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The second biggest online retailer in the world, Staples.com, made $24.4 billion last year. Apparently the office supplies online market is growing steadily and attracting unwanted attention from Amazon, while its brick-and-mortar counterpart is struggling with recession. Below we’ll have a look at the market overview, main sales drivers, top retailers and marketing.
Let’s start with:
The US market, as well as the global market for office supplies is heading to a small rebound, mostly due to a small decrease in demand and a larger decrease in physical store space.
For example, leader Staples.com, is planning on closing 40 underperforming stores this year (out of a total of 1886 stores in the US and Canada), 10 more than previously announced. Challengers Office Max and Office Depot, some of those late at the ecommerce party, have been blown even harder by reduced sales, as well as online retailers increased competition. The two companies are planning on closing 175 and 150 stores, respectively.
On the other hand online and multichannel stores are doing great and Staples announced a new type of smaller stores that engage visitors with interactive kiosks and staff aimed at driving more sales to staples.com.
Staples.com is embracing showrooming and engaging customers offline to drive them to buy online. This means that the company is expecting a decrease in offline buying interest. It also means that the age of the behemoth stores is over and now customers will be expecting offline experience that leads them to buy online.
Office Depot also shifted focus towards a multichannel approach. Monica Luechtefeld, who’s been with Office Depot for the past 17 years restructured marketing teams into a single department, to offer a 360 degrees approach, focused on the customer.
“Instead of looking at you as an online shopper, it’s an attempt to think of you as the customer of Office Depot. The more we look at you horizontally and look at the multiple ways you engage us and the multiple tools that you use to buy − one day a store, one day online, one day a call center − the better we’ll be able to serve you.” said Luechtefeld.
In order to counterbalance Staples’ and Amazon’s competition, Office Depot is also moving into a merger with Office Max, as WSJ reports. The two companies worth $1.3 billion (Office Depot) and $933 million (Office Max) will probably be trading stocks. With almost 60 000 employees and $17.5 billion in combined sales, the two companies will decrease costs and increase market share, if the deal pulls through. Office Depot also tried a merger with Staples in 1997, but the deal was shut down by the U.S. Federal Trade Commission.
Until the merger goes through the US market is shared by Staples (39% market share, also the largest office supplies company in the world), Office Depot (22%), Office Max (13.5%). These companies control 74.5% of the market so they are really setting the trends, and the trends are:
Office supplies are some of the most sought products online, up there with computer hardware and consumer electronics. The online market for office supplies totals $22.8 in US alone but not all office supplies are created equal. When purchasing online customers spend their money on:
Among the office supplies the ones that stand out are the ink and toner cartridge supplies. For office supplies retailers the fact that these product sales decreased in the past year meant a hard blow to the market cap.
Cartridge supplies make up for a large part of office supplies retailers’ margin. In 2011 the ink market alone was worth $14 billion globally so it’s safe to say that the market is here to stay, although growth has suffered due to global recession. New developments in ink manufacturing, online retailing and customer acquisition have changed the landscape but printer ink is still one of the most needed and expensive products on the planet.
As for the vendors, a recent study by Research and Markets shows top vendors as Brother Industries Ltd., Cannon Inc., Hewlett-Packard Co., and Seiko Epson Corp.
The study also shows that among the key growth drivers there is an increase in demand for cheap, high-speed continuous-feed inkjet printers. Recent changes in technology are making possible for buyers to expect reasonably priced color printing.
Although the overall cartridge supplies market is not doing great, thus affecting leaders like Staples, Office Depot and Office Max, a few trends have really picked up:
As such – companies looking into expanding ink and toner sales need to seriously look into:
When it comes to customers, the main targets a office supply retailer has are, according to IBIS World:
When it comes to marketing and customer care, it seems that most office supplies retailers are moving towards a multichannel approach as to leverage the existing stores and maximize profit. Customer care and retention, location based marketing, mobile marketing, direct marketing and social media also seem to be playing a big role when it comes to customer acquisition and retention.
A very important part in Staples.com customer care is their Staples Rewards program. Every purchase offers customers 5% back in online/offline purchases as well as free shipping. Customers can redeem rewards when buying from a physical store, online or on their mobile device, thus ensuring a multichannel experience.
As a very large chunk of the market are households, usually families with one or more children, Staples.com now offers a program targeted at parents and teachers. Parents can offer a teacher of their choice a chance to earn as much as $2000 a year, in reward points.
Office Max also offers a loyalty program – MaxPerks – that allows customers to receive 5% off every purchase in rewards, rewards on cartridge recycling, and other bonus rewards.
Office supplies retailers use mobile to leverage increased mobile commerce traffic, drive foot traffic in store, helping customers find product information and help them check rewards quickly.
When it comes to mobile the largest player on the market, Staples.com is using both a scaled-down mobile version of the site, as well as native apps on iOS and Android.
The mobile experience is extremely easy to use and focuses on:
Office Depot also offers a mobile version, as well as iOS / Android native app but it features more information regarding products and a clearly visible “ink finder” section.
It is clear that both companies are really working on providing their customers with a great mobile experience and help them find the best deals and the right products quickly.
Staples.com has really set a target at providing the best mobile approach it can and Brian Tilzer, VP of Global Ecommerce declared:
“More and more shoppers are turning to their mobile devices as a way to research and shop whenever and wherever they want. Staples is thinking ahead and anticipating customers’ needs, providing an offering that not only serves as an m-commerce tool but listens to, and solves, customers’ pain points.”
When it comes to social media there is no really big winner and tactics and strategies are really similar. Some overall trends seem to be more prevalent though:
Traditionally direct marketing has been one of the best marketing and sales channels before ecommerce started getting traction. Now companies need to face a world where the customer expects real-time, personalized offers.
Amazon is closing in with its beta Amazon Supply, an online store targeting office and home supplies. As such, Staples needed to find a way to fight fire with fire and acquired Runa, a California-based software company that specializes in personalized shopping. The company analyzes browsing history, previous purchases to create a virtual profile for the customer and predict what products would he be interested in.
Profiling is clearly the key to direct marketing as customers are looking into personalized offers and expect companies to provide them with it.
If you’ve read so far, let’s just assume you’ve probably missed a couple of ideas along the way so let’s just wrap this report with the most important take aways: