Tuesday Morning – Get Your Pens and Paper

About fifteen years ago there was a major upheaval in the home and office stationery business.  Before anybody at ground level knew it, suddenly there were huge stationery stores sprouting here and there that sold the usual supplies plus even more at remarkably lower prices.  Not only low prices were inviting, but the large floor spaces permitted them to display thousands of additional items that previously you had to look through a 500-page, glossy catalogue to find what was offered, and then order it.

The earliest out of the gate, I believe, was the Staples chain and they just magically appeared overnight almost everywhere.  Right behind that came one of the fastest collapses of a retailing format ever witnessed.  Within months, it seemed, stationery shops and office supply stores began holding going-out-of-business sales and selling their stock off at cost just to get rid of the stuff and bail out with a minimum of loss.  There were some really great buys for a little while for paupers like me.  My small city had one of the early Staples stores and I was a quick convert, thus inadvertantly contributing to the disintigration of the Mom and Pop stationery stores.

A big, overnight success like Staples always generates other similar businesses looking to cash in on the wave and to establish a viable chain of cash cows of their own.  So we started seeing Office Max stores opening in the Big Box shopping centers, quickly followed by the Office Depot mega-chain.  It was the latter, Office Depot that opened in my town and I was glad to see it for two reasons.  One, having a competitor is much better for the customer because of the pressure we can then put to hold prices down, and in my case the Office Depot is more convenient to get to.

Over these past twelve years or so, I have gotten very comfortable with "my" Office Depot and always head there first for pens, paper, computer and printer supplies, and lots of other administrative necessities.  If they gave me an I (heart) Office Depot bumper sticker, I'd grin and slap it on. 

But it appears that a "market adjustment" in the mega-stationery store industry is taking place.  Yesterday The Wall Street Journal reported that merger talks between Office Max and Office Depot have been taking place and just might be satisfactorily wrapped up as soon as this week.  The WSJ tells us:

OfficeMax Inc.and Office Depot Inc. are in advanced talks to merge, people familiar with the matter said, as the retailers of pens, paper and desks try to fight off tougher competition from rivals like Staples Inc. and Amazon.com Inc.

The deal is expected to be stock-for-stock, though precise terms couldn't be learned, including what percentage of a merged group shareholders of each company would own. The deal isn't done yet, and talks could still fall apart. But an announcement could come as early as this week, the people said.

A deal would combine two companies that have been hammered in recent years by weak economic conditions, falling sales and rising online competition. Office Depot's market value is just $1.3 billion, and OfficeMax's is about $933 million.

Still, the two chains have a substantial retail presence. Office Depot, based in Boca Raton, Fla., has 1,675 stores world-wide, annual sales of some $11.5 billion and about 39,000 employees. OfficeMax, based in Naperville, Ill., has about 900 stores in the U.S. and Mexico, roughly $7 billion in annual sales and approximately 29,000 employees.

Staples is in financial difficulty also.  Their common problems are increased competition from online retailers, especially Amazon.com, and regular stores like Costco and WalMart.  As a result, they are now seeing too much inventory in too many stores that are also too large for the market.  If you are interested in this kind of stuff, click the link above to the WSJ article which expands on it quite a bit.

Now we have to hit our own supply cabinet and get the daily checksheets out.  While you're doing that, I'll hit the coffee cabinet and get the Bunn-O-Matic going again.  See you back in the day room, ok?

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