Office Depot E-Business
21 Pages Posted: 9 Jun 2009
This case is an excellent illustration of offline/online integration. Office Depot used its supply chain, systems integration and existing offline channel strengths to overcome competitive online threats from pure internet players and other office products categories players. Students get to consider the critical strategic options for overall strategy, pricing, product line, promotion and business integration. Other materials: Teaching Outline, Student Assignment Questions, Spreadsheet - Financial Impact of Options
OFFICE DEPOT E-BUSINESS
Office Depot was at a critical decision point in January 1998. From one store 10 years earlier, Office Depot, located in Delray Beach, Florida, had grown rapidly to $ 7 billion in revenues (Exhibit 1) and number one in the office products market. The competitive landscape had gradually changed, and competitors were now attacking Office Depot in every sales channel. Same-store sales growth for the company had decreased from 17% in 1995 to 6% in 1997 (see Exhibit 2). Aggressive pricing by new Internet retailers threatened Office Depot's everyday low price structure and profit margins. CEO David Fuente was very concerned about responding to these competitive pressures.
The Golden Years: 1987–1994
Office Depot opened its first store in Ft. Lauderdale, Florida in October 1986, five months after Staples opened its first office products warehouse store in Boston. In late 1987, Fuente became CEO. Fuente had been president of the Sherwin-Williams retail stores' division increasing its retail business through geographic expansion and by penetrating clearly defined market segments. Office Depot went public in 1988.
Fuente quickly recognized the growth potential of the Office Depot business. The office products business was highly fragmented with three sales channels—retail stores, catalog, and contract. The retail channel consisted of more than 16,000 local merchants who provided neighborhood convenience at premium prices. The catalog channel had a few major players who offered a continuous stream of promotionally priced merchandise with most products costing consumers everyday premium prices. The contract or direct sales channel serviced large companies with multiple locations, next business day delivery, and contract pricing well below that of the catalog and retail store channels.
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Keywords: business-to-business marketing, competitive dynamics, corporate strategy, distribution channels, growth strategy, market analysis, market planning, market segmentation, marketing planning, marketing strategy, new-market entry, operations strategy
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Office Depot E-Business
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