Staples Agrees to Buy Office Depot for About $6.3 Billion | Hacker News Reader

Staples Agrees to Buy Office Depot for About $6.3 Billion

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These businesses are most certainly NOT "on their way out". Office supplies is one of the largest categories in ecommerce. Staples and Office Depot are each doing billions in annual sales online. The idea that Amazon has already won in this category is simply not true (yet, but still).

Staples did ~$10b in online sales last year and Office Depot did ~$6b. Online only.

Staples sells more online in pure dollars than Apple, Walmart or Dell.

This is not Radio Shack.

I think this is a really smart move for Staples.

Source: https://www.internetretailer.com/2013/05/24/big-and-getting-...

Realistically the only way they can go is down. People just aren't even going to buying more of what they sell. The threat isn't Amazon, it's Apple. People are going to continue to use devices more and pens less right up until no one uses pens any more.

Also, bear in mind that you're quoting an article from 2013, and Staples stock fell by about 25% in 2014. They've picked up a little since then, but they're not going to get back to where they were. Their market is slowing disappearing.

>People are going to continue to use devices more and pens less right up until no one uses pens any more.

And what prevents Staples from adjusting their product offerings to lean more towards "devices", and less towards "pens"?

Amazon used to sell only books....

Nothing at all, but their past performance of selling pens is not an indicator of how well they sell devices, or if there'll even be a market for selling other manufacturers devices in the future. Staples are very good at repeat sales of core business stationary. That market is not going to exist for that much longer.

Maybe they'll move to a different market successfully, maybe they won't. They wouldn't be the first once successful company to fail as the market changes though.

I've been hearing that for decades, and while the latest round of technology is a step in that direction, it is not significant enough to overcome the advantages of existing office supplies. (Largely because nobody really knows what those advantages are in a way that can be outmaneuvered digitally.)

How long do you imagine 'that much longer' to be? That sounds too weaselly to be accurate.

Like the paperless office? Still waiting...

The Myth of the Paperless Office is a wonderful read. https://mitpress.mit.edu/books/myth-paperless-office

Yes, I agree.

My point is that these business are a lot larger than people realize, and that the phase out is going to be a lot slower than people think because it's primarily enterprise recurring contracts that are powering their sales.

That said, I use the printer at my office maybe 1x/week, so I agree that it's not long-term sustainable. This is why consolidation is a good bet for short-term viability and the deal is a good one for Staples for right now.

I have some experience consulting with one of these companies, and I know they understand the importance of moving past paper and into things like tablets and ereaders. It's perhaps their primary focus to transition to new tech without confusing existing customers.

I agree it's a good idea for both companies. There's a perception that's perhaps unfair that these companies are complacent relying on paper and ink. These kinds of things are important to their current business, but both companies are more forward-thinking than most people give them credit for.

Staples sells devices - pads, scanners, printers. That's a big part of their business.

Is that disappearing truly due to demand drop off or just because everyone is cutting something off?

I wouldn't say their market is disappearing because I don't ever think the need for pen and paper will ever disappear. It's definitely shrinking and there's market adjustments occurring but I don't see them ever going away.

The supply room at my work is stocked by Staples. That might be a bigger business than their retail stores. We even use reams of printer paper as monitor risers.

This is smart for Staples, but the industry is still in trouble. They're going to get eaten alive by Walmart on the retail side and Amazon on the online side.

Staples and all the other office suppliers do best in two areas: printing services and consumables. Printing services have massive margins. And consumables, particularly remanufactured toner, are big cash cows. Business machines are low margin or loss leaders.

The stores are money losers. They would close them all if they could. They're used as feeders for their print business, value add for their contract customers, and sources of toner cartridges to be remanufactured.

Walmart, with its school supply aisle, is the largest office supply retailer in the world. Their supply chain is far superior to anything in the traditional office supply world, and in retail pricing, it shows.

Same goes for Amazon. They have massive economies of scale and a very well tuned supply chain.

Walmart has been aggressively putting the hurt on the retailers, particularly in Back-to-School season (Christmas for office supply retailers) in the form of advertising and moving the supplies towards the front of their stores.

Amazon dipped it's toe in the water with Amazon Supply. I'm surprised they haven't built an on-the-ground sales force to really expand it. I suspect that when they do, they'll take a big bite out of Staples.

At least in Germany, I've been surprised at Amazon's poor selection of office supplies. Not that we have great retail stores for office supplies here either, but at least I can go out and buy a small pack of rubber bands for 75 cents.

Amazon could (and probably should) be doing a lot better in this market.

Normally I'd be opposed to/worried about mergers like this, but I feel like these businesses are on their way out (certainly in the physical retail world) so this particular merger might not be so bad. After all, they have a lot of competition from Amazon and the like.

Its very similar to the sirius/xm merger. Technicality they were the entire satellite radio market however the competition transcends the transmission method and was massive.

Recently I bought a router from Staples because I had 15% cash back if I used my debit card. Found the same router on Amazon.com and they have matched 110% of the price (must be sold by Amazon). So I actually got my router for less than Amazon's price.

So I think they are stepping up their game to compete online.

Until Amazon offers same day delivery everywhere, office supply stores will have a market. People will always be running to the store at the last minute to get supplies for a project due the following day.

The weirdest thing to me is they JUST finished the merger between Office Depot and Office Max last year.

Until your comment I hadn't even realized that Office Max had been subsumed. I guess that goes to show how little I interact with those stores anymore.

I worked at Office Max in high school and had never stepped foot into an Office Depot, when I eventually did it was like this uncanny valley feeling because it was so similar to Office Max and yet it clearly wasn't. When they announced the merger it didn't surprise me at all.

