The office supply space nicely demonstrates the strength of the market leader versus the struggle of the clones. Staples, Office Max, and Office Depot: On the surface they look to be exactly the same business — office stuff. And when you compare their products and services, it does seem to be that way. But here we clearly see the advantages of market leadership.
Staples, which started in 1985/1986, grew aggressively, entering Canada in 1991 and Europe in 1992. They opened their 1000th store in 1999. Today, Staples earns around $27 billion in revenue.
Office Depot, which started around the same time as Staples, grew less aggressively, entering Canada in 1992 and Europe in 1994/1995. They opened their 1000th store in 2005. Today, Office Depot earns around $14 billion in revenue.
OfficeMax, which started in 1988, has been dogged with being latecomer to the office party. They report having “over 900” stores (and have shut down several underperformers over the years. Today, OfficeMax earns $8.9 billion in revenue.
These business models are basically the same: Big box retail stores serving the office and home office supply needs with paper, supplies, furniture, copies, etc. Through aggressive growth and superior branding, Staples has managed to stay well ahead of Office Depot (and far, far ahead of Office Max).
Here are a few examples of how Staples has stayed ahead:
- Their entrance into Europe was Germany and the UK while Office Depot’s first European entrance was Poland. (That’s not a knock against Poland, of course, but we often look to the UK and Germany as business leaders and they are far better springboard companies for further European expansion than Poland is).
- Staples has a stronger brand: One brand (Staples Business Depot) and a compelling benefits-oriented marketing slogan (“That was easy”). Office Depot, however, has a fairly bland name and forgettable marketing (as this older article discusses). OfficeMax struggles with its branding, as illustrated by FurnitureMax, a division of OfficeMax that is poorly defined and barely a brand.
- Staples has a slightly more aggressive acquisition plan, and their recent purchase of Corporate Express was a powerful way to scoop up those clients and lock them in before Office Depot or OfficeMax could get them.
The Business Diamond Framework
An application of the Business Diamond Framework to this situation shows us that Staples’ strong Leadership and more compelling To-Market sales and marketing communication are key to Staple’s differentiation. And, their size (which helps to create a Support Diamond economy of scale) locks them into the top position. It appears that all three have a Value-Add function that is extremely similar.
What Office Depot or OfficeMax can do about it
If Office Depot and OfficeMax want to do something about it, they need to stop acting like clones. They need to find something that separates them from Staples. To borrow a Blue Ocean Strategy term, they need to get out of the red ocean of office supply and redefine what they do.
Obviously I’m not suggesting that they sell something other than supplies, but rather that they change what they’re known for.
- There are a million MBAs that are looking for work and would kill for real life experience right now. Office Depot or OfficeMax should have a business consultant with their own little office in every store to provide business advice (and the occasional upsell, of course). You can work it in a number of ways — from free advice to heavily discounted advice for card members. Whatever.
- Seminars. I’d heard that Staples was offering seminars but I’ve never seen an actual date and time anywhere. The business-information category is big, and there is some room for local businesses to fill in where web-based business information is failing people.
- Proactive at-your-office sales. Yes, this goes against the retail model but waiting until people buy online doesn’t always work. I think that busy small business owners would find it helpful to have a *non-pushy* sales consultant show up with a vanload of commonly purchased stuff every quarter. (Yeah, this is old school).
- Better web-based services. When I go online to any of the three sites, I’m punched in the face with “buy now” messages. Fine… because that’s the reason I visit their sites. But Grand and Toy (a Canadian office supply founded in 1882 — yeah, 1882) is doing some interesting things their web presence. Visit their website to see far more impressive functionality and connection, and take note of their online business community, which is a partnership with SalesSpider.