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Office Depot, Inc.

Office Depot, Inc.

2200 Old Germantown Road
Delray Beach, Florida 33445-8223
U.S.A.
Telephone: (561) 438-4800
Toll Free: (800) 937-3600
Fax: (561) 438-4001
Web site: http://www.officedepot.com

Public Company
Incorporated: 1986
Employees: 46,000
Sales: $12.36 billion (2003)
Stock Exchanges: New York
Ticker Symbol: ODP
NAIC: 453210 Office Supplies and Stationery Stores; 454110 Electronic Shopping and Mail-Order Houses

Office Depot, Inc. ranks as the second largest operator of office supplies superstores in the United States, trailing only category leader Staples, Inc. The company operates about 870 retail stores in 44 states and the District of Columbia, offering a full range of office supplies and office furniture, business machines and computers, and computer software. Most of the stores also include a copy and print center offering multiple services, such as printing, reproduction, mailing, and shipping. These stores principally serve consumers and small to medium-sized businesses. Besides retail, Office Depot's distribution channels include direct mail, contract delivery, Internet web site, and business-to-business e-commerce. Office Depot also owns Viking Office Products, Inc., a wholly owned subsidiary and one of the leading direct-mail marketers of office products in the world. International operations, involving a full array of distribution channels, extend to 23 countries, including Canada, where there are more than 30 retail stores; France, 42 stores; Japan, 19 stores; Spain, six stores; and Hungary, four stores. In addition, Office Depot has joint venture and licensing agreements for approximately 130 stores in Mexico, El Salvador, Guatemala, Costa Rica, Israel, Poland, and Thailand. Nearly one-quarter of the company's revenues are generated outside the United States.

Mid-1980s Origins

Along with rival companies Staples and Office Club, Inc., Office Depot was a pioneer in the field of office supplies discount retail. The three companies were founded within months of each other in 1986 in three different corners of the United StatesOffice Depot in Florida, Staples in Massachusetts, and Office Club in California. All of them saw opportunities in selling office supplies to small businesses at bulk discount rates that had previously been the privilege of larger companies. Since small businesses had never purchased supplies in quantities large enough to receive bulk discounts, they had been at the mercy of conventional retailers who, in the absence of price competition, could sell at manufacturer's suggested retail prices and take markups of as much as 100 percent. Buying directly from manufacturers instead of wholesalers and keeping overhead low, a discount retailer could offer goods from 20 to 75 percent off of full retail. Another trend that proved advantageous for these three companies was the advent of warehouse-style discount retailers in the 1980s; what Price Club had done for general merchandise and what Circuit City had done for consumer electronics, Office Depot, Office Club, and Staples sought to do for ballpoint pens and legal pads.

Office Depot was founded in Boca Raton, Florida, by entrepreneur F. Patrick Sher and two partners, Jack Kopkin and Stephen Dougherty. The company opened its first retail store in Fort Lauderdale in October 1986, and it proved successful enough that two more Office Depot stores appeared in Florida by the end of the year. The company continued to grow rapidly; in 1987 it opened seven more stores in Florida and Georgia and sales topped $33 million. Sher did not have long to savor his success, however, for he died of leukemia scarcely a year after his first store had opened. He was succeeded as CEO by David Fuente, an experienced retail executive whom Office Depot lured away from Sherwin-Williams, where he had been president of the paint stores division.

Fuente's strategy was to have Office Depot continue to grow at a breakneck pace, to trap market share before copycats got into the act. He planned to enter ten new markets a year and add 50 stores a year. Although Office Depot opened only 16 stores in 1988, expanding into Kentucky, North Carolina, Tennessee, and Texas, Fuente met his goal in 1989 and 1990. Sales topped $132 million in 1988, and Office Depot went public in June with an initial offering of more than 6 million shares at $3.33 per share. Office supply discount retail as a whole was proving wildly successful; although they accounted for only a small fraction of office supply retail sales by the end of the decade, at least one analyst predicted in 1989 that discounters would form the fastest growing specialty-retail segment for several years to come.

Office Depot gained the distinction of being the first of the three original discount chains to turn a profit for a period of four consecutive quarters, which it did during the last two quarters of 1988 and the first two of 1989. The company achieved its success with stores that resembled nothing so much as warehouses. Their decor was functional and unassuming, in a style described by a reporter for Fortune as "plain pipe rack," with merchandise stacked floor-to-ceiling on steel shelves. As David Fuente explained it, "Customers pick only from the first six feet of 'shelf' space anyway. So we use the area above 'for storage.' " By 1989, Office Depot stores were averaging $150,000 in sales per week. Of course, lack of concern for the aesthetics of interior design characterized the company's competitors, as well. Office Depot held an edge in that commercial rents were lower in the South than elsewhere in the United States, allowing the company to build exceptionally large stores and still keep overhead costs relatively low.

Rapid Growth in the Early 1990s

Office Depot continued to grow dramatically in 1989 and 1990, expanding beyond its regional base in the South into the Midwest. By the end of 1990 the company boasted 122 stores scattered across 19 states and sales of $625 million. Much of that expansion was financed by the sale of 3.6 million shares of stock for $41 million to Carrefour, a French chain-store concern with subsidiaries throughout Europe.

The office supply discount field became more crowded and competitive in the early 1990s as other companies, including OfficeMax and BizMart, joined the lucrative industry. With the struggle for market share becoming more vigorous, Office Depot and Office Club decided to merge in 1991. The move solidified Office Depot's position on the Pacific Coast in one swoop by eliminating a major competitor and giving it a substantial number of new stores in a regional market where the company previously had only a slim presence. For its part, Office Club had not fared quite as well as its fellow discounting pioneers; during the four quarters that constituted Office Depot's first profitable one-year period Office Club lost $2.7 million, compared to Office Depot's gain of $5.1 million and Staples' narrower loss of $1.9 million. The merger, therefore, proved advantageous to Office Club as well.

Office Club had been founded in northern California in 1986 by Mark Begelmanpreviously an executive with British American Tobaccoin partnership with a friend who had been selling office products to Price Club. They reasoned that the same marketing principles that allowed Price Club to retail office supplies at deep discounts would work for stores specializing in that kind of merchandise. The first Office Club store opened in January 1987 in Concord, California. Office Club grew quickly, though not as frantically as Office Depot. By the end of 1987 Office Club had opened five stores. At the time of the merger, it operated 59 stores, most of them in California, and had posted annual sales of $300 million.

The merger was approved by Office Depot shareholders in April 1991. As a result of the agreement, which entailed a stock swap worth $137 million, Mark Begelman became president and chief operating officer of Office Depot, with David Fuente remaining chairman and CEO. Over the next 13 months, all Office Club stores were either closed or converted into Office Depot outlets, and the membership fee that Office Club had been charging its regular customers was dropped.

