Office Supply Chains Merge to Recover Dwindling Profits
Bill Briggs, Internet Retailer Senior Editor, recently delivered some sobering news regarding erstwhile office supply behemoths Office Max Inc. and Office Depot Inc. Having fallen far behind Staples Inc. in online as well as total sales, a large-scale merger is in the works. Expected to close by 2014, the move should create an $18B entity (from projected 2012 sales), though even this impressive number falls short of Staples’ $25.02B 2011 sales.
Office Supply Performance Gaps
What gives in the sales discrepancy? Let’s compare some figures:
• Between 2007 and 2011, Staples grew web sales 89.3% from $5.6B to $10.6B.
• In that same timeframe, Office Depot web sales decreased by 40% from $4.9B to $2.9B.
• Likewise, OfficeMax web sales dropped 8.2% from $3.16B to $2.9B.
Those precipitous drops, particularly on the part of Office Depot, are indicative of a general trend. While Staples adjusted early to secure a lead in online sales, neither OfficeMax nor Office Depot took adequate advantage of the fact that office supplies as a product category was one of fastest to be adapted for web sales. Due to consistent demand, ease of transport, and a number of other factors, office supplies continue to enjoy a steady online purchasing contingent.
Still, company executives are optimistic about the future. They recognize the changing industry, and in particular they are committed to stronger competition web markets. OfficeMax CEO Ravi Saligram and Office Depot CEO Neil Austrian will continue to serve in their current capacities until a committee of combined board members elect a CEO.
Outside parties are skeptical but curious. “They will likely need some major capital investment in Internet technology once the deal closes,” opined Jim Okamura, managing partner at retail consultant Okamura Consulting. “It can take multiple years to get a ship that large turned.” We’ll have to wait and see if stabilization is on the horizon for these struggling giants of yesteryear.
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