Can the Office Depot Inc (ODP) Retailers Survive?

Office Depot Inc (NYSE:ODP)In a few months there will be two office “superstores” left, once Office Depot Inc (NYSE:ODP) finishes its purchase of OfficeMax Inc (NYSE:OMX) and begins its direct competition with Staples, Inc. (NASDAQ:SPLS).

The question for investors isn’t which company will survive, but will any of them? Over the last year, five years, or 10 years, all three of these companies have been losing value and losing money.

How can they at least make an argument toward survival? Let’s explore that a moment.

OfficeDepot Seeks Direction

As preparation for their merger, OfficeMax Inc (NYSE:OMX) and Office Depot Inc (NYSE:ODP) have launched a search for a new CEO.

It’s instructive that the leaders of this effort aren’t insiders at either company. They’re the CEO of Dunkin Brands Group Inc (NASDAQ:DNKN), who was on the Office Depot Inc (NYSE:ODP) Board, and the former CEO of Alberto Culver, who served OfficeMax.

Whomever they choose has their work cut out for them. Over the last five years OfficeMax Inc (NYSE:OMX) has lost 40% of its value. Office Depot Inc (NYSE:ODP) has done even worse, losing 70% of its valuation. This is basically a 1+1=1 merger.

The first step is going to be easy, eliminating stores that compete directly with one another, and laying off the workers. Will these be the largest stores in a region, or the smaller ones? That will tell us a lot about the company’s faith in its new direction.

The second step is to choose that direction. Recent visits to both stores have found listless employees, empty aisles nearly devoid of merchandise, and a mix of offerings from the 1990s. The smaller Office Depot Inc (NYSE:ODP) stores look better than the larger OfficeMax outlets. But both have a basic problem.

How do you become relevant to business again? What can an “office supply” store offer in a post-office supply era, where companies are even planning on ending PC purchases, insisting that employees “bring their own?”

Can Office Depot Inc (NYSE:ODP), perhaps, get contracts for employee “bring your own” purchases, with costs shared by the companies?

Staples Seeks New Niches

Staples, Inc. (NASDAQ:SPLS) has shown an interest in reinventing the space by launching itself into the 3D printer space, with 3D Systems‘ Cube, a $1,299 unit that is aimed at a mass market alongside MakerBot’s Replicator.

This is a follow-on to the company’s decision to offer 3D printing services at its stores last December. That move was made in conjunction with a small 3D printing company, Mcor, but it points to a dramatic new direction for the space.

Services

Want to know what the most crowded store in this space is? It’s the UPS Stores, formerly Mailboxes Etc. locations. Those stores are very small, they offer only two services – shipping and receipt of packages and mail – but they have dramatically increased UPS’ reach into the small business market.

Another word for services is logistics. And logistics is what small-to-medium sized businesses need more than anything else. They need help getting stuff in, getting stuff out, expanding their lines of business.

If these stores have a future, it’s in services, logistics, in doing for businesses what businesses find hard to do for themselves. Staples has made the first tentative steps in this direction. And the market has begun to notice – Staples, Inc. (NASDAQ:SPLS) stock has been practically stable the last three months while the glow of the Office Depot Inc (NYSE:ODP) merger talk has died off, sending that stock down 13%.

There is plenty of time to speculate that one of these two stores gets it right, but right now Staples is the way to go.

The article Can the Office Retailers Survive? originally appeared on Fool.com and is written by Dana Blankenhorn.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!