Even after the merger, Office Depot continued to expand. In June 1991 it sold another 1.8 million shares of stock to Carrefour for $40 million to finance expected growth, making Carrefour an 18 percent owner. In addition to the outlets acquired from Office Club, the company opened 57 new stores in 1991. At the end of the year, Office Depot had 229 stores and posted sales of $1.3 billion.

At about the same time, Office Depot saw its sales of office machines, including personal computers, begin to grow by leaps and bounds, and the company began to emphasize this side of its business more strongly. In December 1992, Begelman claimed in an interview that 10 percent of all fax machines sold in the United States were sold by Office Depot. Store layouts were redesigned so that more machines could be put on display. The company began selling not only PC clones by Packard-Bell and Compaq, but also the real thingin August 1991 IBM agreed to let Office Depot sell its PS/1 computers and around that time Apple gave permission for them to sell the Macintosh Performa line as well.

In 1992 Office Depot went international, acquiring HQ Office International, the parent company of the Great Canadian Office Supplies Warehouse chain, which operated seven stores in western Canada. HQ Office International, Inc. had been founded in 1990 by Robert McNulty as a Canadian extension of his unsuccessful California-based HQ Office Supplies Warehouse chain, which was carved up and bought out by Staples and BizMart in 1990. Office Depot immediately replaced the HQ Office International name with its own and began expanding its presence in Canada, opening two stores in Manitoba. Office Depot's entry into the Canadian market set the company up for an eventual confrontation with Business Depot, a small chain based in eastern Canada, in which Staples held a minority stake.

Company Perspectives:

At Office Depot, we strive to be a compelling place to work, shop and invest. We maintain an unwavering commitment to creating an inclusive environment throughout our company where all people are valued and respected for their unique perspectives, contributions, beliefs and cultural heritage.

In addition to expanding into new geographic areas, Office Depot began expanding its customer base. Originally catering to businesses with 20 or fewer employees, Office Depot decided to attract larger business by acquiring contract stationers and integrating them into its retail business. In May 1993 Office Depot acquired the office supply operations of contract stationer Wilson Stationery & Printing, a subsidiary of Steelcase Inc. The deal was valued at $16.5 million. In the next year the company bought three more contract stationers.

Having successfully moved into the established retail office supply market, Office Depot was confident they could challenge the existing system that served larger businesses. CEO David Fuente told Forbes in May 1994, "We're all selling the same stuff; we're all selling legal pads and pens and pencils, and we all buy from the same place. The real difference in performance is going to be: Are you pricing them better? Giving better service? Delivering better? The difference is not in the strategy but in the execution." Staples and OfficeMax clearly felt Office Depot was on the right track: they both followed suit by acquiring their own contract stationers. Two years later, however, Office Depot had yet to see big returns on its investment. Integrating the contract stationers into their core retail business had cost more than expected, but Office Depot remained confident that the more diverse customer base should make the investment worth it in the long run.

The company saw $2.6 billion in sales in 1993, with $63 million in profit. By 1994 Office Depot had grown to 362 stores, which still followed the company's original conceptwarehouse-like buildings that stocked office supplies at 30 to 60 percent off manufacturer's list prices. The company's closest competitor, the Kmart Corporation subsidiary OfficeMax, was only half its size. Not satisfied, Office Depot planned to double the number of its stores in the next five years.

Mid- to Late 1990s: Failed Staples Takeover, International Expansion, Viking Acquisition

In September 1996 Office Depot agreed to be acquired by Staples, its largest competitor, in a deal estimated at $4 billion. As these companies were number one and two, respectively, among discount chains, questions about antitrust violations were quickly raised. The Federal Trade Commission (FTC) found that the combined company would control prices in many metropolitan areas and that in cities where Office Depot and Staples competed head to head, prices might be expected to rise 5 to 10 percent. The FTC sought a court order to stop Staples from buying Office Depot. In response, the two companies agreed to sell 63 stores to OfficeMax to open competition in certain areas, a proposal that had to be approved by the FTC. They also argued that, with only 5 percent of the office supply market, their merger was not threatening. Unappeased, the FTC argued that office superstores are a market to themselves and that Office Depot and Staples controlled 75 percent of that market. The FTC sued to stop the deal, and in late June 1997 a federal judge granted a preliminary injunction to block the transaction. At this point, Staples and Office Depot abandoned their merger plans, conceding defeat.

Aside from this failed merger, the mid- to late 1990s were noteworthy for Office Depot's steady expansion of its overseas operations. From 1995 to 1998 the company opened stores in Poland, Hungary, and Thailand under licensing agreements, and in Mexico, France, and Japan through joint ventures. In 1998 Office Depot bought out its joint venture partner in France and it did likewise in Japan the following year. Also important to this international push was the August 1998 acquisition of Viking Office Products, Inc. for about $2.7 billion in stock. Based in Torrance, California, Viking was the largest direct-mail marketer of office products in the world. Of Viking's $1.29 billion in 1997 revenues, 60 percent was generated outside the United States. It operated 11 delivery centers in Europe and Australia.

Also in 1998 Office Depot added to its growing channels of distribution with the launch of its first web site, www.officedepot.com, in January. The company's first European e-commerce site, www.viking-direct.co.uk, was launched in the United Kingdom one year later. Also in 1999 Office Depot entered into a partnership with United Parcel Service, Inc. (UPS) in order to begin offering UPS packaging and shipping services at its U.S. stores. That year, revenues surpassed the $10 billion mark for the first time, hitting $10.2 billion, while profits were a record $257.6 million. Office Depot ended the decade with 825 stores in the United States and Canada, and 32 overseas.

Key Dates:

1986:
F. Patrick Sher and two partners found Office Depot, Inc. in Boca Raton, Florida, and open their first store in Fort Lauderdale.
1987:
Sher dies of leukemia and is succeeded as CEO by David Fuente.
1988:
Company goes public.
1991:
Office Depot acquires Office Club, Inc. and its 59 stores, mostly in California.
1992:
Company acquires Canadian firm HQ Office International, Inc. in first move outside the United States.
1997:
Federal Trade Commission blocks proposed acquisition of Office Depot by Staples, Inc. on antitrust grounds.
1998:
Company's first web site, www.officedepot.com, is launched; direct-mail marketer Viking Office Products, Inc. is acquired.
2000:
Bruce Nelson succeeds Fuente as CEO.
2001:
Major restructuring involves the closure of 70 stores and an exit from several markets.
2003:
Office Depot acquires the French firm Guilbert S.A., a leading European contract stationer.

