Is Office Depot Shifting Focus Towards B2B?
Earlier this month, Office Depot announced its plans to acquire IT services provider CompuCom for about $1 billion. This comes nearly three years after the FTC blocked a potential Staples / Office Depot merger, claiming the merger would monopolize the industry.
The acquisition, a strategic decision to drive new revenue, is a result of Office Depot’s declining sales. The company announced on Thursday that they were down 8% year-over-year. It’s yet another example of the dying retail industry, but for slightly different reasons.
As businesses continue to make digital shifts, the demand for traditional office products like pens and paperclips has significantly declined. While still remaining profitable, the company’s year over year sales have consistently declined, pressuring the business to make some sort of shift that would result in a new market for business. CEO Gerry Smith called the acquisition an “extremely important pivot” and argued that it would “be a big revolution in the retail space.”
In addition to slumps in sales, Office Depot has shown significant declines in operations and shipping spend, thus being flagged as a risky candidate for B2B creditors. Thus, the deal has certainly caught the attention of those creditors, as the acquisition sets Office Depot up with the opportunity to sell tech services to business customers.
Office Depot will reportedly place tech kiosks run by trained CompuCom employees inside of its 1,400 retail stores, which will continue to sell traditional office supplies. Office Depot projects that the acquisition of CompuCom will begin returning profits within the first year, targeting small and medium sized businesses as the first entity to provide enterprise-level tech services. CompuCom’s already established SMB offering known as Tech-Zone will be placed in all of Office Depot’s stores, offering real-time services and support while driving customers into the stores.
As Smith stated, “technology is the office supply of the future”. The deal is expected to close before the end of this year. In identifying a market opportunity to increase revenue through relationships with other businesses, Office Depot may shift focus away from their brick-and-mortar stores. In addition to focusing on those larger business relationships, the company is addressing the needs of small business startups by introducing a bundled subscriptions service called BizBox. The online platform, available at MyBizBox.com, includes a variety of services including marketing and design services like email, website creation, and logo design as well as office management services such as accounting, payroll and HR. Supporting the company’s mission to become a “services-driven company” as stated by CEO Gerry Smith, BizBox will be priced affordably for small businesses, starting at just $99/mo.
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