23 Dec

Online Sales Channels—Staples And Office Depot

WRITTEN BY Phalguni Soni FEATURED IN M&A and Event Driven

If you can’t beat them, join them

Faced with significant challenges, Staples (SPLS) and Office Depot (ODP) are reinventing themselves. They’re stressing alternative selling channels, notably e-commerce—including mobile, tablet, and desktop. During the last fiscal year—ending on February 1, 2014—almost half of SPLS’s sales came from its online sales channel.

In 2013, SPLS was ranked as the third online player. According to Internet Retailer, SPLS’s online sales were estimated at $10.4 billion. It was placed below Amazon (AMZN) and Apple (APPL) with $67.9 billion and $18.3 billion in sales, respectively. Walmart (WMT) is the world’s largest retailer. It was ranked fourth. It had online sales of ~$10 billion.

Online Sales Channels—Staples And Office Depot

Product offering

However, SPLS’s online sales were nearly flat from 2011 to 2013—we’ll discuss this in the next part of this series. The company made several improvements in 2013 and 2014. It increased the number of products available online from ~100,000 at the beginning of 2013 to over one million by 3Q14. Also, it wants to end fiscal year 2014 with over 1.5 million new products.

Products are being offered in non-core categories—like business technology, furniture, facility supplies, and safety supplies. They also launched a wide assortment of products to serve industry verticals—for example, restaurants and retail stores. SPLS believes that this will help with the decline in its core office supplies category.

Sales impact

SPLS estimates that by the end of 4Q14, the enhanced product offering on www.staples.com, www.staples.ca, and www.quill.com will be driving more than $4 million in online sales each week—versus ~$1 million at the start of fiscal year 2014. That resulted in incremental online sales of over $150 million.

In the next part of this series, we’ll discuss SPLS’s advantage over ODP. We’ll look at how ODP can benefit from a potential merger.

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