After years of hawking paper, pens, envelopes, desk accessories and small electronic devices, the nation’s big office-supply retailers are targeting a new clientele.
Staples Inc., Office Depot Inc. and OfficeMax Inc. worked as feverishly as other retailers to sell holiday gifts in late 2003, but now more of their energy is devoted to finding new ways to make themselves indispensable year-round to small-business owners and institutions such as schools.
Chris Foley, the principal of a Roman Catholic school that opened in the fall in Douglassville, Pa., is one example. She practically bubbles when she talks about Staples.
Foley bought dozens of pieces of office, classroom and computer-lab furniture from Staples Business Expo services, a start-up endeavor that the company is testing in the far corners of the Philadelphia region that it plans to expand to the city and close-in suburbs early in 2004.
Not only was the furniture for Foleys’ Immaculate Conception Academy of good quality, but she found the service from Staples exceptional, she said.
“I’ve worked with a lot of people in my time, but never with anyone who was as concerned with my needs,” Foley said. “What I appreciate is their attitude. Nothing is too much trouble.”
Wall Street analysts say the office-supply companies are having an increasingly hard time competing on their products with big discounters such as Wal-Mart Stores Inc. and Target Corp.
But using Business Expo, Staples appears to have found a better way than its competitors to serve its primary customer, the analysts said.
The Framingham, Mass.-based firm “has done more to differentiate itself in a commoditized business,” said Brian Postol, an analyst with A.G. Edwards & Son Inc. in St. Louis. “Their core competency is selling to the small-business owner. The other retailers have not done as good a job.”
Along with schools, small businesses need bigger and faster photocopiers, more-sophisticated phone systems, more advice on how to use technology and more-durable furniture than the individual consumer with a home office, the office-supply companies say.
Yet the small business or school not only gets less service but also often winds up paying more than a big company that has the volume to negotiate deals directly from manufacturers, they said.
Business Expo centers open
Staples’ solution is its Business Expo centers, which the company started thinking about a decade ago and which it has been concentrating on for the last few years, said Tom Stemberg, the company chairman and founder.
Staples has created a store within a store to target these customers. The company began setting up the centers in Dover, Del.; Millville, N.J.; and in the Reading, Pa., and Harrisburg, Pa., areas in 2002.
The firm also redesigned the Dover store to make it like those of consumer-electronics retailers, with more open space and brighter lighting, and fewer high shelves with products stacked to the ceiling. Staples officials said they plan to continue such changes.
So far, most of Business Expo’s customers for such services as technology consulting have been the same business professionals using the store for office supplies, said Steve McMahon, the company’s director of sales for Business Expo. “They knew us, and they trusted us.”
Family-owned Church’s Auto Parts in Ridley Park, Pa., needed a larger copier and liked Staples’ low-key sales approach and willingness to tailor a service contract to its needs.
“They gave me [contract] options I could add or subtract,” co-owner Roger Church said. “The prices were very good. You could not beat the warranty. Plus, it’s Staples. It’s a big company. I’m very happy.”
Sales growth beats rivals’
Of the three big office-supply retailers, Staples had the strongest growth in fiscal 2002 when its sales rose 8 percent, while Office Depot’s sales in the 2002 calendar year were up a little less than 2 percent and OfficeMax reported a 3 percent increase.
In Staples’ fiscal third quarter, which ended Nov. 1, sales increased 13 percent over the same period a year ago.
Of course, Staples’ competitors say they also can provide small businesses with many of the products and services that Business Expo does.
Office Depot not only directs its advertising to small businesses, but also conducts free classes and counseling on how to run a business better, using its Small Business Development Centers. The centers so far are only within its South Florida stores, near its headquarters in Delray Beach. But starting this year, Office Depot will install them in stores nationwide, spokesman Brian Levine said.
OfficeMax, which was sold for $1.3 billion in December to Boise Cascade Corp., has trained sales people who work with business customers who have big or complex photocopying jobs or who need to buy a large amount of office furniture, spokesman Steve Baisden said.
Also, the firm has opened in downtown Chicago the first of what could be a chain of smaller OfficeMax Express stores, less than one-sixth the size of the typical 20,000-square-foot store.
“Those are targeted especially to the needs of the small business,” Baisden said.
Stephen Hoch, a management professor at the Wharton School who specializes in retailing, said Staples’ actions are logical for a retailer that stood out in the 1980s for its size and range of products but now competes against even bigger discounters.
“I understand the need to distinguish themselves,” Hoch said. “The big-box retailers started off being unique, but their success can be curtailed. Retailers can be easily copied.”
