Staples and Office Depot: A potential monopoly?

Staples recently announced the plan to purchase its biggest competitor Office Depot. What does this mean for business customers? Well, there has been an uproar where customers are now concerned the potential merger will create a monopoly resulting in increased pricing and will have a significant impact on the office supply commodity. Is it possible? Yes. Is it likely? I do not think so.

The office supply space has become more competitive in recent years allowing regional players to compete and become more relevant. Also, Staples (and Office Depot) is looking to not only expand their customer base, but their service offering in more than basic office supplies. Staples has become less focused on selling office supplies but rather growing in areas like print management and copy services, technology, water & coffee services, and janitorial services and other facilities maintenance products, just to name a few.

One of the reasons for this is that some businesses are not only shifting to a paperless or lower desktop printer demand environment, but are looking for a one-stop shop for business process needs. Staples would like to be a partner with its customers and to be considered for more than just pens and pencils. This allows customers to not only consolidate their business needs efficiently, but reduce invoicing, account support and contacts, and have additional leverage in negotiating contracts and incentives with one supplier.

As I mentioned, competition is continuing to grow in the office supply arena not only by typical office supply companies. Retailers like Amazon or bigger stores like Target, Wal-Mart, and even Sam’s Club or BJ’s have these products available. You can basically buy these goods anywhere you shop today. They are not always price competitive, and I do not think Staples is at risk for losing purchases, but it continues to drive rivalry in this commodity. On the other side, where business customers shop Amazon for other technology merchandise, Staples can be considered if they expand their product line and are more cost effective.

Another thought is that although Staples is at the top of their game, merging with Office Depot will allow them to expand to customers in rural areas where Office Depot may be prevalent and have a more enticing domestic reach…or expanding its global reach. They still have a far way to go compared to Amazon, but it is probably something in their pipeline especially if the merger is approved and they have the financial backing to support infrastructure changes.

The Federal Trade Commission (FTC) is a long way off from approving the merger especially now with the American Postal Workers Union putting up a fight. I would encourage my business customers not to run away yet but rather see what the decision is, talk to your account reps to gain more conclusive insight and, consider growing the business with these companies. Also, consider: do you even use all of the supplies you purchase every year? Are there other things you could be doing to reduce your supply expense? Take a breath, take a step back. Place everything within its larger context - it will be OK.