Power is shifting from Big Box players to…
'The New Propellers' of office productivity
The renaissance of the progressive superdealer

11 Nov 07
Is the BIG BOX phenomenon or era of the power channel, as it is more often called, over? It started back in the 90's when the publicly funded superstores rose rapidly, first through organic growth and then through acquisition into mail order and contract stationery.

It was a remarkable transformation of the OP industry from a market dominated by regional superdealers and mail order specialists focused on B2B to one led by the rapidly emerging power channel. The leading BIG BOX players were Staples, Office Depot, OfficeMax and Corporate Express.

Here, we had 4 major players who in 2006 aggregated nearly $50bn in sales. The 3 superstore brands had taken their retail reputation in the USA and extended into mail order and contract stationery, worldwide…seemingly seamlessly.

In Staples and Office Depot's case, the brands became trusted with B2B customers and were led by people who understood the OP market viz. Ron Sargent and Bruce Nelson.

However, a few years ago…probably around 2004 things started to falter. Probably the first case, was OfficeMax after they merged with #1 US contract stationer Boise. The #3 low performing superstore effectively dragged Boise down including the revelation of misappropriated funds by the OfficeMax merchandising executives. This led to the exit of the highly respected ex-Boise chief Chris Milliken . In 2005, retailer Sam Duncan from outside the industry replaced Milliken. 'Turnaround Sam' has achieved little since and Max have gone backwards.

The second case, was Corporate Express who rose through acquistion and imploded through poor execution of the integration process. They have survived, but the familiar pattern of 'acquire and fire' has continued. Over the last 5 years CXP has probably gone backwards in sales and definitely in profitability. How CEO Frans Koffrie survived for so long until just recently, we'll never know.

The third case was definitely Office Depot. Depot seemed to be proceeding well with their roll up of acquisitions and organic growth including Viking Direct. Then about 3/4 years ago, Depot acquired Europe's #1 contract stationer Guilbert and from there things went downhill fast. The retail division lost serious ground to Staples and the latter made rapid headway to overtake them in sales 2-3 years ago. Bruce Nelson, the CEO was ousted and replaced by Steve Odland another retailer from outside the industry.

Odland proceeded to make a number of strategic errors which have destroyed the value of the company…reduced to a third of Staples market capitalisation for 80%+ of revenues. He outsourced customer service, decided to pull the highly profitable Viking brand first in the USA and soon in Europe. Depot has made the disastrous acquisition of Allied in NJ; been found out by Georgia State for contract overcharging and has been caught disclosing Q2 results to analysts pre – shareholder's meeting. Odland has shown no sign of understanding the intimacy of the OP industry and we feel his days are numbered.

Office buyers have become extremely wary of the promises..,promises and non performance of these companies. Meanwhile, Staples in the USA and strategic partner Lyreco continued their rise-and-rise because their executive understood their customers and how to serve them via sales people.

Concurrent with this there has been a renaissance of independent superdealers who have grown rapidly on the back of the OP wholesalers by focusing on the customer intimacy model and providing a wider range of services e.g. FM supplies.

We reckon there are 200 dealers in the USA and approximately 50 dealers in the UK who are market focused and driving the office productivity proposition. These companiers are growing at least 5-15%/year…in the past we have described them as PROPS….Providers of Office Productivity Solutions.

This is the customer intimacy model going forward. We feel strongly that power is shifting from the empty, soulless and centralised BIG BOX players to the new breed of dynamic PROPS, who are going to market with more positive and dynamic drive….propelling the way forward.  It's no longer a renaissance though, it's more a resurgence.

Welcome then to the era of the New Propellers…the propellers of office productivity. Get the full profile, insights and analysis of the New Propellers in the USA, UK and Europe in the new edition of Office Megatrends 2008-12.