Early 2000s: Struggling to Regain Momentum

Despite the record results for 1999, all was not well at Office Depot. As the ill-fated Staples deal unfolded, Office Depot had placed its expansion plans on hold. Then when the deal died, the company scrambled to make up for lost time, opening new stores rather haphazardlyentering new markets, where competitors were already entrenched, with just a couple stores, and making some poor choices in regard to specific store locations. Office Depot was also hurt by heightened competition from warehouse discounters, particularly Costco Wholesale Corporation and Wal-Mart Stores, Inc.'s Sam's Club, who made aggressive moves into some of the most profitable office supplies categories, including computer paper, toner, and inkforcing price cuts. Sales and profits were negatively affected, and Office Depot began missing some analysts' projections. After second-quarter 2000 earnings dropped 22 percent, the company's board reacted by easing Fuente out of the CEO slot and into the position of nonexecutive chairman. Bruce Nelson was promoted to CEO from his previous position as international president. Nelson had joined Office Depot as the president of Viking Office Products, and earlier in his career had garnered more than two decades of senior management experience at Boise Cascade Office Products.

Nelson spent the next several months making changes to top management and launching a thorough review of the firm's operations to identify underperforming outlets and weak markets. In January 2001 he announced that Office Depot would close 70 of its 888 North American stores, leaving the following markets altogether: Cleveland; Columbus, Ohio; Phoenix; and Boston. Expansion for 2001 was pared back to 50 new stores, with the new outlets being about 20,000 square feet each, about 5,000 square feet smaller than the average existing store. Nelson also aimed to refocus the stores on small and medium-sized businesses by eliminating a great deal of consumer-oriented merchandise, such as DVD players and children's computer software. In all, about 1,800 products were to be cut; these represented about 20 percent of the total number of products but generated only about 2 percent of sales. In connection with this restructuring, Office Depot recorded an after-tax charge of $260.6 million for the fourth quarter of 2000, leaving profits for that year to stand at a much reduced $49.3 million.

Continuing its ongoing overseas expansion, Office Depot in early 2001 acquired Sands & McDougall, an office products firm that was the largest contract stationer in Western Australia. The company also expanded its business services operations into Ireland, the Netherlands, and France that year. In December 2001 Nelson was named to the additional position of chairman, succeeding Fuente, who nevertheless remained on the company board. The Viking direct-mail business expanded into Switzerland, Spain, and Portugal during 2002, and Office Depot's business services division expanded into Italy. Through its Mexican joint-venture partner, Grupo Gigante, S.A. de C.V., the company expanded into Central America that same year, opening stores in Guatemala and Costa Rica.

In early 2003, however, Office Depot elected to exit from the Australian market in order to concentrate its international attention mainly on Europe. It sold its Australian operations to Officeworks, a subsidiary of Coles Myer Ltd. that was the leading office supplies retailer in Australia. It took little time for Office Depot to make a major move that nearly doubled its European operations. In June 2003 the company acquired the France-based Guilbert S.A. from Pinault-Printemps-Redoute S.A. for $945.2 million. Guilbert was one of the largest contract stationers in Europe, with operations in nine European countries and 2002 revenues of $1.6 billion. The acquisition of Guilbert, based in Senlis (outside Paris), not only accelerated Office Depot's penetration of the market for large business customers in Europe, it also gave the company the number one position among the continent's office supply firms. Office Depot subsequently, in April 2004, gained its first wholly owned operations in Eastern Europe by acquiring its licensee in Hungary, which had been operating three Office Depot stores in that nation. The company planned to use its Hungarian subsidiary as a base for expansion into the ten countries in the region that had recently joined the European Union.

After nearly four years of declines in quarterly same-stores sales (sales at stores that have been open for more than one year), Office Depot appeared to have turned the corner during the first half of 2004 when it posted two consecutive quarters of 3 percent increases in same-store sales. The company was also busy with a number of new initiatives. In February it rolled out its first-ever customer loyalty program, Office Depot Advantage, which rewarded customers who spend as little as $200 in a three-month period with a gift certificate good for future purchases. To help ramp up expansion efforts, the company agreed to buy 124 former Kids "R" Us stores from Toys "R" Us, Inc. for $197 million in cash. The deal was later reduced to 109 stores, and Office Depot planned to resell or sublet about half of the total, but 45 to 50 of the stores were to be converted to the Office Depot format. Many of the acquired stores were in the Northeast, and the company announced an aggressive expansion into that region, a stronghold for its two main rivals, Staplesnow the number one U.S. operator of office supplies superstoresand OfficeMax. Overall, in an attempt to close the gap with Staples, which had 1,400 stores, the 900-unit-strong Office Depot aimed to open 80 new stores in 2004 and then 100 new stores in each of the following three years. The new stores were to feature a new store format called Millennium 2. Nelson told the Palm Beach (Fla.) Post: "We worked to create a store that was easier to shop, less expensive to open and more efficient to operate. This serves as our foundation to enter a new era." The format emphasized grouping product categories together in the way customers use them and also featured increased cross-merchandising. Also significant was that the stores began showcasing a new line of fashion-forward furniture created by Emmy Awardwinning designer Christopher Lowell.

Principal Subsidiaries

Eastman Office Supplies, Inc.; Guilbert SAS (France); OD International, Inc.; The Office Club, Inc.; Office Depot of Texas, L.P.; Office Depot International (UK) Limited; Viking Office Products, Inc.; Office Depot International BV (Netherlands).

Further Reading

"The Big Interview: Mark BegelmanOffice Depot," Office Products International, December 1992.

Brooks, Rick, "Office Depot to Buy Viking in Stock Deal," Wall Street Journal, May 19, 1998, p. A3.

Caminiti, Susan, "Seeking Big Money in Paper and Pens," Fortune, July 31, 1989.

Davids, Meryl, "Pushing the Envelope at Office Depot," Journal of Business Strategy, September/October 1998, pp. 25+.

Dieckmann, Heike, "Buckled Wheels?," Office Products International, November 2003, p. 40.

Hirsh, Michael, "But Nary a Trust to Bust," Newsweek, June 2, 1997, pp. 4445.

Kaye, Steven D., "Out with the Old, In with the New," U.S. News and World Report, March 24, 1997, p. 60.

La Monica, Paul R., "Office Depot: Stock Up," Financial World, January 30, 1996, p. 24.

Libbin, Jennifer, "Office Depot CEO Outlines Future," DSN Retailing Today, May 21, 2001, pp. 4, 59.

Liebeck, Laura, "Office Depot Ventures into Canada, Magazine Business," Discount Store News, February 3, 1992.

Milstone, Erik, "Office Depot on the Fast Track," Palm Beach (Fla.) Post, March 29, 1992.

Moukheiber, Zina, "A Lousy Day for Golf," Forbes, May 9, 1994, pp. 60, 64.

Ostrowski, Jeff, "Office Depot Closing 70 Stores," Palm Beach (Fla.) Post, January 4, 2001, p. 1D.

Owers, Paul, "Acquisition to Put Office Depot on Top," Palm Beach (Fla.) Post, April 9, 2003, p. 8B.

, "Office Depot Replaces CEO Fuente," Palm Beach (Fla.) Post, July 19, 2000, p. 6B.

Pascual, Aixa M., "Can Office Depot Get Back on Track?," Business Week, September 18, 2000, p. 74.

Rawls, Linda, "Office Depot's New Store Style Set," Palm Beach (Fla.) Post, July 1, 2004, p. 1D.