Staples Depot? I wish them luck. On the rare occasion I buy something online from one of their stores (probably something that generates a loss or wash for them) and pick it up, it feels like I'm their first customer of the day.

I have no idea how they keep the lights on.

Whenever I go in, usually during peak business hours, it's unusual if there's even another customer in there. I'm usually just buying a pack of cheap pens or something, maybe once every 6 months.

Many moons ago, it used to be an underappreciated place to buy cheap computer parts, but even SD cards are grossly overpriced these days.

My understanding is it's all corporate accounts. Almost nobody actually goes into the store, but my girlfriend's work regularly puts together orders and has them delivered for any office supplies they need. The retail stores are just a big distribution network, and customers are reluctant to go to Amazon or a smaller supplier because a) nobody ever got fired for buying Staples b) they already have an account there.

Staples has a shockingly large (at least to me) online business. They're the second largest online retailer in the US (second only to Amazon):

http://www.fool.com/investing/general/2014/03/27/staples-is-...

I use them to buy toner for printers at work. Free next day AM delivery and they usually have better prices than amazon.

I honestly had no idea. I would have figured new egg or Ann Taylor (based on how much my wife shops there on-line).

That doesn't make up for their empty retail stores though, unless those stores really are local warehouses/depots in the scheme of their online operations -- is that their model ? Former retails promoted to faux retail/consumer warehouses ? Does having that high profile physical presence drive their online retail, so the costs are worth it ?

Well the "synergies" or "cost savings" associated with mergers like this are when they shutter stores and lay off the employees. Post merger there will be less retail stores.

Staples gives store credit for printer ink cartridges, even if you didn't buy them there. They also coupon heavily so walking in and buying something retail is like doing the same at Bed, Bath & Beyond.

Have you ever been there during "back to school" season? Its a jam packed free for all.

They probably have a lot of seasonal business when all the grade school semesters start.

>I have no idea how they keep the lights on.

Back-to-school season, teachers/schools and corporate accounts.

Staples Depot Max

Office Depot bought OfficeMax a while back.

This will be interesting to see. Yeah these office supply stores have competition from online retailers, but I would assume they make a good chunk of their revenue from corporate/education customers. Since that is their biggest revenue stream, I wonder how that aspect of the industry would be affected by the merger.

That's an excellent point. The ceiling on those revenues, though, is still Amazon. It's a matter of the office assistant going to the online Staples/Office Depot/Max catalog or going to Amazon; there's not much of a switching cost.

CDW [1] is still around and is much more targeted towards that audience.

[1] https://www.cdw.com/

Staples also makes a TON of money from their Printing Centers. I worked at one for a few months as I was finishing up my undergrad. The money they make in that department EASILY carries the rest of the store. Even though they've been in the computer selling business for a number of years, I'm willing to bet that they haven't made much money on it, whereas office supplies and printing are where the real money is.

There are plenty of competitors for the large customers. Few consumers have ever heard of them, though, because they only do large accounts.

Plus, Sam's Club has been on a major push over the past several years to attract small and medium business customers. They will be a serious competitor for Staples Depot Max in that segment.

I really hope they adopt that name, Staples Depot Max!

As someone who works in IT at Office Depot, I can say that the Office Max merger isn't even close to half way done from a technology standpoint

If Office Max is still using the same inventory tracking systems they used in the late 90s then I fully understand why.

Staples has been well run. Especially its online business. They were installing Kiva Systems' bots in their distribution centers before Amazon (which now owns Kiva), and they've consistently squeezed more margin than others from a category that deals 100% in commodities.

Those deck chairs are not going to rearrange themselves.

Heh I only go to Office Depot to buy a bunch of what I've found are the best microfiber cloths, only sold at Office Depot: http://www.officedepot.com/a/products/328533/Ativa-Microfibe...

From an IT perspective, it means a lot of integration work between the two companies. So the employees have that to look forward to. I imagine many Office Depot employees will be jumping ship early to avoid the massive layoffs at the end of the year.

In 18 months we've gone from 3 major national office supply players to 1. What is driving this? Amazon? Are the old office supply catalogs like Quill still around?

Quill is still around. Our secretary orders all our office supplies through them through an account they've had open since the 90s.

Staples has owned Quill since 2002.

There are others too, Crystal rock for example.

Money is cheap these days. When money is cheap, mergers are popular. Better to borrow and acquire now than compete later (I suppose).

I wonder what they are going to do about store overlap. There is one of each within three block of my office and I suspect that's not uncommon.

So we now effectively have an office supply monopoly? Ugh.

> So we now effectively have an office supply monopoly?

We have a retail office supply specialty chain physical store monoculture, but actual retail sales of office supplies also take place at non-specialty physical stores, at non-chain physical stores, and, most significantly, online (both from specialized and general retailers), and for most transactions customers easily substitute among those groups. So a single-entity dominating the brick-and-mortar chain subcategory is hardly a "monopoly".

As other's have pointed out in this discussion, Amazon and Walmart's Sam's Club are probably more than enough competition to keep prices in check in the office supply market.

Wouldn't it make more sense to convert all the stores to microcenters? microcenter.com

There's definitely some overlap in their inventories but it might surprise you to learn that office supply stores also carry office supplies that Microcenter typically doesn't. Things like mops, cleaners, file cabinets, furniture, chair mats, and paper.

I think 'about' should be changed to ~ (approximately) because the current phrasing sounds like you're saying, "give or take $100M" like it's nothin'

I'd prefer to see

Staples Agrees to Buy Office Depot for ~$6.3 Billion

Staples Agrees to Buy Office Depot for About $6.3 Billion

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