Office Depot, Staples merger and new CEOs
What the new CEOs should do
Changes are afoot among the office supply chains with both Office Depot and Staples looking for new CEOs. This comes on the heels of the expected Office Depot Staples merger between the two retailers coming to an end over antitrust concerns.
That leaves both of them in a quagmire. What to do now? What do the future CEOs of these chains have to look forward to when they take office?
For one, they both will find declining sales and profitability. Office Depot will close hundreds of stores, including an exit out of Europe. Staples is doing much the same with sales declining 5% in the last quarter.
Both retailers have blamed the rise of internet spending for the kinds of products they both offer, and they are right about that. Amazon has become the go-to retail space and threatens the entire retail industry, not just the office supply chains.
From the perspective of consumers, why buy from office supply stores – especially in bulk – when shopping online is believed to be more convenient?
Where Office Depot, Staples stand now
The proposed Office Depot Staples merger was irrelevant anyway. Consumers never saw a true difference between them, so a Office Depot Staples merger would have largely gone unnoticed among them. (That is, until prices went up.)
Now that a federal judge has nixed the merger, both must think of the other as the enemy, not a potential partner. Stealing market share from Amazon is possible, but it’s impossible if target audiences cannot distinguish between the two suppliers. Consumers can’t choose either Home Depot or Staples when they cannot tell why they should choose one over the other. Audiences couldn’t tell you which is which.
Closing stores will mean nothing if consumers have no compelling reason to choose one of them over the competition. In fact, if Office Depot and Staples don’t uncover those reasons for choice, they will become the next Circuit City and Radio Shack.
Right now, neither has a brand claim that makes them relevant. The theme line for Staples is “Make More Happen.” Office Depot claims you shop there to “Gear Up for Great.”
What do those mean? Is either of them emotional enough to create preference? Both themes are used in current back to school advertising, but neither are emotional or say anything truly meaningful about who their individual customers are.
Taken at its word, the definition of a Staples customer is some one who wants to make more happen. The definition of an Office Depot customer is that they gear up for great.
Does either of these retailers truly believe these are the most emotionally intensive triggers for target audiences when buying office supplies?
What the CEOs of Office Depot and Staples should do
Let’s take one step back. Retail as a whole is an industry in crisis. Amazon has taken a big bite out of the market share of brick and mortar brands, and retailers have been late to respond. It’s not too late, but audiences prefer Amazon in greater and increasing numbers, thanks largely to its Prime membership.
But there are larger issues involved. Retailers have long taken for granted that the shopping experience will draw customers. Therefore, there is an entire science devoted to making the experience more fulfilling and enticing.
What if shoppers don’t want to experience a store at all? What if they would rather do something else and leave the shopping chores (such buying back to school supplies) to Amazon for the convenience or Walmart for the prices?
Strangely, retailers invest very little in their brands. Instead, most focus on products, sales and sub-brands. The problem with that strategy is that you train audiences to shop based on convenience – which store is closer – and that means opening more stores, not closing them. Convenience becomes the rational trigger because all retailers sell similar products, hold sales and promote sub-brands. Customers can get them anywhere (even online).
Instead, investing in the parent brand as the reason for preference gives the meaning to why those products, sales and sub-brands are important. It demonstrates the difference between you and your competition to offer a true choice.
It’s the reason why Nike has rarely talked about the advantages of its shoes, instead saying the Nike user will “Just Do It.” The Nike wearer is a winner, who does not have time for indecision.
For the new CEOs of Office Depot and Staples, there is also no time for indecision. There is a future where both chains could close and the new executives will wonder why they couldn’t prevent it. Don’t be that CEO.