With the rise of e-commerce, are the giants of the office supplies industry being left in the dust? And has the office supplies battleground now moved online?
Over the past five years, the office supplies and business supplies industry has seen some dramatic changes. The introduction of Amazon Business, a venture set up by e-commerce mammoth Amazon, has left many retailers and resellers attempting to try and keep up with its growing pace. Aside from Amazon, overall competition is fierce too, with existing providers like Viking, Euroffice, Staples and challengers from larger brands like Post Office Shop all staking their claim in a competitive market.
But with recent reports suggesting that the UK based retailer Office Outlet is seeking further investment and the confirmation made over in America that the owner of Staples Inc, Sycamore Partners, have completed the acquisition of office products wholesaler, Essendant – are we seeing the brick-and-mortar based office supplies battleground now shifting onto the world wide web instead?
Office Outlet Searching for Investment
A story first broke by The Times, it was revealed late last month that private equity firm, Hilco, are searching for new investment with its Office Outlet stores. According to their article, the CEO of Office Outlet, Chris Yates, penned a letter to potential investors late last month in an attempt to raise further funds towards a new strategy for the business.
Since the sale of Office Outlet to Hilco in 2016 and our article detailing how Office Outlet was subletting its stores, the business formerly known as Staples hasn’t been able to gain the footing it once held on the office supplies industry.
The company registered a CVA agreement in August last year, meaning that many of its worst performing stores were downsized or in many cases, closed on a permanent basis. Some of the remaining stores were given a reduction in rent once the agreement had been confirmed, but recent comments made by Yates suggests that a new strategy which requires further funding is needed to help maintain company finances.
Since the closure of some of its stores, Office Outlet has been able to keep 94 of its outlets, including its online presence, trading as normal. Yates states however that the firm is still looking to open smaller stores in an overarching strategy to grow underlying earnings by £10 million over the next three years.
Sycamore Acquires Essendant
Proving that jostling for dominance on the office supplies battleground isn’t only taking place in the UK, key owner of Staples Inc, Sycamore Partners, confirmed its acquisition of North American office products wholesaler Essendant last week.
The restructure of Essendant in 2018 lead to an ownership saga, stemming from the proposed merger of Essendant and SP Richards – a situation which caused Staples and its owner, Sycamore Partners to intervene and disrupt proceedings.
Staples purchase of Essendant was then confirmed in September 2018 but was put on hold whilst disputes and strike action within the American Government were taking place. A leadership change was also made within Essendant, with Ric Phillips, choosing to pursue other opportunities outside of the business.
New President of the company, Harry Dochelli, has remained optimistic on the value of the addition of the Essendant purchase by Staples and Sycamore, commenting:
“Essendant has been a key partner to the reseller community for almost a century, and we see that relationship only strengthening by working with Staples. Essendant brings a unique value proposition to its reseller partners, and with Staples will now have enhanced capabilities to provide our customers, enabling them to win in the marketplace.”
Further commentary from a Staples press release suggests that the company will be working with Essendant in order to “give reseller customers access to an expanded product assortment, innovative technology and world-class supply chain capabilities and support”, which can perhaps be seen as the newly merged business attempting to once again gain supremacy on the office supplies battleground.
W.W Grainger’s Attempt to Compete in Amazon Power Struggle
One office supplies company who are looking to directly address the rise of Amazon and Amazon Business within the sector is W.W Grainger. In order to keep up with customer demand and attempt to join in with the power struggle against the e-commerce giant, Digital Commerce 360 reports that Grainger have cut their pricing structure and made several revamps to their online strategy.
Due to these changes, W.W Grainger reported a boost in overall sales and a reduction in gross margins. This is evidenced in their fourth quarter results released towards the end of last month, and estimations made by the company that they will retain between $38.10 (£29.30) and $38.70 (£29.76) in gross profit from each sale made in 2019.
The changes have come at the expense of Grainger restructuring some of it expenses and follow a $139 million (approx. £107 million) non-cash impairment charge attributed to their UK based Cromwell business.
It can be easy to suggest that the business has been facing pressure from the rapid growth of Amazon’s business-to-business offering, Amazon Business, which was first introduced in 2017. But looking at the overall picture, a renewed focus on its online strategy and presence has helped them remain in the fight taking place on the current office supplies battleground.
Has the Office Supplies Battleground Moved Online?
Do you think more businesses within the office supplies sector need to place more importance on their online offering to remain competitive against Amazon? Or is Amazon’s offering simply too strong to compete against right now?
Let us know your thoughts in the comments below or send us a tweet on our Twitter account @OfficeSuppBlog.