Office Depot: A brick-and-mortar store reinventing itself in the Amazon era
Like Sears, Office Depot is another brick-and-mortar retailer who has seen better days. The company is plagued with $1.7 billion in long-term debt and saw a proposed merger with Staples blocked, but the future has started to look brighter in the last few months.
Staying in the game
Office Depot has seen their online Office product transaction volume increase 9% year-over-year to this point. Efforts to maximize their brick-and-mortar retail footprint has paid off. Office Depot’s buy-online-pickup-in-store option has seen a remarkable 30% sales growth year-over-year.
Struggling to compete online with Amazon
While positive, this growth is nothing compared to Amazon’s market share. Amazon holds a stunning advantage in the online market share of office products. According to data gathered on Jumpshot’s Insights tool, Amazon is at 85% of sales in the category compared to all other retailers. Office Depot holds just 4%, third behind Walmart’s 5%.
Transactions are slipping away to Amazon. 20% of all OfficeDepot.com shoppers also end up hopping over to Amazon for their pen, paper, and folders purchases.
In 2017, Amazon drove almost 1.5 million of its 81 million sales this way. Not a huge win for Amazon, but a massive loss for Office Depot, whose yearly transactions totaled 3,365,672.
Essentially this means Office Depot is losing 43% of its online retail sales to Amazon. Unless Office Depot can continue to gain traction the B2B route, they’re going to struggle as more and more people begin product searches on Amazon.
Staying afloat in the Amazon era
Like Sears, Office Depot’s leading products are their own private label offerings. Office Depot labeled products drive more than 28% of all their online retail sales.
Unlike Sears, Office Depot proves to be more adept at shifting its brick-and-mortar retail footprint to straddle physical and digital realms. The past few years have seen the company reposition itself as an office product and service provider.
To this end, Office Depot CEO, Gerry Smith, even claims that “Technology is the office supply of the future.”
Use the resources you have
Office Depot has space in its retail stores and they’ve decided to try to use it. August 2018 was the start of a pilot program for Office Depot’s coworking space idea: Workonomy Hub. Workonomy Hub not only offers daily drop-in rates and monthly private office rentals in an Office Depot location, but also provides services like DIY copying, printing, packing, shipping, and tech support.
Diversify and offer something Amazon doesn’t
Tech support for businesses is where Office Depot is leaning. With its acquisition of CompuCom in 2017, the company has experienced an increase in service revenues. CompuCom provides hardware and software lifecycle services for businesses as well as IT support services. Office Depot is incorporating these valuable services into their business services and technology products platform and it’s paying off.
Office Depot saw service revenues increase and shares were up 13.5% in the second quarter this year.
No, Office Depot’s new business strategies are not going to allow them to beat Amazon at the online office supply game, but it will position them to depend less on online retail sales and tap a growing market for highly-equipped coworking spaces and B2B IT support.