A couple of decades ago, upon commencing a week-long data review with a sister publication, the magazine\u2019s highly esteemed executive editor entered the project\u2019s data room with an enormous grin.\u00a0 When asked why the obvious glee, he answered that he had received advanced word that a top retailer which he had covered for years, was about to close down operations.\u00a0 Why the grin?\u00a0 He responded that he now had a rich source of stories to write which should keep him very busy for the next six months.<\/p>\n
The natural response to this was to question the value of losing a major source of fare beyond that half year.\u00a0 Upon hearing this, the editor\u2019s grin was immediately gone.\u00a0 Then comments were tossed around as to the loss of jobs, competition and the effects on national and local economies.\u00a0 Suddenly happiness turned into a pre wake-like gloom.<\/p>\n
Now we learn that Staples has entered into an agreement to <\/strong>acquire Office Depot<\/a>, in a deal valued at $6.3 billion in cash and stock.\u00a0 Apparently discussions for this acquisition began last September.\u00a0 Thus, these negotiations commenced less than one year after Office Depot\u2019s mega-acquisition of OfficeMax became official.<\/p>\n During the time between the announcement of the Depot\/Max merger and its official closing, it was generally anticipated that this would be a deal to end the ills of these two specialty retail market giants.\u00a0 In fact, since the actual closing in November 2013, there has been relatively little time to allow the expected benefits of the acquisition to totally unfold.\u00a0 During the time leading up to completion of the deal, it was widely anticipated that it would require at least three years before all adjustments necessitated by combining the assets of two giant retailers could be completed and measured.<\/p>\n Post-merger real estate dealings alone required the newly emerging company to make judgments as to market saturation and intra-market store redundancies.\u00a0 A vital part of this process is anticipating termination dates of key store leases and using time to determine individual store viabilities.\u00a0 The resulting merged company continues to strongly advertise both Office Depot and OfficeMax in single promotions, even in child friendly themes such as back to school and the all-important end-of-year holiday season.\u00a0 Why then another acquisition\/merger now?<\/p>\n Should the proposed Staples deal go through, which retailers would likely then provide the steepest competition for the emerging giant?\u00a0 At first glance that would likely be Amazon and Walmart on a national level.\u00a0 On local and regional levels, non-traditional market players would likely play up their offerings within their respective communities.<\/p>\n Of course, these include general merchandisers such as discount big boxes, which already feature retail space and web designs capable of accommodating additional product.\u00a0 While dollar stores will not get into office equipment or furniture, they are masters at adjusting local store\u2019s abilities to compete through product-mix adjustments and additions.\u00a0 They already attract price conscious businesses, and who isn\u2019t price conscious these days?\u00a0 Competitive product pricing has generally been viewed as a weakness of these top office product retailers.\u00a0 In fact losing to competitors on general pricing perceptions is likely a major factor behind the need for these well-financed retail giants to merge and eliminate intra-market competition.<\/p>\n As far as specialty retailing goes, retailers representing other focused industries already have made significant inroads into this market.\u00a0 Western-based Fry\u2019s Electronics, whose truly big box store imprints well-exceed 100,000 sq. ft.\u00a0 has long featured wide aisles full of office products and has the space to significantly increase its offerings as individual markets change.\u00a0 Fry\u2019s office products lineup includes cash registers and electronic time and attendance systems alongside office furniture and reams of paper products.<\/p>\n Currently there is a bit of a competitive lull among specialty consumer electronics retailers.\u00a0 Chains such as Best Buy and hhgregg have actively been seeking new product lines while substantially altering product mixes to meet the challenges of a rapidly changing consumer electronics industry, as new-age products rapidly become outmoded.\u00a0 Product lines such as CDs, DVDs, desktop computers and compact digital cameras have been on the decline for some time, as technologies rapidly advance.<\/p>\n Years ago office supply retailers increased sales by competing with consumer electronics retailers on computer and camera type offerings. Now it seems equally opportunistic for CE retailers to reverse that trend.\u00a0 Thus the new Staples\/Office Depot\/OfficeMax may face competition on more fronts than ever, as their consolidation weeds out many of their own locations, deemed as weak or redundant. Home Depot, with its <\/strong>boldly expanding distribution platform<\/a> combined with a greatly enhanced and growing web presence, promises to offer products never before associated with the company.\u00a0 Home Depot already offers a significant selection of office furniture, machines and a relatively rudimentary selection of office supplies.<\/p>\n Depot was one of the first retailers to enter the 3-D printer competition, shortly after Staples became the first major retailer to test out selling this new age product.\u00a0 With the Home Depot\u2019s advertising resources and buying power, combined with its aggressive new outlook on offering nontraditional product lines, they could eventually be seen as a Home \u2018Office\u2019 Depot, with a potentially enormous, ancillary niche market.<\/p>\n That a Staples\/Depot\/Max deal may so soon follow the Depot\/Max acquisition, it makes one wonder if there is still a genuine need for this type of specialty retailer.\u00a0 The current and potential competition is considerable and likely to grow in strength and numbers.\u00a0 In that regard, it is expected that the FTC will closely examine the many trade issues which such a deal strongly suggests.<\/p>\n Some expect that the acquisition may well be blocked.\u00a0 However, in the early days after the announcement, there has been relatively little mention of this from the parties involved or even the press, especially considering the contentious arguments surrounding the Family Dollar\/Dollar Tree\/Dollar General negotiations<\/a>. Of course, the dollar store market has been one of the best recent growth retail segments, expanding aggressively even during the recession.\u00a0 That there is less initial concern involving possible FCC action regarding the Staple\u2019s acquisition may indicate the current dysfunctional state of this market.<\/p>\n As noted in several previous CSG Insights, <\/strong>the current wisdom at these office supply giants seems to be leading toward converting to smaller, more compact locations<\/a> while relying on web-based, in-store kiosks to increase product offerings.\u00a0 The problem here is that the web doesn\u2019t induce product browsing, and valuable impulse purchases, as a well-stocked store does.\u00a0 Similarly, incremental purchases likely suffer as well.\u00a0 If big box CE stores and discounters explore more of this market, whatever remains of a Staples acquisition could be even more negatively impacted by the resulting competition.<\/p>\n","protected":false},"excerpt":{"rendered":" A couple of decades ago, upon commencing a week-long data review with a sister publication, the magazine\u2019s highly esteemed executive editor entered the project\u2019s data room with an enormous grin.\u00a0 When asked why the obvious glee, he answered that he had received advanced word that a top retailer which he had covered for years, was… Continue reading Staples: And Then There Was (N)one?<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"post-template-no-sidebar.php","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[5],"class_list":["post-4741","post","type-post","status-publish","format-standard","hentry","category-discount-specialty","tag-insight","entry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/posts\/4741","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/comments?post=4741"}],"version-history":[{"count":0,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/posts\/4741\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/media?parent=4741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/categories?post=4741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.chainstoreguide.com\/offthechain\/wp-json\/wp\/v2\/tags?post=4741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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