Digital Loser: Staples (The Fight for Survival)<\/p>\n
Business summary<\/strong><\/p>\n Staples engages in the retail of office supplies and equipment such as printing paper, pens, highlighters, notepads, printers, copiers etc. The company operates through its network of ~1,679 stores, its online platform staples.com and through its \u201cdelivery\u201d \/ contract business to business channel. The company has ~$22.5BN in sales and employs ~79K people across its operations in North America, Europe and Latin America.<\/p>\n Digitalization destroying the office supply and retail market<\/strong><\/p>\n Digitalization negatively impacts Staples\u2019s business in two ways. First, the company\u2019s core office supply products are slowly fading away. At the heart of the decline is the continued reduction in paper usage as offices go digital. People are increasingly viewing and editing documents digitally on their i-pads and computers. Digital storage is also quickly replacing paper file cabinets. Most of communication is also now done electronically with paper letters only being used when a signature is required. \u00a0As offices increasingly go paperless, sales of other products such as highlighters, pens, staplers and notepads also decline. \u00a0Secondly, digitalization has also greatly increased competition with competitors such as Amazon.com able to sell more goods with less costs. The major cost for brick and mortar retailers such as Staples are people and stores and online players have less of these. This enables Amazon to sell similar goods at lower prices while making the same margin<\/p>\n Evidence: consistently declining numbers<\/strong><\/p>\n Sales have declined for 9 of the last 10 quarters (from Q1 2013) on a year on year basis.\u00a0 EPS has declined in all of the last 10 quarters on a year on year basis<\/p>\n The company\u2019s response to this threat is two pronged: 1.) Leverage its differentiated existing relationships with business customers to compete in the business to business segment. 2.) Do its best in the direct to consumer \/ brick and mortar retail segment where it faces significant competition with few competitive advantages <\/strong><\/p>\n Focusing on its business to business channel<\/u>: The company is expanding online experience for business customers. It refreshed staples.com, introduced ipad and i-phone apps and is developing e-commerce expertise in Seattle, San Matteo and Cambridge. The company is also making acquisitions to strengthen its capabilities in the business to business segment. It bought PNI Digital media; a software company that allows customers to print business cards, wedding invitations and premium photographs. It also bought MAKR; software that allows customers to develop their own brands<\/p>\n Acquiring Office Depot:<\/u> The company has reached a definitive agreement to acquire Office Depot for $6.8BN. Office Depot shareholders have already approved the deal and the transaction is scheduled to close in Fiscal Year 2015 pending regulatory approval. Regulatory approval is expected as the highly competitive nature of the industry coupled with declining sales in both Staples and Office Depot, make it unlikely that the merger will create an anti-competitive situation. The merger makes a lot of sense as this is the quickest way for the businesses to cut costs significantly. The merger is expected to yield $1 BN of cost saves in 3 years. The key areas for cost cutting are: headcount and G&A expense reduction, procurement, advertising and marketing and retail network optimization<\/p>\n Aggressively shrinking its retail footprint<\/u>: <\/strong>The company plans to shut down 255 stores in North America in 2014 and 2015 and to reduce its store sizes from 24,000 sqf to 12,000 sqf. Store count has already shrank from 1,917 stores in 2011 to 1,679 stores in 2014 driving the elimination of more than 5 million of square feet<\/p>\n Expanding retail product offering beyond office supplies<\/u>: Offering breakroom products such as coffee and snacks. Launching the \u201cCopy and Print\u201d business to offer publishing and design services to customers. Partnering with the US Postal Service (USPS) to offer shipping services through its retail outlets; 500 stores already provide USPS shipping<\/p>\n Promoting \u201cOmni Channels\u201d to gain a \u201cdigital advantage\u201d through its store footprint: <\/u>\u00a0<\/strong>Omni channels include \u201cBuy-Online, Pick-up in store\u201d and \u201cShip to Store\u201d<\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Can anything save Staples? Paper usage is shrinking, pens, highlighters and note-pads are disappearing. Does putting two dying businesses together create life?<\/p>\n","protected":false},"author":143,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-673","hck-submission","type-hck-submission","status-publish","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-and-losers\/","yoast_head":"\n