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What the Staples-Office Depot merger means for smaller e-retailers

February 5, 2015 09:40 AM
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Staples Inc.’s plan to purchase Office Depot for $6.5 billion means the two biggest surviving names in the office supplies retailing industry are going to be joining forces, if regulators approve the acquisition. But smaller online competitors don’t see the combined company as threatening their business.

Staples, No. 3 in the Internet Retailer Top 500 Guide, and Office Depot (No. 9) combined to generate an Internet Retailer-estimated $14.5 billion in web sales in 2013. All 32 of the office supplies retailers in the Second 500 Guide combined to generate $280.3 million in sales that year, or roughly 2% of the two behemoths’ combined online business.

But that doesn’t mean the smaller e-retailers can’t compete with an even-bigger Staples. “The big keep getting bigger and that’s not necessarily a bad thing for smaller merchants,” says Seth Newman, president of web-only retailer Envelopes.com. “Many times the larger companies are slower to react to changes in the market and new opportunities while smaller firms can adapt quickly.”

“Not all (Office) Depot and (Office) Max customers will flip their business over to Staples,” adds Ron Weber, president of discount online office supplies online retailer iBuyOfficeSupply.com, No. 597 in the Internet Retailer Second 500 Guide. “Many will shop and find out that there are clear low-cost providers that beat the big-box stores’ pricing every day. I don’t see much changing from our perspective.”

There’s also the question of the newly merged brand establishing a unique identity for itself online.

Paula Rosenblum, managing partner at RSR Research, admits she had trouble telling the difference between Staples’ and Office Depot’s respective web sites.

“The challenge will remain differentiating in a world where you don’t have to touch or feel these commodities to buy them,” she says. “Whether it’s consolidated or not, (the new company) has to redefine its reason to exist.”

Envelopes.com, which ranks No. 519 in the Internet Retailer Second 500 Guide, specializes in all things envelopes, a move that Newman thinks helps his company stand out.

“(We) serve a niche left behind by the big guys as they rationalize their inventory offerings to only the most popular items in a category,” Newman says. “We counter that by offering the long tail of all sizes, styles and colors of envelopes and paper products and offering value-added services such as printing, addressing and fulfillment that these traditional firms do not.”

There’s also the question of how staffs from both companies are going to be affected once the acquisition is complete.

On an investors’ call announcing the acquisition on Wednesday, Staples CEO Ron Sargent didn’t say exactly how many jobs would be affected, although Staples did say it expects to save $1 billion a year by closing stores and reducing headcount. That could make some experienced e-commerce personnel available.

Weber says his company will be ready and waiting with a soft landing spot for top talent left out in the cold by the merger.

“Some talented people with industry experience will be looking for jobs, and we can benefit from that as well,” Weber says. “It is a good day for the independent dealer channel in the office products industry.”

 

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