Selz, Michael, "Office Supply Firms Take Different Paths to Success," Wall Street Journal, May 30, 1991.

Terhune, Chad, "Office Depot, Shifting Selling Strategy, to Post a Charge of Up to $300 Million," Wall Street Journal, January 4, 2001, p. B13.

Troy, Mike, "Change Is in the Air at Office Depot," DSN Retailing Today, August 7, 2000, pp. 3, 88.

, "Expansion and Renovation on Agenda at Office Depot," Discount Store News, June 8, 1998, pp. 7, 134.

, "Moving Beyond No. 1: Office Depot Gets Better, Not Bigger," Discount Store News, October 26, 1998, p. 43.

, "Office Depot Churning Up Change," DSN Retailing Today, March 22, 2004, pp. 1, 43.

, "Office Depot Resurges amid Merchandising Makeover," DSN Retailing Today, June 7, 2004, pp. 20, 24.

, "Office Depot Shifts Store Expansion to M2 Format," DSN Retailing Today, July 19, 2004, pp. 4, 21.

Douglas Sun

updates: Susan Windisch Brown, David E. Salamie

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Office Depot Incorporated

Office Depot Incorporated

2200 Old Germantown Road
Delray Beach, Florida 33445
U.S.A.
(800) 937-3600
Fax: (561) 265-4400
Web site: http://www.officedepot.com

Public Company
Incorporated:
1986
Employees: 31,000
Sales: $5.3 billion (1996)
Stock Exchanges: New York
SICs: 5943 Stationery Stores

Thanks to its 1991 merger with competitor Office Club, Office Depot Incorporated is one of the largest discount retailer of office supplies and furniture in North America. In addition to office products, the company also sells computer hardware and electronics designed for small business applications. Office Depot operates over 300 stores, most of them located in the South, the lower Midwest, and the West.

Mid-1980s Origins

Along with rival companies Staples and Office Club, Office Depot was a pioneer in the field of office supplies discount retail. The three companies were founded within months of each other in 1986 in three different corners of the United StatesOffice Depot in Florida, Staples in Massachusetts, and Office Club in California. All of them saw opportunities in selling office supplies to small businesses at bulk discount rates that had previously been the privilege of larger companies. Since small businesses had never purchased supplies in quantities large enough to receive bulk discounts, they had been at the mercy of conventional retailers who, in the absence of price competition, could sell at manufacturers suggested retail prices and take markups of as much as 100 percent. Buying directly from manufacturers instead of wholesalers and keeping overhead low, a discount retailer could offer goods from 20 to 75 percent off of full retail. Another trend that proved advantageous for these three companies was the advent of warehouse-style discount retailers in the 1980s; what Price Club had done for general merchandise and what Circuit City had done for consumer electronics, Office Depot, Office Club, and Staples sought to do for ballpoint pens and legal pads.

Office Depot was founded in Boca Raton, Florida, by entrepreneur F. Patrick Sher and two partners. The company opened its first retail store in Fort Lauderdale in October 1986, and it proved successful enough that two more Office Depot stores appeared in Florida by the end of the year. The company continued to grow rapidly; in 1987 it opened seven more stores in Florida and Georgia and sales topped $33 million. Sher did not have long to savor his success, however, for he died of leukemia scarcely a year after his first store had opened. He was succeeded as CEO by David Fuente, an experienced retail executive whom Office Depot lured away from Sherwin-Williams, where he had been president of the paint stores division.

Fuentes strategy was to have Office Depot continue to grow at a breakneck pace, to trap market share before copycats got into the act. He planned to enter ten new markets a year and add 50 stores a year. Although Office Depot opened only 16 stores in 1988, expanding into Kentucky, North Carolina, Tennessee, and Texas, Fuente met his goal in 1989 and 1990. Sales topped $132 million in 1988, and Office Depot went public in June with an initial offering of more than six million shares at $3.33 per share. Office supply discount retail as a whole was proving wildly successful; although they accounted for only a small fraction of office supply retail sales by the end of the decade, at least one analyst predicted in 1989 that discounters would form the fastest growing specialty-retail segment for several years to come.

Office Depot gained the distinction of being the first of the three original discount chains to turn a profit for a period of four consecutive quarters, which it did during the last two quarters of 1988 and the first two of 1989. The company achieved its success with stores that resembled nothing so much as warehouses. Their decor was functional and unassuming, in a style described by a reporter for Fortune as plain pipe rack, with merchandise stacked floor-to-ceiling on steel shelves. As David Fuente explained it, Customers pick only from the first six feet of shelf space anyway. So we use the area above for storage. By 1989, Office Depot stores were averaging $150,000 in sales per week. Of course, lack of concern for the aesthetics of interior design characterized the companys competitors, as well. Office Depot held an edge in that commercial rents were lower in the South than elsewhere in the United States, allowing the company to build exceptionally large stores and still keep overhead costs relatively low.

Rapid Growth in the Early 1990s

Office Depot continued to grow dramatically in 1989 and 1990, expanding beyond its regional base in the South into the Midwest. By the end of 1990 the company boasted 122 stores scattered across 19 states and sales of $625 million. Much of that expansion was financed by the sale of 3.6 million shares of stock for $41 million to Carrefour, a French chain-store concern with subsidiaries throughout Europe.

The office supply discount field became more crowded and competitive in the early 1990s as other companies, including OfficeMax and BizMart, joined the lucrative industry. With the struggle for market share becoming more vigorous, Office Depot and Office Club decided to merge in 1991. The move solidified Office Depots position on the Pacific Coast in one swoop by eliminating a major competitor and giving it a substantial number of new stores in a regional market where the company previously had only a slim presence. For its part, Office Club had not fared quite as well as its fellow discounting pioneers; during the four quarters that constituted Office Depots first profitable one-year period Office Club lost $2.7 million, compared to Office Depots gain of $5.1 million and Stapless narrower loss of $1.9 million. The merger, therefore, proved advantageous to Office Club as well.

Office Club had been founded in northern California in 1986 by Mark Begelmanpreviously an executive with British American Tobaccoin partnership with a friend who had been selling office products to Price Club. They reasoned that the same marketing principles that allowed Price Club to retail office supplies at deep discounts would work for stores specializing in that kind of merchandise. The first Office Club store opened in January 1987 in Concord, California. Office Club grew quickly, though not as frantically as Office Depot. By the end of 1987 Office Club had opened five stores. At the time of the merger, it operated 59 stores, most of them in California, and had posted annual sales of $300 million.

The merger was approved by Office Depot shareholders in April 1991. As a result of the agreement, which entailed a stock swap worth $137 million, Mark Begelman became president and chief operating officer of Office Depot, with David Fuente remaining chairman and CEO. Over the next 13 months, all Office Club stores were either closed or converted into Office Depot outlets, and the membership fee that Office Club had been charging its regular customers was dropped.

