By Matt Townsend
Bloomberg News
WWR Article Summary (tl;dr) Staples, the office-supply store is targeting a market that, while now trendy, it still considers neglected: small businesses. That market includes independent contractors who patronize co-working offices to entrepreneurs on Main Street and in Silicon Valley.
NEW YORK
Twenty-somethings sip gourmet coffee in comfy booths as a chill soundtrack plays. There’s funky art, as well as skylights, an artificial putting green and, on some nights, happy hours with beer and wine.
A W hotel? A tech startup?
It’s a Staples office-supply store, that longtime favorite of cubicle jockeys and back-to-school shoppers.
The company offers this “co-working” space, where millennials on laptops set up their instant offices, inside the very first Staples store in America.
Three decades ago, it opened in Boston’s Brighton neighborhood, just down the street from the International House of Pancakes where future office-store magnate Tom Stemberg signed the company’s founding documents.
This blend of old and new shows how Staples Inc. is digging up its roots as one of the first, and most successful, big-box retailers. Under Shira Goodman, the company’s new chief executive officer, Staples hopes it can reverse its years of declining sales, unlike so many other retailers left for dead in the internet age.
Staples is targeting a market that, while now trendy, it still considers neglected: small businesses, from independent contractors who patronize co-working offices to entrepreneurs on Main Street and in Silicon Valley.
Goodman sees a revamped Staples as a small-business consultant of sorts, “indispensable partners” to companies. In her first interview as CEO, she displayed a PowerPoint slide that showed sales from online orders surpassing 80 percent by 2020, up from 60 percent now.
“If you want to get our strategy on one page, this would be it,” Goodman said from the company’s headquarters in the Boston suburb of Framingham, Mass. “If you go to most people on the street and ask about Staples they’d go, ‘Oh yeah, the office-products superstore.’ But the reality is that’s very far from where we are today, and even farther from where we want to be.”
Goodman wants to dominate the $80 billion-a-year U.S. midmarket, or businesses with fewer than 200 employees. To increase a market share of less than 5 percent, Staples has sold off overseas divisions, shut down unprofitable U.S. outlets and, last month, said it will close 70 of its more than 1,500 stores after shuttering more than 300 over the past three years.
Goodman’s strategy hasn’t won over Wall Street. Only one of 14 analysts recommends its stock. One of those skeptics, Brad Thomas of Keybanc Capital Markets, said rivals such as Office Depot and Amazon.com Inc. are also vying to sell to small businesses. Staples shares closed at $8.66 Monday, a third of their 2007 peak and down about 6 percent this year.
Staples, with $18 billion in annual revenue, still the largest company in office supplies, had originally gone down the traditional route of a market leader in a declining industry. In February 2015, it tried to buy smaller Office Depot, which had already snapped up rival OfficeMax.
But the Federal Trade Commission challenged the deal as anti-competitive and blocked it last May. Three weeks after the busted deal, Ron Sargent, who took over for Stemberg in 2002, resigned, and Goodman became CEO.
Goodman sees a silver lining in not having to handle integrating the operations of a rival. “Now you could have unbelievable focus around the Staples of the future and how quickly can we get there,” she said.
Stemberg, the big-box pioneer who died of cancer in 2015, planted the seeds of the current approach. He thought it was impractical for businesses to drop by a store to pick up, say, a 50-pound case of paper. In 1993, Stemberg began running a distribution network that, at least initially, became a key advantage as e-commerce arrived later that decade.
Goodman, 56, knows this side of the business well. A former consultant at Bain & Co., she worked with Stemberg on the delivery project. (Bain Capital, co-founded by former Bain & Co. consultant and future Republican presidential candidate Mitt Romney, backed Stemberg in 1986 when it opened the first store.)
In 1992, Staples hired Goodman, and she worked her way up though roles in marketing to human resources to operations. Shortly after arriving, she helped bring on Neil Ringel, the executive overseeing delivery.
When Ringel looks at the future he sees a woman the company calls “Jackie”: an office manager at a small company, a “jack-of-all-trades” who must handle everything from ordering ink to unclogging toilets.
Ringel wants to win Jackie with offerings and memberships to make her job easier. They include a mobile app that provides ordering via voice, photo, text and Facebook Messenger. There are also discounts from Staples and third-party vendors such as FTD for flowers and Drizly for booze.
Staples has expanded into supplies, such as soap and coffee K-Cups, for bathrooms and break rooms. Topping stalwarts such as paper, these items now make up 12 percent of sales. To cater to smaller firms, Staples also plans to hire 1,000 new salespeople, a 25 percent increase. “We’re doubling down,” Ringel said.
Staples is also working on a national marketing campaign. “We have to move the brand, so that people understand it really is this partner for business,” Goodman said
A case in point: Staples’ partnership with Workbar, a Boston-based co-working company founded in 2009. Co-working has surged in popularity along with the rise of self-employment. Monthly Workbar memberships cost $130, and more than 200 people have joined since the first of three spaces within Staples stores debuted in September.
The partners share revenue, but the benefit runs deeper, according to Brian Coupland, Staples vice president of retail merchandising. Workbar attracts the coveted millennial generation, as well as entrepreneurs, a potential pipeline for new small business customers.
Coupland has his eye on Workbar customers like Dmitri Boulanov, a 28-year-old tech consultant who praised the “cool coffee machine” and overall aesthetic: “Nothing really stood out about Staples before, but this does.”
