The Great Staples Carve-Out and a Possible Monster Mash-Up

Staples

In the first post of this series, I talked about procurement’s role in divestitures and more broadly in strategic planning, using the recently rumored Staples proposal to the Federal Trade Commission (FTC) as a case study.

In a post my colleague Jason Busch just wrote about Staples founder Tom Stemberg, who just died far too young, he cited Tom’s statement about the importance of “equalizing how much small and large stores paid for the same supplies.” My recommendation therefore would be for Staples to carve out the small and medium-sized business (SMB) segment and sell it to a private equity firm that could bring an Essendant-powered” — or “S.P. Richards-powered” — supply chain that could reintermediate regional or local office products firms. There’d need to be enough volume to get good pricing and warrant enough attention from either wholesaler relative to Staples.

But what could this be? Amazon Business could, in theory, be an option, if it embraced reintermediation like we’ve always recommended it should. Amazon is shutting down its Amazon Local business, which was a clone of Groupon, but Amazon Business has an opportunity to reintermediate B2B service suppliers. We expect to see that happen, and perhaps this opportunity could accelerate this in office products — although this is likely two or three years too early for Amazon to adopt. OK, but here’s another option.

Monster Mash-Up

How about OfficeZilla?

Say what? Who? Well, check them out.

Now check out two of their affiliates:

Do these URLs and sites look similar? Yep, it’s an office products e-commerce franchise.

And it’s a front-end to the Essendant distribution supply chain, like so many regional office product retailers that shall go nameless, as written about here.

Yes, it’s an e-commerce platform that essentially creates “Staples in a Box” for local office products stores. Obviously it’ll need to have a more robust supply chain and e-commerce infrastructure than just embedding different logos on its site and other basic features, but it’s a start. Add some private equity money to buy out the Staples SMB contracts, and now you have a meaningul market entrant! By the way, I’ve never talked to OfficeZilla, but they are basically the franchise model I was advocating in an earlier post.

So, the e-commerce “information supply chain” part of this solution is done. Now, how about the physical supply chain (and volumes) and the financial supply chain to finance this venture?

For the physical supply chain, you’ll also need volume aggregation, support from the local dealers, and some money to fund this venture. So, I’d suggest first joining forces with Independent Stationers as both a co-op and as a community. Then you need some investment to buy out the Staples contracts. (Perhaps Mitt Romney or Bain can re-engage.) And for all you hedge fund managers out there reading this, you could consider getting into the game rather than just betting on it from the sidelines. Or maybe the venture capitalists funding jet.com can throw some more money in and get into the localization game rather than just cloning and reskinning amazon.com.

Yet, when all is said and done, and even if my harebrained idea still leaves Staples with a monopoly for the large enterprise market, I don’t care, because it’ll give me more fodder to advise CPOs on how to best rip apart their supersized market baskets when the price increases eventually come rolling in — and they will come, young Skywalker, they will come.

If the FTC is going to cut a deal with Staples, it might want to consider counter-proposals to just the ones Staples is bringing to the table. The question is whether the supply markets will come to the rescue here. If they will, they better move fast.

But I’m just a blogger and by no means a market mover, so I’d love to hear from you on your thoughts about what you think should happen and what you think will happen. 2016 prediction season is almost upon us, so please chime in!

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