How Staples Can Adapt Its Principal Office Supplies Business in the Age of E-commerce

Staples must become a different kind of retailer in the age of e-commerce with value-added services beyond product distribution.

Mar 29, 2014 at 1:28AM

Staples (NASDAQ:SPLS) has had stagnant sales growth for the last five fiscal years; maybe it's time that the company reorganizes itself in yet another private-equity deal, to come out with a new line of staple offerings for today's changing office-supplies market. The ways office supplies are offered and consumed have evolved in the age of e-commerce and digital consumption, but office-supplies store operators, including Staples, have remained largely the same. Office Depot (NASDAQ:ODP) recently acquired Office Max, but merging with competitors to become bigger may do little to bring disappearing customer demand back to stores. Like many brick-and-mortar retailers, office-supplies operators face similar structural challenges to their old retail business models.

Old retail concept
Office-supplies companies, like Staples and Office Depot, came to exist when people needed a special place to get their stationery. Nowadays, to get basic office supplies, people don't need to go anywhere, thanks to online shopping. Even when they do, other retail outlets of all sizes, from big box supermarkets such as Wal-Mart to street corner drug stores like Walgreen, all offer commonly used stationery supplies, partly replacing the need for stand-alone office-supplies stores.

Moreover, because of digitalization at work and in school, people are buying less old-time office supplies, including paper, pens, envelopes, staplers, staples, etc. As demand for traditional office supplies wanes, it's no surprise that sales for Staples and others have declined over time.

The root of the problem for Staples and others in the office-supplies market is that customers don't come to office-supplies stores the way they used to. The traditional retail concept that Staples and others still rely on to operate their stores now adds less value to today's customers. Moving goods through the supply chain to consumers was a challenging task that retailers needed to take on in the past.

Current retail environment
Merchandise distribution is less challenging in today's inter-connected marketplace. Staples recently announced the closing of 225 stores, which seems like a natural reaction to the current changing market conditions. In comparison, Office Depot added a chain of Office Max stores by merging their two operations. This looks like a less logical response, given that there isn't a booming office-supplies market in the making.

However, closing stores is only a defensive reaction as a result of realizing what customers may no longer need. Taking proactive moves, Staples must first learn what customers really want for today's office supplies. Switching to online selling may seem like a business initiative, but a separate presence of may contribute little to how Staples could better operate its existing stores. It's just another online operation among many other online sites -- unless, of course, Staples can connect what's online with what's in its stores.

The lingering issue is how physical stores can remain a value-added business proposition in the age of e-commerce. To ensure continued relevancy, online tools may be used to provide digital access to a store's physical setting. For example, online access to updated store inventory information may incentivize some customers to make a store trip for supplies that can't be conveniently bought online. Also, given the continued decline in its store sales, but a trend of increasing online orders, Staples could, over time, convert some retail stores into distribution centers or pick-up sites for online operations. This would save the company delivery and shipping costs.

Potential future changes
As the largest office-supplies retailer, Staples ultimately has to envision a modern retail concept to justify the need for continued physical retail presence in the age of e-commence. The reason why a retail store was there before may not provide the same valid grounds for its being there today. The traditional retail idea of channeling goods to customers through retail stores is no longer the most relevant in today's product distribution.

However, Staples remains product-centric with a vision of striving to offer every product that customers need. The company expanded its business with new models of contract selling and catalog business; but these are mere old-school retail-store tactics used to reach out to business customers. To add real value, today's retailers may have to go beyond distributing products; they may have to provide additional services that can create product uses and stimulate customer demand.

One such service that Staples could offer would be office designs that illustrate what office supplies may go into the setting up of different offices. With the service, Staples could make suggestions to customers about their office-supplies purchases, instead of being concerned about losing customer demand. Different model office designs could be conveniently shown on the company's website to avoid taking up expensive retail space. Service-supported retailing helps transform the old retail concept to maintain the vitality of today's retail business. Staples can either take initiatives to change its old retail practice or continue its decline and wait for activist investors to come in and show it the new way.

By all means, Staples and other traditional retail stores should compete with online office-supplies retailers. But Staples would do much better if it could also lead the efforts to redefine the value it could offer as a service-oriented retailer. When customers value the additional product-use services, they'd likely buy the recommended products from the retailer.

Boost your 2014 returns with The Motley Fool's top stock
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Jay Wei has no position in any stocks mentioned. The Motley Fool owns shares of Staples. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers