Procurement Saint: What Would Thomas Stemberg Think About the Staples-Office Depot Merger? Jason Busch - November 17, 2015 8:15 AM | Categories: Category Intelligence (Indirect), Industry News, M&A, Services and Indirect Spend | Tags: General News, L1, L3 In the heated exchanges over the pending Staples-Office Depot merger, which is still in limbo based on Federal Trade Commission review, there are two chapters not known by many, at least in detail, on the periphery of the arguments both for and against the combination: 1) why the late Thomas Stemberg, the founder of Staples, in fact started the business to begin with, and 2) that he had tried to buy the same business nearly 20 years before in the spirit of cost savings, which would be passed along to customers. What are the real risks in contracting? Check out our research paper Contract Management: Understand How to Focus on the Right Thing In an obituary covering Stemberg’s business career, The Washington Post notes that Stemberg originally “described his business plan as simple: equalizing how much small and large stores paid for the same supplies.” Perhaps ironically today, given how corporate office products contracts work, Stemberg was truly an advocate for small businesses when launching Staples — and for driving prices lower for firms of all sizes. Back before Staples, “if you were a small business, you went to a small stationary store and paid $3.68 for a dozen ballpoint pens,” the Post quoted Stemberg saying in an interview with the Fairfield County Business Journal. “But big businesses were paying less than $1 for the same pens.” In attempting to reduce costs for the business and for customers, Stemberg said he had in fact tried to buy Office Depot once before when he was still actively involved in the Staples business. This merger attempt was halted almost 20 years ago, in 1997, just around the time Staples was starting to make aggressive moves to the Internet as a sales channel in the B2B world and early stage e-commerce growth was gathering steam. (Staples would launch its first e-commerce site in 1998.) Fast-forward to today and everyone has an opinion on the case, even competitors, some of whom would like to see the deal go through for various reasons that are likely to benefit them. But corporate procurement organizations, especially those in middle-market companies, are unlikely to see any savings from the merger in reduced prices and could very well face SKU-based increases down the line — a situation which Stemberg would not likely be excited over, given his premise for founding Staples in the first place. When Stemberg started Staples, he clearly set out to become a saint for procurement and price transparency, a person to be lauded for his contribution to reigning in indirect costs for companies of all sizes. OK, he probably wanted to make a little money, too. But where the business ends up could very well cloud the legacy he set out to create in empowering small and medium-sized businesses to get the best possible deals on office products — and maybe even larger firms, as well. For further background on the case, please see our extensive procurement and CPO-centric coverage of the proposed Staples and Office Depot merger below. Please follow Jason Busch on Twitter @jasondbusch Related ArticlesWhat CPOs Should do Right Now About the Pending Staples-Office Depot MergerUnintended Consequences: The CPO’s View of the Proposed Staples and Office Depot Merger (Part 4)Define Your Market Basket: The CPO’s View of the Proposed Staples and Office Depot Merger (Part 3)The Amazon Effect: The CPO’s View of the Proposed Staples and Office Depot Merger (Part 2)The CPO’s View of the Proposed Staples and Office Depot Merger (Part 1 – Introduction)Staples and Office Depot: A potential monopoly? Voices (3) Ira Gorsky: 17.11.2015 at 11:49 am Does anyone think that the proposed divestiture to Essendant will create a viable competitor? WSJ Story Excerpt: Staples Inc. and Office Depot Inc. are offering to transfer large corporate contracts worth roughly $600 million to wholesaler Essendant Inc., according to people familiar with the matter, in an attempt to mollify government antitrust concerns. http://www.wsj.com/articles/staples-office-depot-in-talks-to-transfer-corporate-contracts-1447445357 Reply Zach miller: 17.11.2015 at 6:02 pm No, they are simply divesting contracts that are regularly renegotiated, and they will end up back with staples because essendant won’t be able to handle that large of a business increase. Reply Ira Gorsky: 18.11.2015 at 10:12 am Zach, Do you have any guess why customers aren’t publicly complaining about the Office Depot-Staples transaction? Are they complaining behind the scenes or are they just indifferent? Reply Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.