June 23, 2014 at 1:51 pm | Articles & Interviews
Office Depot is a company in search of itself.
New chief executive Roland Smith said the nation’s No. 2 office-supply retailer needs to develop what’s known as a “unique selling proposition” — a way to set itself apart from competitors that include Staples, Amazon and Costco.
Speaking with analysts last week, the former Wendy’s CEO discussed the company’s financial losses and laid out elements of his plan to turn around the nearly 30-year-old business based in Boca Raton.
He offered no specifics of how Office Depot might differentiate itself, but analysts say they’ve seen similar efforts from Office Depot over the years, with little success. They say the seller of pens, paper and printing must improve on what customers value most: the right mix of products, easy online ordering and consistent service.
“They’re doing what Staples and most other office supply companies are doing: focusing on the value proposition and moving more business online,” said Liang Feng, analyst for Morningstar.
One problem is that sales of core office-supply products “are not holding up well,” Feng said. Office Depot reported better sales, for example, for janitorial supplies than for traditional office supplies in its most recent quarter.
Former CEO Neil Austrian even hinted last year that Office Depot may someday sell something different from office supplies. Following stockholders’ approval of Office Depot’s $1.2 billion merger with OfficeMax last July, Austrian remarked, “This merger gives the time to create a different type of company.”
In recent years, Office Depot strengthened its focus on technology gadgets, aiming to draw younger people to its stores. But the push to compete on tablets during the holidays drove prices low, hurting overall sales, executives said during this week’s conference call with analysts.
“The problem is everybody is focused on tablets. Even grocery stores are selling tablets,” Feng said. While Office Depot needs to offer everything that a small business needs, but “you can only charge so much,” he said.
Jaynie Smith, a Fort Lauderdale consultant who specializes in helping companies find their competitive edge, said companies need to first get their fundamentals right, such as understanding their customers.
Her firm, Smart Advantage, has analyzed more than 150 companies about what their customers most value and then asked the same questions of customers.
“Ninety percent get it wrong, from small to Fortune 500 companies,” she said.
Since small business is a key customer for Office Depot, the company must always have the inventory that those companies need, she said. The company could then tout that “the top most-frequently purchased items are in stock 99.9 percent of the time,” she said.
The right inventory mix is important because if Office Depot – or it’s new subsidiary OfficeMax – runs out of a needed item, the customer says, “I’ll go to Staples,” she said.
The company website also is critical, with Amazon’s “one-click” ordering as the golden standard. Ordering from Office Depot’s website should be as seamless as Amazon, said Smart Advantage’s Smith.
Office Depot also could get creative in differentiating itself, she said — for example, installing a Starbucks cafe or a banking kiosk inside stores. “The biggest commodity for the small-business owner is time,” she said.
How service is delivered may be even more important than the products being sold, experts say.
John Riggs, who teaches marketing at Nova Southeastern University in Davie, said that to be effective, a “unique selling proposition” must be consistent. An Office Depot customer must get the same great customer experience from a store in Fort Lauderdale as one in Atlanta.
That takes customer service training of employees at every level. “Great organizations really work with their employees from a training perspective,” he said.
Riggs said he experienced inconsistency during a recent Office Depot visit to replace a clip for his employee badge. First, he asked an employee at the Copy & Print depot where he could find the clips.
“Not my department,” he was told.
“If I was buying a computer, I would have walked out,” Riggs commented.
But not yet discouraged, he went off to find another red shirt, the store uniform. That employee knew where the clips were.
“He personally walked me over there,” Riggs said.
A unique selling proposition “is all about my perceived value of being there – or at Staples across the street,” he said.