Even after the merger, Office Depot continued to expand. In June 1991 it sold another 1.8 million shares of stock to Carrefour for $40 million to finance expected growth, making Carrefour an 18 percent owner. In addition to the outlets acquired from Office Club, the company opened 57 new stores in 1991. At the end of the year, Office Depot had 229 stores and posted sales of $1.3 billion.

At about the same time, Office Depot saw its sales of office machines, including personal computers, begin to grow by leaps and bounds, and the company began to emphasize this side of its business more strongly. In December 1992, Begelman claimed in an interview that ten percent of all fax machines sold in the United States were sold by Office Depot. Store layouts were redesigned so that more machines could be put on display. The company began selling not only PC clones by Packard-Bell and Compaq, but also the real thingin August 1991 IBM agreed to let Office Depot sell its PS/1 computers and around that time Apple gave permission for them to sell the Macintosh Performa line as well.

In 1992 Office Depot went international, acquiring HQ Office International, the parent company of the Great Canadian Office Supplies Warehouse chain, which operated seven stores in western Canada. HQ Office International had been founded in 1990 by Robert McNulty as a Canadian extension of his unsuccessful California-based HQ Office Supplies Warehouse chain, which was carved up and bought out by Staples and BizMart in 1990. Office Depot immediately replaced the HQ Office International name with its own and began expanding its presence in Canada, opening two stores in Manitoba. Office Depots entry into the Canadian market set the company up for an eventual confrontation with Business Depot, a small chain based in eastern Canada, in which Staples held a minority stake.

Company Perspectives:

Office Depots mission is to be the most successful office products company in the world. We will achieve success by an uncompromising commitment to: A) superior customer satisfactiona company-wide attitude that recognizes that customer satisfaction is EVERYTHING; B) associate-oriented environmentan acknowledgement that our associates are our most valuable resource. We are committed to fostering a environment where recognition, innovation, communication and the entrepreneurial spirit are encouraged and rewarded; C) industry leading value/selection/ servicesoffering only the highest-quality merchandise available at everyday low prices, providing customers with an outstanding balance of value, selection and services; D) ethical business conductconducting our business with uncompromising honesty and integrity; E) shareholder valueproviding our shareholders with superior return-on-investment.

In addition to expanding into new geographic areas, Office Depot began expanding its customer base. Originally catering to businesses with 20 or fewer employees, Office Depot decided to attract larger business by acquiring contract stationers and integrating them into its retail business. In May 1993 Office Depot acquired the office supply operations of contract stationer Wilson Stationery & Printing, a subsidiary of Steelcase Inc. The deal was valued at $16.5 million. In the next year the company bought three more contract stationers.

Having successfully moved into the established retail office supply market, Office Depot was confident they could challenge the existing system that served larger businesses. CEO David Fuente told Forbes in May 1994, Were all selling the same stuff; were all selling legal pads and pens and pencils, and we all buy from the same place. The real difference in performance is going to be: Are you pricing them better? Giving better service? Delivering better? The difference is not in the strategy but in the execution. Staples and OfficeMax clearly felt Office Depot was on the right track: they both followed suit by acquiring their own contract stationers. However, two years later Office Depot had yet to see big returns on its investment. Integrating the contract stationers into their core retail business had cost more than expected, but Office Depot remained confident that the more diverse customer base should make the investment worth it in the long run.

The company saw $2.6 billion in sales in 1993, with $63 million in profit. By 1994 Office Depot had grown to 362 stores, which still followed the companys original conceptwarehouse-like buildings that stocked office supplies at 30 to 60 percent off manufacturers list prices. The companys closest competitor, the Kmart subsidiary OfficeMax, was only half its size. Not satisfied, Office Depot planned to double the number of its stores in the next five years.

Challenges of the Mid- and Late 1990s

In late 1995 Office Depots stock dipped following a slowdown in computer chip orders, which analysts feared would slow demand for personal computers. Smith Barney analyst James Stoeffel told Financial World that such fears were overstated. Because computer sales only accounted for approximately ten percent of Office Depot revenues and because the company only stocked the most popular brands, a slowdown might not mean disaster. Its not immaterial, but its obviously not the most critical part of their business, Stoeffel maintained. With its continued potential for growth, the companys stock soon bounced back from its low of $19 a share.

In 1997 Staples attempted to acquire Office Depot, its largest competitor, in a deal estimated at $4 billion. As these companies were number one and two, respectively, among discount chains, questions about antitrust violations were quickly raised. The Federal Trade Commission (FTC) found that the combined company would control prices in many metropolitan areas and that in cities where Office Depot and Staples competed head to head, prices might be expected to rise five to ten percent. The FTC sought a court order to stop Staples from buying Office Depot. In response, the two companies agreed to sell 63 stores to OfficeMax to open competition in certain areas, a proposal that had to be approved the FTC. They also argued that, with only five percent of the office supply market, their merger was not threatening. Unappeased, the FTC argued that office superstores are a market to themselves and that Office Depot and Staples controlled 75 percent of that market. As of early 1998, the two office supply giants remained hopeful of a merger.

Principal Subsidiaries

The Office Club, Inc.; H. Q. Office International, Inc.

Further Reading

The Big Interview: Mark BegelmanOffice Depot, Office Products International, December 1992.

Caminiti, Susan, Seeking Big Money in Paper and Pens, Fortune, July 31, 1989.

Hirsh, Michael, But Nary a Trust to Bust, News week, June 2, 1997, pp. 4445.

Kaye, Steven D., Out with the Old, In with the New, U.S. News & World Report, March 24, 1997, p. 60.

La Monica, Paul R., Office Depot: Stock Up, Financial World, January 30, 1996, p. 24.

Liebeck, Laura, Office Depot Ventures Into Canada, Magazine Business, Discount Store News, February 3, 1992.

Milstone, Erik, Office Depot on the Fast Track, Palm Beach Post, March 29, 1992.

Moukheiber, Zina, A Lousy Day for Golf, Forbes, May 9, 1994, pp. 60, 64.

Selz, Michael, Office Supply Firms Take Different Paths to Success, Wall Street Journal, May 30, 1991.

Douglas Sun
updated by Susan Windisch Brown

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Office Depot Incorporated

Office Depot Incorporated

2000 Old Germantown Road
Delray Beach, Florida 33445
U.S.A.
(407) 278-4000
Fax: (407) 265-4403

Public Company
Incorporated: 1986
Employees: 9,000
Sales: $1.70 billion
Exchanges: New York
SICs: 5112 Stationery & Office Supplies

Thanks to its 1991 merger with competitor Office Club, Office Depot Incorporated has become the largest discount retailer of office supplies and furniture in North America. In addition to office products, the company also sells computer hardware and electronics designed for small business applications. Office Depot operates over 300 stores, with most of them located in the South, lower Midwest, and Pacific Coast.

