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STAPLES.COM
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STAPLES.COM

• Beginning
• Company History
• Business model
• Competition
• GBF
• conclusions

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Beginning

• Staples Inc. was started by Tom Stemberg and Leo
  Kahn in 1986.
• Core business was selling office products
• The idea was to eliminate the middleman, the
  company could offer lower prices than competitors
  
• The first Staples Office Superstore opened in
  Brighton, Massachusetts ,1986

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Expansion phase

• Targeted the small business market.
• By 1989, 23 stores in operation including major
  concentration in New York, Washington D.C.,
  Philadelphia, Boston and other northeastern USA.
• Staples constructs a 32,000-square-foot delivery
  distribution center at its warehousing center in
  Putnam. 199O
• 1OO stores by 1991, sales over 547 million

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Expansion phase cont.

• Expands on west coast with 1O stores in L.A
  itself.
• Invests in Business Depot, Ltd., a new Canadian
  office superstore.
• Expands in Florida, the home of rival office
  depot.
• Acquires a 48 stake in MAXI-Paper, an operator
  of five office superstores in Germany.
• Partners with Kingfisher plc to open office
  superstore in the U.K.

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How did they do it?

• Marketing Strategy
• telemarketing to draw customers to the stores.
• special discounts to secure repeat business.
• invests more than 1 million to develop a
  database of small businesses.
• negotiations with leading online portals to get
  featured as a lead office supplier.
• Private Label line of generic office supplies at
  unusually low prices.
• Aggressive market strategy for vast customer
  acquisition.

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Acquisitions

• Business Depot, for 32 million.
• Two contract stationers in New Jersey and New
  York , D.A. MacIssac, Inc., a regional contract
  office supplier.
• Ivan Allen Co., a regional office supplies
  dealer, and Quill Corp., a direct marketer of
  office supplies through mail-order, the Internet,
  and telemarketing.

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Acquisitions Cont.

• Claricom Holdings Inc., a provider of
  telecommunications products and services to small
  businesses.
• Three European office supply companies--Sigma
  Burowelt of Germany, Office Centre of the
  Netherlands, and Office Centre of Portugal.
• Partenership with France's Lyreco Group to
  access the Asian, Canadian and Europeans markets.

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Industry and environment

• Market for office supplies was blooming.
• Small and larger businesses were looking for
  easier access to stationary and other office
  products.
• Rate of small business creation was increasing.
• Not many major players other than office Depot
  and office Max.

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Competition.

• Major Competitors - Office Depot and Office Max.
  
• Local drug stores
• Supermarkets and stationary stores
• Major discount chain such as Wal-Mart.

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Concerns..

• Competitors had an online presence and were
  stealing away market share.
• Internet was becoming a major part of the
  businesses.
• It appeared that the first in the game will win
  others stake.
• Convenience as a major requirement by clients.

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Birth of Staples.com

• Main reason was to create an online presence in
  order not to loose the market share.
• A separate business Unit for Staples Inc.
• Delivery and most other processes were still
  integrated with the parent company.
• Target customers were small office, home office
  or SOHO market.
• Aimed at changing the way business buy office
  supplies
• Every retailer was trying to grab a stake on the
  digital frontier- no matter how big their
  companys market cap was.

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Marketing for Staples.com

• Jeanne Lewis, decided to market this online
  division in a different fashion than a regular
  internet start-up.
• Management took the multichannel approach
  moving as the clients move.
• Bill boards, television spots, radio and other
  offline media was used to get the message out
  there.
• First step was to create a good performing
  website and second was to throw it in the market.
  

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Financing

• September 15, 1999 . Issuance of tracking stock
  for funding marketing plans and potential
  acquisitions.
• November 1999, issued 5 equity stock to 5 VCs
  including General Atlantic, Highland Capital
  Partners, and other investment firms.
• Main reason for this equity distribution was to
  gain some outsider expertise and exposure for
  tracking stock.

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Analyst Concerns

• Why would a 14 year old well established chain
  decide to start new model?
• How would Staples.com fit in the parent company
  culture. ?
• Would the resources of the parent company enough
  to share with the online division.
• How about the current staff?
• Would this be a complementary effort or
  cannibalizing own business?

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Tom Stemberg's answers

• The way I look at it is that I am better of
  cannibalizing my business than waiting for one of
  the competitors to do it.
• Eventually I know these already established
  cyber stores of Office Max etc would squeeze us
  out if Staples.com did not go online. They were
  gaining market share and offering next day
  delivery. Thats when I knew I had to develop a
  site that offered more value for the customer
  than theirs did

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Adjusting of Staples.com

• Lewis decided to distinguish Staples.com from
  parent company.
• New physical façade and creative interior design.
• Employee benefits, perks and game rooms and
  coffee facilities.
• Creating a feeling of an internet start-up.

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Value to the client

• Clients could set up their own homepage that
  could be customized with personalized shopping
  lists, e-mail reminders, favorite aisles and
  product matchmaker service.
• Comparison shopping
• Clients can set up group accounts. Allows
  multiple employees to shop on the website.
• Frequent delivery and confirmation options.

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GBF factors

• Network effects- none- no relation between
  different managers buying products.
• Scale of economies- substantial- more client
  does add to the opportunities to expand and cost
  reduction
• Customer retention- substantial as well- cost of
  moving for the customer will be high once a
  member.
• Hence the customer lifetime value is definitely
  positive as major customer base is comprised of
  businesses and professionals who as long as they
  keep getting the service, will stay and pay.

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Success Story

• Staples.com achieved its goal of becoming the
  leading online retailer of office supplies.
• Sales jumped over a million and operating profit
  increased through 95.
• Lewis decided to simultaneously offer business
  services to create competitive edge.
• Aimed at becoming one stop e-commerce shop for
  small business.

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Success cont.

• Investment in two internet companies
  Register.com, an online domain-name registry and
  Point.com, which sells some 2OO wireless phones
  and offers more than 3OOO wireless plans over the
  internet.
• Deals allowed clients to register a domain name
  and keep a close eye on clients orders to
  understand spending nature.

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Conclusions

• Staples.com is a successful online retailer.
• It has enhanced the core business and has added a
  value to it.
• Staples.com management took the environment as
  threat and hence came out with Staples.com.
• There were concerns regarding integration of this
  online division into the parent company but the
  venture was very well executed and controlled.

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Q U E S T I O N S ????/