“Office Depot” The First Office Depot opened in 1986 in Lauderdale Lakes, Florida. The Office Depot is a global supplier of office products and services and has experienced a dramatic growth process over the past twenty-five years. In 1990 the Office Depot Companies bought “The Office Club Inc. ”, and immediately became the largest office retailer in North America. Having built its business within the United States and having secured a firm business foundation, Office Depot expanded internationally in 1992. In 1996, Office Depot took its’ catalog and delivery service(s) online.
Office Depot opened about 125 stores between the years 2000-2004. With the economic downturn of 2007, new strategies had to be put in place, and by 2009, 125 stores in international markets were closed. Office Depot exited the Japanese market entirely. Today, Office Depot provides office supplies and services through 1,678 retail stores worldwide, a dedicated sales force, top-rated catalogs, and global e-commerce operations. Office Depot has annual sales of $11. 5 billion, employs roughly 39,000 employees, and serves customers in 61 countries.
Their distribution channels include stores, direct mail, contract delivery, the internet, and B2B e-commerce. Viking Office Products, their wholly owned subsidiary, currently operates one of the industry’s leading direct mail marketers of office products worldwide. The competitive strategy that the Office Depot will approach is a “ best-cost provider strategy” to become #1 in the office supply business. For online purchases, customers will be offered free shipping on any purchase over $25. 00. A promotional discount will be applied for 20% off, on the next purchase for every $100. 00 spent by the customer.
There will be a rewards program for customers and businesses that continue to shop with Office Depot. Based on the number of office supply items purchased, the next item will be free and additional discounts will be applied to future purchases. After the retail store(s), prices will be lowered on items bought primarily by back-to-school customers and also year-round casual shoppers items. The retail stores will monitor active inventory for excess quantities and slow moving items and record adjustments as necessary to lower the price(s) if the anticipated realizable amount is below cost.
Also, estimate and determine what items to stock and at what level, and what items to discontinue and how to value them prior to sale. The large-format retail stores will be reduced to half of the current square-footage, and staff will focus only on supplying consistently purchased merchandise. Items that tend to sit dormant at retail will be provided online only. If a retail store cannot maintain projected sales quotas, the store will be closed in that market area. New government contracts will be provided at 20% discount based on the number of office supplies purchased.
Office Depot will retain business with local, state, and federal governments’ and non-profit organizations contracts by offering a lower cost than other competitors. Office Depots long term strategic direction is to be consumer focused in terms of product assortment, store layouts, new service offerings, and compelling pricing that sends a positive value message to its’ customers. This falls in line with the “best cost provider strategy” giving customers more value for the money while satisfying buyers’ expectations on key quality/features/performance/service attributes beating their price expectations.
One of the main ways that Office Depot has responded was with its’ Magellan innovation, a three-year program which significantly enhanced IT capabilities. The new system will provide such benefits as improved forecasting, better support for planning, and improved profitability. This can be achieved through better utilization of store space, better pricing and data integrity, better stocking, and reduced inventory with the end results benefiting the customer.
In 2011 Office Depot announced that it is boosting their capital expenditure budget for 2012 to approximately $160 million, with a heavy emphasis on e-commerce and other IT investments. The retailers’ digital investments will be particularly important given its plans to shrink both the average size of its brick-and-mortar stores and its product assortments. Office Depots’ e-commerce sales have become an integral part of the company. Office Depot is the number (2) U. S. e-commerce retailer, second only to Amazon. com Inc.
Office Depots’ aggressive Internet strategy has also generated twice the e-commerce sales of its’ rival Staples Inc. Office Depot SWOT Analysis Strengths: * Strong private label product line increases sales nationally and internationally. * Large, diverse customer base (individuals, small business, and large businesses) both nationally and overseas. * Company transitioning to smaller store format will increase presence in high growth markets. * As a direct result of negative economy, company has shuttered underperforming stores. * Cash liquid business with total assets of over four- billion dollars U.
S. Weaknesses: * Little opportunity for real growth in U. S. market due to over-saturation. * Increases in competition in U. S. products market, combined with a reliance on low profit- margin electronics. * Due to the downturn of the economy coupled with continued nationally high unemployment rates… sales, profits, and some business markets have diminished. * Accusations of overcharging Government Contract customers have been made public. Opportunities: * Money spent on office equipment and related items increasing among small and medium businesses. Increased ability to enter into more densely populated areas, while also reducing costs. * Increased opportunities of acquisitions due to strong cash reserves. * Increasing line of private label products geared towards “green” technology. Threats: * The global financial downturn. * High unemployment, coupled with an increase in office vacancies, compounded by low consumer confidence results in decreased spending. * Low cost/low quality imported equipment and products can lead to quality related issues. * Low switching costs increases competition and can lead to “price wars”.