Along with rival companies Staples and Office Club, Office Depot was a pioneer in the field of office supplies discount retail. The three companies were founded within months of each other in 1986 in three different corners of the United StatesOffice Depot in Florida, Staples in Massachusetts, and Office Club in California. All of them saw opportunities in selling office supplies to small businesses at bulk discount rates that had previously been the privilege of larger companies. Since small businesses had never purchased supplies in quantities large enough to receive bulk discounts, they had been at the mercy of conventional retailers who, in the absence of price competition, could sell at manufacturers suggested retail prices and take markups of as much as 100 percent. Buying directly from manufacturers instead of wholesalers and keeping overhead low, a discount retailer could offer goods from 20 to 75 percent off of full retail. Another trend that proved advantageous for these three companies was the advent of warehouse-style discount retailers in the 1980s; what Price Club had done for general merchandise and what Circuit City had done for consumer electronics, Office Depot, Office Club, and Staples sought to do for ballpoint pens and legal pads.

Office Depot was founded in Boca Raton, Florida, by entrepreneur F. Patrick Sher and two partners. The company opened its first retail store in Fort Lauderdale in October of 1986, and it proved successful enough that two more Office Depot stores appeared in Florida by the end of the year. The company continued to grow rapidly; in 1987 it opened seven more stores in Florida and Georgia and sales topped $33 million. Sher did not have long to savor his success, however, for he died of leukemia scarcely a year after his first store had opened. He was succeeded as CEO by David Fuente, an experienced retail executive whom Office Depot lured away from Sherwin-Williams, where he had been president of the Paint Stores Division.

Under Fuente, Office Depot continued to grow at a breakneck pace, with its success matching the pace of its expansion. The company opened sixteen more stores in 1988, expanding into Kentucky, North Carolina, Tennessee, and Texas. Sales topped $132 million, and Office Depot went public in June with an initial offering of more than 6 million shares at $3.33 per share. Office supply discount retail as a whole was proving wildly successful; although they accounted for only a small fraction of office supply retail sales by the end of the decade, at least one analyst predicted in 1989 that discounters would form the fastest growing specialty-retail segment for several years to come.

Office Depot gained the distinction of being the first of the three original discount chains to turn a profit for a period of four consecutive quarters, which it did during the last two quarters of 1988 and the first two of 1989. The company achieved its success with stores that resembled nothing so much as warehouses; their decor was functional and unassumingin a style described by a reporter for Fortune as plain pipe rackwith merchandise stacked floor-to-ceiling on steel shelves. As David Fuente explained it, Customers pick only from the first six feet of [shelf] space anyway. So we use the area above [for storage]. By 1989, Office Depot stores were averaging $150,000 in sales per week. Of course, lack of concern for the aesthetics of interior design characterized the companys competitors, as well. Office Depot held an edge in that commercial rents were lower in the South than elsewhere in the United States, allowing the company to build exceptionally large stores and still keep overhead costs relatively low.

Office Depot continued to grow dramatically in 1989 and 1990, expanding beyond its regional base in the South into the Midwest. By the end of 1990 the company boasted 122 stores scattered across 19 states and sales of $625 million. Much of that expansion was financed by the sale of 3.6 million shares of stock to Carrefours, a French chain-store concern with subsidiaries throughout Europe.

The office supply discount field became more crowded and competitive in the early 1990s as other companies, including Office Max and BizMart, joined the lucrative industry. With the struggle for market share becoming more vigorous, Office Depot and Office Club decided to merge in 1991. The move solidified Office Depots position on the Pacific Coast in one swoop by eliminating a major competitor and giving it a substantial number of new stores in a regional market where the company previously had only a slim presence. For its part, Office Club had not fared quite as well as its fellow discounting pioneers; during the four quarters that constituted Office Depots first profitable one-year period Office Club lost $2.7 million, compared to Office Depots gain of $5.1 million and Stapless narrower loss of $1.9 million. The merger, therefore, proved advantageous to Office Club as well.

Office Club had been founded in northern California in 1986 by Mark Begelmanpreviously an executive with British American Tobaccoin partnership with a friend who had been selling office products to Price Club. They reasoned that the same marketing principles that allowed Price Club to retail office supplies at deep discounts would work for stores specializing in that kind of merchandise. The first Office Club store opened in January 1987 in Concord, California. Office Club grew quickly, though not as frantically as Office Depot. By the end of 1987 Office Club had opened five stores. At the time of the merger, it operated 59 stores, most of them in California, and had posted annual sales of $300 million.

The merger was approved by Office Depot shareholders in April of 1991. As a result of the agreement, which entailed a stock swap worth $137 million, Mark Begelman became president and COO of Office Depot, with David Fuente remaining chairman and CEO. Over the next thirteen months, all Office Club stores were either closed or converted into Office Depot outlets and the membership fee that Office Club had been charging its regular customers was dropped.

Even after the merger, Office Depot continued to expand. In June of 1991 it sold another 1.8 million shares of stock to Carrefours to finance expected growth. Aside from the outlets acquired from Office Club, the company opened 57 new stores in 1991. At the end of the year, Office Depot had 229 stores and posted sales of $1.3 billion.

At about the same time, Office Depot saw its sales of office machines, including personal computers, begin to grow by leaps and bounds, and the company began to emphasize this side of its business more strongly. In December of 1992, Begelman claimed in an interview that 10 percent of all fax machines sold in the United States were sold by Office Depot. Store layouts were redesigned so that more machines could be put on display. The company began selling not only PC clones by Packard-Bell and Compaq, but also the real thingin August 1991 IBM agreed to let Office Depot sell its PS/1 computersand also Apples Macintosh Performa line.

In 1992 Office Depot went international, acquiring HQ Office International, the parent company of the Great Canadian Office Supplies Warehouse chain, which operated seven stores in western Canada. HQ Office International had been founded in 1990 by Robert McNulty as a Canadian extension of his unsuccessful California-based HQ Office Supplies Warehouse chain, which was carved up and bought out by Staples and BizMart in 1990. Office Depot immediately replaced the HQ Office International name with its own and began expanding its presence in Canada, opening two stores in Manitoba. Office Depots entry into the Canadian market set the company up for an eventual confrontation with Business Depot, a small chain based in Eastern Canada, in which Staples holds a minority stake.

In May 1993 Office Depot acquired the office supply operations of contract stationer Wilson Stationery & Printing, a subsidiary of Steelcase Inc. The deal was valued at $16.5 million, and gave Office Depot an entree into the side of the office supply retail business that serves larger companies, rather than the small and mid-sized businesses that had made up its customer base in the past.

Within its first five years, Office Depot grew from a tiny retail firm operating out of a storefront in Boca Raton to a major company with its own headquarters complex. It had also gobbled up one of its most serious competitors. After just seven years, Office Depot became the largest company in a lucrative and rapidly growing retail sector. How long the business can sustain such an amazing rate of growth is open to question, but with markets in the United States that remain largely untapped, a foothold in Canada, and the possibility of ventures in Europe through its link with Carrefours, it is likely that Office Depots success has yet to approach its highest point.

