June 24, 2008
Amazon.com Invades Staples’ Territory
Amazon still has plenty of product categories to conquer and its latest target is the office supplies market. The online giant announced it has launched its own office supplies store (www.amazon.com/officesupplies) with over 500,000 products from manufacturers including Avery, Hammermill, Midland Paper, Papermate, Raymond Geddes and Russell+Hazel.
“We are thrilled to offer our customers an easy and convenient way to find and discover everything they need to outfit their office or classroom,” said Chris Rupp, director of merchandising for computers and office supplies for Amazon.com, in a press release.
Amazon, which will be going up against the likes of Staples and Office Depot with its newest venture, is offering special promotional deals on a variety of products through June 29. The e-tailing giant will make use of the tools and services that have made it a success in other areas of its business including product information, customer reviews and free shipping.
The online merchant has continued to be effective even in the current challenging economic environment. Amazon recently announced it would open a new 500,000 square-foot fulfillment center in Goodyear, Ariz.
A report from Citigroup Global Markets, quoted in the Seattle Post-Intelligencer, said that Amazon’s “consistently maniacal focus on price, selection and convenience has allowed it to maintain growth rates two times to three times that of overall e-commerce growth rates in the U.S.”
Discussion Questions: Do you see the office supplies business heading more to the online channel and, as such, does Amazon represent a true threat to the market share of companies including Staples and Office Depot?
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Staples does a great job catering to small businesses–both online and at the closest outlet (of which there are many). They have a great online office supply offering. Staples can’t let Amazon undercut their prices on key destination items and categories. They also need to maintain their focus on their loyalty programs and target customers (including small business), and possibly ramping up with some type of rewards program.
Amazon made a smart move entering the office supply business. The category is ripe for moving more online. With their strong customer support service, delivery processes and consumer reputation, they are well positioned for success. There is no reason to expect anything less.
At the same time, there is plenty of room and reason for online and offline office supply retailers to coexist.
It will be interesting to watch how successful Amazon is in the office supply arena because it is a completely different “day and age” from when they introduced books and expanded into groceries. Both Staples and Office Depot have a well established online presence and their customers can also “run down the street and buy something.” That’s how many small businesses fulfill their needs.
Turning this thought upside down, their lack of a physical presence may give Amazon some advantage when it comes to charging customers sales taxes and the company avoids store operating costs, which with rising utility costs could be a significant burden. But ultimately, Amazon needs to figure out a way to remind customers when to order supplies so that they can anticipate their needs and replenish them automatically.
All things being equal, I would have to give this one to Amazon. They have proven time and time again their ability to make e-commerce work. And the fact that they can probably offer the same items at lower prices than Staples will make them a tough opponent.
My advice to Staples: Restructure your locations so that they become “destinations” rather than just stores. Start presenting products in a way that encourage interaction and tryouts. Also concentrate more on products that buyers would want to actually see and touch before buying, such as office furniture, electronics and interior fixtures. Then create bundle pricing and purchasing/service contracts for computers, copiers and other big ticket electronics.
Amazon will never be able to compete on that level.
I have to stop typing now, my typewriter is about to run out of ribbon.
Staples and OD are really pushing the online side of the business so it only makes sense for Amazon to get into the game. They do online and they do it very well. As long as they can fill orders and deliver on time, they should be successful.
Amazon has a huge presence in online shopping and I think we will see a lot of loyal Amazon shoppers defer their office supply purchases to Amazon. Service and selection is what will make or break them in this category. Knowing Amazon’s track record, it should be a cakewalk for them and they will dominate in yet another online retail category.
Amazon tends to do things faster, better, and cheaper. As the retail stores become smaller (which is the case here in Atlanta), more inventory is being shifted to online-only, and often with free delivery. As long as Amazon keeps price parity and a good variety, they should find a good market.
Staples may have seen this coming with their recent acquisition of Corporate Express. In a market dominated by Staples, Office Max and Office Depot, Amazon will have a challenge establishing a foothold in the office supplies market but their credibility on price, assortment and execution will take them far.
It will be interesting to see how effectively the “bricks & clicks” office suppliers respond to the challenge.
Amazon will take market share in office supplies, but the long-run market share losers won’t be Staples or Office Depot or OfficeMax. The losers will be the smallest players, not the national chains. No doubt that in the short run, Amazon’s grand opening specials will be exciting loss leaders that will steal unprofitable volume from everyone.
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Staples does a great job catering to small businesses–both online and at the closest outlet (of which there are many). They have a great online office supply offering. Staples can’t let Amazon undercut their prices on key destination items and categories. They also need to maintain their focus on their loyalty programs and target customers (including small business), and possibly ramping up with some type of rewards program.
Amazon made a smart move entering the office supply business. The category is ripe for moving more online. With their strong customer support service, delivery processes and consumer reputation, they are well positioned for success. There is no reason to expect anything less.
At the same time, there is plenty of room and reason for online and offline office supply retailers to coexist.
It will be interesting to watch how successful Amazon is in the office supply arena because it is a completely different “day and age” from when they introduced books and expanded into groceries. Both Staples and Office Depot have a well established online presence and their customers can also “run down the street and buy something.” That’s how many small businesses fulfill their needs.
Turning this thought upside down, their lack of a physical presence may give Amazon some advantage when it comes to charging customers sales taxes and the company avoids store operating costs, which with rising utility costs could be a significant burden. But ultimately, Amazon needs to figure out a way to remind customers when to order supplies so that they can anticipate their needs and replenish them automatically.
All things being equal, I would have to give this one to Amazon. They have proven time and time again their ability to make e-commerce work. And the fact that they can probably offer the same items at lower prices than Staples will make them a tough opponent.
My advice to Staples: Restructure your locations so that they become “destinations” rather than just stores. Start presenting products in a way that encourage interaction and tryouts. Also concentrate more on products that buyers would want to actually see and touch before buying, such as office furniture, electronics and interior fixtures. Then create bundle pricing and purchasing/service contracts for computers, copiers and other big ticket electronics.
Amazon will never be able to compete on that level.
I have to stop typing now, my typewriter is about to run out of ribbon.
Staples and OD are really pushing the online side of the business so it only makes sense for Amazon to get into the game. They do online and they do it very well. As long as they can fill orders and deliver on time, they should be successful.
Amazon has a huge presence in online shopping and I think we will see a lot of loyal Amazon shoppers defer their office supply purchases to Amazon. Service and selection is what will make or break them in this category. Knowing Amazon’s track record, it should be a cakewalk for them and they will dominate in yet another online retail category.
Amazon tends to do things faster, better, and cheaper. As the retail stores become smaller (which is the case here in Atlanta), more inventory is being shifted to online-only, and often with free delivery. As long as Amazon keeps price parity and a good variety, they should find a good market.
Staples may have seen this coming with their recent acquisition of Corporate Express. In a market dominated by Staples, Office Max and Office Depot, Amazon will have a challenge establishing a foothold in the office supplies market but their credibility on price, assortment and execution will take them far.
It will be interesting to see how effectively the “bricks & clicks” office suppliers respond to the challenge.
Amazon will take market share in office supplies, but the long-run market share losers won’t be Staples or Office Depot or OfficeMax. The losers will be the smallest players, not the national chains. No doubt that in the short run, Amazon’s grand opening specials will be exciting loss leaders that will steal unprofitable volume from everyone.