Products is a large direct marketer for office supplies in the United States, Australia, and Europe. Also, Office Depot was able to merge with Office Max in November of 2013. Before the companies merged together, they both had 66,000 workers and served businesses and customers in 59 countries with more than 2,200 retail stores. The resources, capabilities, and competitive advantages that will help Office Depot compete with their fiercest competitors, would be its acquisition of CompuCom Systems. Office Depot’s CEO Gerry Smith says: “The combination of CompuCom’s enterprise IT services with our millions of customers and approximately 1,400 distribution points gives us the credibility and scale to build a sustainable platform and stand apart from the competition.” This is going to create an opportunity to have business to business revenue and high value service. As for Staples, it released a delivery service called “Staples Rush”. With this service you can get the items on the same day that you ordered them. However, this is only available in certain areas including: Dallas, Boston, Chicago, Manhattan, Houston, San Francisco, Seattle, and Los Angeles.
The marketing strategy for staples went from selling low priced office supplies to how it enables professionals to enhance their work.(Pymnts, 2017) It even changed its slogan from “Make More Happen” to “Its Pro Time”.(Pymnts, 2017) Its tactics involve them telling the world about their delivery business, that will allow its customers to interact with an associate, and have the convenience of online ordering.(Pymnts, 2017) The marketing strategy for office depot is to provide business services and supplies, products and technology solutions through its fully integrated platform.(Company Facts, 2018) Its tactics involve them having many locations around the world where its products can be sold, to attract more customers and increase its revenue. Both Office Depot and Staples management seems to have an effective strategy and tactical plan that it can effectively implement to succeed within today’s retailing market. Office Depot came up with a way to have fast delivery and a helpful online ordering process. Staples also has fast delivery but with innovative services and products. Both companies have numerous locations around the world which will help bring in more revenue for each of them. Office Depot and Staples should respond to its competitive challenges by merging with Amazon, Apple, and Microsoft. If they work together, they can share ideas and become even more successful in the future.
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