Principal Subsidiaries

The Office Club, Incorporated; H.Q. Office International, Incorporated

Further Reading

The Big Interview: Mark BegelmanOffice Depot, Office Products International, December 1992.

Caminiti, Susan, Seeking Big Money in Paper and Pens, Fortune, July 31, 1989.

Liebeck, Laura, Office Depot Ventures Into Canada, Magazine Business, Discount Store News, February 3, 1992.

Milstone, Erik, Office Depot on the Fast Track, Palm Beach Post, March 29, 1992.

Selz, Michael, Office Supply Firms Take Different Paths to Success, Wall Street Journal, May 30, 1991.

Douglas Sun

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Office Depot, Inc.

Office Depot, Inc.

2200 Old Germantown Road
Delray Beach, Florida 33445
USA
Telephone: (561) 438-4800
Web site: www.officedepot.com

WHAT YOU NEED. WHAT YOU NEED TO KNOW. CAMPAIGN

OVERVIEW

In 2001 Office Depot, Inc., prided itself as the world's largest seller of office furniture and second-largest supplier of office supplies after Staples, Inc. In addition to having a stronghold on the office-furniture market, the retailer sold art and engineering supplies, computer hardware and software, and printing and copying services. Except for the fact that it touted its office furniture slightly more than the competition, Office Depot's marketing strategy paralleled the rest of the office-supply industry. Office Depot, Staples, and OfficeMax relied heavily on back-to-school sales. To first attract parents who needed school supplies for their children and later to draw in small businesses, Office Depot released a campaign titled "What You Need. What You Need to Know."

The "What You Need. What You Need to Know" television, radio, and print campaign was created by BBDO New York in 2001. The campaign's budget was undisclosed, but according to the market research firm Nielsen Monitor-Plus, Office Depot spent $25 million on advertisement for the fourth quarter of 2002. The campaign initially aired television commercials suggesting that parents could improve their children's school success with the proper back-to-school supplies. After research showed that 80 percent of Office Depot's customers were purchasing supplies for small businesses, the campaign shifted in September 2003. Four new television spots told the stories of office workers whose work lives improved thanks to Office Depot. Near the end of 2003 the campaign also advertised Office Depot's exclusive line of Christopher Lowell office furniture. The campaign ended in December 2004.

Although some within the advertising community criticized it for not differentiating the Office Depot brand from its competition, the campaign helped Office Depot's sales outperform Staples in 2002, during which it posted $11.4 billion in sales. By 2004 Office Depot had again slipped behind Staples, which had become the world's largest supplier of office supplies. Although other campaigns contributed to the ad agency's success, "What You Need. What You Need to Know" helped BBDO earn "Agency of the Year" in 2002 from Shoot magazine.

HISTORICAL CONTEXT

The first Office Depot opened in Lauderdale Lakes, Florida, in 1986. By the end of 1987 the office-supply store had opened nine more stores. After growing at breakneck speeds, the Florida-based chain had a nationwide presence in the early 1990s. Created by the ad agency Gold Coast Advertising, one of Office Depot's first campaigns was titled "Takin' Care of Business." The tagline was taken from the title of a 1974 song by the rock band Bachman-Turner Overdrive. In 1996 Office Depot awarded its estimated $67 million account to the Chicago office of J. Walter Thompson USA, a unit of the WPP Group. J. Walter Thompson elaborated on the previous campaign's theme with the tagline "This is where I take care of business." The campaign was intended to make Office Depot every business' first choice for office furniture and office supplies.

In 1996 Staples tried to purchase Office Depot for $3.4 billion, but the government stopped the acquisition on antitrust grounds the following year. Undaunted by the decision, Office Depot moved forward with store expansion and a nationwide advertising campaign. The cartoon-strip character Dilbert was used for a $30 million campaign that first aired on Thanksgiving Day in 1997. The following year Office Depot released a campaign targeting parents of schoolchildren and starring Dilbert's canine sidekick, Dogbert. The cartoon dog appeared in two 30-second television spots that aired in August 1998. In the commercials the bespectacled Dogbert touted Office Depot as the best place for school supplies. The $10 million campaign included a sweepstakes in which 40 different people were eligible to win a $5,000 Office Depot shopping spree. The campaign included a Supporting School Values program that provided discounts for PTA members and teachers.

TARGET MARKET

When the campaign broke in 2001, it targeted the parents of children returning to school in the fall. Commercials suggested that if parents truly wanted their children to succeed, they should outfit them with the proper school supplies, which could be found at Office Depot. That same year Staples conducted a survey that two years later would affect how Office Depot defined its target market. Staples discovered that business customers accounted for 90 percent of its profits. Following Staples' example, in 2003 Office Depot shifted the campaign's target from parents to small businesses. During the second half of 2003 Office Depot still held large back-to-school sales, but it spent much of its 2003 budget on four commercials aired in September 2003. The spots featured office workers trying to improve their work environments with Office Depot products. More than 40 percent of Office Depot's sales were also generated by the company's business-services group, which delivered office products to medium and large businesses.

The shift of the campaign's target market led to a two-pronged strategy that involved not only the advertising campaign but also the Office Depot store interiors. Whether shopping as executives or employees, women made up 60 percent of Office Depot's customer base, according to a New York Times interview with Bruce Nelson, Office Depot's CEO. To cater to the female majority, store interiors were decorated in pastel colors, which supposedly resonated more with women than men. In order to shed the warehouse stigma of a typical office-supply store, Office Depot also began selling premium office furniture and displaying products in a way that modeled non-warehouse retailers.

Executives at Office Depot believed that if small businesses and entrepreneurs were more prosperous, Office Depot sales would subsequently improve. Part of the campaign involved a partnership between Office Depot and Florida Atlantic University's Small Business Development Center (SBDC). SBDC business analysts spoke at two-hour seminars at Office Depot stores that could be attended free of charge by Florida's local business leaders. "For years, we provided small businesses with the tools they needed to run their business," Monica Luechtefeld, the executive vice president who headed Office Depot's online business, said to the Palm Beach Post. "Today those tools tend to be information as much as products. A large part of our customer base is small business and the small business entrepreneur. As they become healthy, that obviously creates a healthy customer for us."

DESKS, CHAIRS, AND FILE CABINETS

Between 2001 and 2003 the office-supply company Office Depot ran an advertising campaign titled "What You Need. What You Need to Know." During the campaign Office Depot reigned as the leading retailer of office furniture. Desks, chairs, and file cabinets were Office Depot's best-selling furniture items.

