Reference no: EM131287346

STAPLES, INC.

Staples operates in the highly competitive, $240 billion office products market, which historically has been served by traditional office products retailers. These traditional retailers purchase a significant portion of their merchandise from wholesalers that purchase merchandise from manufacturers. Traditional office supply retailers often employ commissioned salespeople who use the wholesaler's catalog to present their business customers with products to select.

But due to their ability to sell at lower prices, mass merchandisers, warehouse clubs, and discount retailers have taken market share away from these traditional retailers, and the industry has grown substantially in the past two decades with the emergence of office supply superstores like Staples, Office Depot, and Office Max. In addition, mail order firms, contract stationery businesses, electronic commerce wholesalers, and manufacturers that sell directly to the consumer all compete for sales.

However, though the office products business has changed in recent years, a significant portion of the market is still served by small retailers. Regardless, the superstores have dramatically changed the landscape of the office supply industry. First, they greatly expanded the use of the retail store format to distribute office supply products, capitalizing in part on the significant increase in the number of home offices. Prior to the mid-1980s, office supply customers primarily placed their orders through commissioned salespeople. Second, an even more recent change in this industry has been the greater use of the Internet for ordering office supply products. These changes have resulted in a very price-competitive market for office supplies, dominated by a small number of providers.

Company Background
Originally opened in 1986 by executive-turned-entrepreneur Tom Stemberg, Staples sales exceeded $16 billion in 2005.30 Staples has been credited with pioneering the high-volume office products superstore concept. By evolving its original mission of slashing the costs and eliminating the hassles of running an office, to making it easy to buy office products, Staples has become the world's largest office products company. To distinguish itself in this competitive industry, Staples strives to provide a unique shopping experience to customers in all its market segments.

Central to maintaining customer satisfaction is developing strong customer relationship skills and broad knowledge about office products in all associates hired by the company. Therefore, Staples includes formal training as an integral part of the development of its associates. Another truly important aspect of customer service is the availability of merchandise. In the office supply industry, customers have very specific needs, such as finding an ink cartridge for a particular printer, and if the store is out of stock of a needed item, the customer may never come back. Staples uses various channels of distribution to address the needs of its different segments. Smaller businesses are generally served by a combination of retail stores, catalog, and the Internet.

Retail operations focus on serving the needs of consumers and small businesses, whereas the catalog and Internet operations focus on customers who need delivery of their office products and other specialized services. The typical Staples retail store has approximately 7,000 stock keeping units (SKUs), but Staples.com offers about 45,000 SKUs. Staples believes that the Internet channel has helped it increase its sales while reducing its overhead costs.

It has developed three standalone Web sites: Staples.com, a public Web site; Quill.com, an e-commerce site for medium-sized businesses; and StaplesLink.com, a secure, customized, e-commerce procurement Web site for large customers with contracts with Staples. In addition, the company has placed Staples.com kiosks in its stores so that customers can make purchases of any product, even if they are not stocked in the store. Customers can pay for these purchases at the register or through Staples.com and have the product delivered to their home or business. This multichannel approach allows Staples to increase its productivity by stocking only fast-moving items in stores but not sacrificing product availability.

Multichannel Integration
Staples' overall goal has been to become the leading office products and service provider by combining its existing experience, extensive distribution infrastructure, and customer service expertise with Web-based information technology.

As a result, the integration of different channels of distribution into one seamless customer experience has been of particular interest to the company. Staples, like many other multichannel retailers, has found that many customers use multiple channels to make their Staples purchases and that sales increase when customers use more than one channel (customers that shop two channels spend twice as much as a single-channel shopper; a tri-channel shopper spends about three times as much as a single-channel shopper).

Therefore, the greater the number of channels a particular customer shops, the greater the overall expenditure he or she is likely to make. Staples faces several challenges in integrating its channels of distribution, most of which are related to its Internet channel. First, it must consider the extent to which the Internet may cannibalize its retail store sales. The most attractive aspect of the Internet is its potential to attract new customers and sell more to existing customers. But if overall sales are flat, that is, if online retailing only converts retail store sales to Internet sales, Staples suffers increased overhead costs and poorer overall productivity.

Second, Staples must be concerned about the stock position of its retail stores compared with that of alternative channels. Since a retail store cannot carry as much merchandise as the Internet channel, the challenge is keeping an appropriate balance between minimizing stockouts and avoiding the proliferation of too many SKUs in the retail stores.

Questions

1. Assess the extent to which Staples has developed a successful multichannel strategy. What factors have contributed to its success?

2. What are the advantages and disadvantages of using kiosks as a part of its approach?

3. How should Staples assess which SKUs to keep in its stores?