COMPETITION

In 2001 Staples reigned as the world's largest office-supply store. Starting in the mid-1990s Staples advertised under the slogan "Yeah, we've got that." The campaign ended in 2003, when Staples severed its eight-year relationship with the ad agency Cliff Freeman & Partners and gave its account to Martin/Williams of Minneapolis. Martin/Williams's first campaign for Staples, which was released with an estimated $50-$70 million budget, featured the tagline "That Was Easy" to emphasize the ease of shopping at Staples. The office-supply store also shifted from advertising in Sunday circulars to mailing ads directly to businesses. The first of two TV spots for "That Was Easy" featured two executives trying to lead a business meeting with ridiculously misprinted handouts. The second spot featured an office-supply store calling out printer cartridge numbers as if they were number-letter combinations in Bingo. At the spots' conclusions a voice-over explained how the shopping experience at Staples was less stressful than at the competition. "Our job is getting people to drive by Office Depot and OfficeMax and go to Staples instead," John Karlson, senior vice president for strategic development at Martin/Williams, said to the New York Times. "The way to do that is by making it easier to get through the store, within the format of the large superstore."

In conjunction with the "That Was Easy" campaign's theme of convenience, Staples also began advertising products unique to its stores. Staplers that allowed consumers to staple giant stacks of paper with one finger were featured in direct mailers. Combination locks that used scrambled words instead of numbers were pushed with the "That Was Easy" campaign. "We want our brand to stand for ease and innovation," Ronald L. Sargent, the chief executive of Staples, told the New York Times.

MARKETING STRATEGY

The "What You Need. What You Need to Know" television, radio, and print campaign was created by BBDO in 2001. Over its four-year lifespan, the campaign's strategy morphed as its target market changed. The first TV spots targeted the parents of children returning to school in the fall of 2001. These commercials suggested that if parents wanted their children to succeed, the children should be equipped with the proper school supplies. Several months later, in 2002 Office Depot aired one 30-second spot to announce its sponsorship of the Winter Olympics. In a $2 million Super Bowl spot titled "Don Barcome, Curling Expert," a man watching the Olympic sport of curling on television wondered aloud, "What is that?" No one answered. Then the copy "But, if life was like Office Depot …' appeared. Now, with a life "like Office Depot," the same man asked, "What is that?" The ice curling champion Don Barcome suddenly appeared and explained, "Curling, an ancient Scottish ice sport, played with a 42-pound stone." The same man who had asked, "What is that?" next appeared shopping inside an Office Depot. The spot ended with the Office Depot logo, the Olympics logo, and the tagline "What you need. What you need to know." During the same week a similar spot featured the figure skater Tara Lipinski explaining the lutz ice-skating jump.

The campaign also partnered Office Depot with Florida's SBDC. Executives at the office-supply company believed that if small businesses and entrepreneurs improved their businesses, the success would equate to higher sales for Office Depot. Throughout 2002 speakers from SBDC were hired by Office Depot to speak at stores in Miami and Coral Springs, Florida.

In 2003 the campaign stopped airing commercials related to the Olympics and created spots that targeted small businesses. The change came after an Office Depot survey discovered that 80 percent of the store's customers were buying for their small businesses. Office Depot's largest competitor, Staples, had successfully targeted small businesses earlier. From September until the end of November, four spots suggested that Office Depot products could improve the lives of small-business employees. "The strategy builds on what we did for back-to-school about owning your kids' success," explained BBDO senior creative director Adam Goldstein in Adweek. "This is about owning the success of your small business." The first spot featured a worker who received a raise after Office Depot helped her choose an ink cartridge. The next spot, "JoAnn," lampooned reality television shows with a small-business owner who needed to "update her look" with Office Depot products. The third featured adults running after an Office Depot van as if it were an ice-cream truck. The final spot showed an Office Depot "ringer" helping a business win its corporate softball game.

Near the end of 2003 Office Depot advertised its exclusive Christopher Lowell line of office furniture. Executives at Office Depot hoped that the furniture would differentiate Office Depot more from its competitors. The tagline "What you need. What you need to know" was used until December 2004.

OFFICE DEPOT RETAIL GIANT

In 2003 the office-supply company Office Depot was the world's second-largest online retailer. It was also the sixth-largest furniture retailer in the United States.

OUTCOME

The campaign's first full year helped Office Depot outperform Staples. When Staples posted $10.7 billion in global sales for 2002, Office Depot led the industry with $11.4 billion. The following year, however, Staples became the leader with $11.6 billion in sales. Analysts within the office-supply sector explained that Staples had surpassed Office Depot by placing stores in more preferred locations. Office Depot CEO Bruce Nelson also attributed the change in supremacy to international currency exchange rates. With 16 percent of Office Depot's locations existing outside of North America in 2002, the deflated U.S. dollar sent Office Depot's operational costs skyrocketing.

The "What You Need. What You Need to Know" campaign was one of many campaigns that earned BBDO "Agency of the Year" from Shoot magazine (an ad-industry publication focusing on commercial production) in 2002. In regards to Office Depot's future advertising campaigns, ad critics pointed out that "What You Need. What You Need to Know" successfully defined a preferred target market of small-business owners and entrepreneurs for Office Depot. The retailer's exclusive Christopher Lowell office furniture further promoted Office Depot as an office-furniture leader. With the inside of its stores decorated to appeal to women, Office Depot separated itself even more from the warehouse-style interiors of OfficeMax and Staples. Advertising critics agreed that, after struggling to define its brand throughout the 1990s, Office Depot had finally differentiated itself during the span of "What You Need. What You Need to Know."

FURTHER READING

Albright, Mark. "Office Supply Shoppers." St. Petersburg (FL) Times, June 25, 2001, p. 3E.

Charry, Tamar. "Office Depot Prepares to Revitalize Its Campaign after Merger Plans with Staples Are Undone." New York Times, July 28, 1997, p. 9.

Deutsch, Claudia H. "Big Office Supply Retailers Try to Build a Smaller Box." New York Times, August 12, 2004, p. 1.

Elliott, Stuart. "Staples Is Changing Its Slogan to Stress the Ease of Shopping for Office Supplies in Its Stores." New York Times, February 27, 2003, p. 6.

Howard, Theresa. "Advertisers Turn to Bowl Pregame." USA Today, January 24, 2002, p. B16.

Lowes, Robert. "Office Design and Supplies." Medical Economics, June 18, 2004, p. 38.

Masters, Greg. "Office Superstores Tidy Up." Retail Merchandiser, November 1, 2002, p. S5.

Sampey, Kathleen. "Office Depot Talks to Small Business: It's the Client to the Rescue in 4 Playful BBDO Spots." Adweek, September 29, 2003, p. 9.

Sataline, Suzanne. "Office Depot Sues Staples over Ads Placed on Google." Wall Street Journal, October 21, 2005, p. B2.

Troy, Mike. "Rebounding Office Superstore Rivals Pose New Challenge for Staples." DSN Retailing Today, November 5, 2001, p. 25.

Waresh, Julie. "Office Depot's New Campaign Enlists a Well-Known Dogface." Palm Beach (FL) Post, August 3, 1998, p. 3.

――――――. "Still in Print." Palm Beach (FL) Post, October 21, 2002, p. 1D.

                                              Kevin Teague

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