Staples store.
Photograph by Spencer Platt — Getty Images

The corporate services unit could surpass retail this year

By Phil Wahba
March 15, 2016

Maybe re-naming its business services division Staples spls Business Advantage from Staples Advantage will do the trick for the office supplies giant.

Staples, desperate for new avenues of growth as the odds of its planned $5.5 billion acquisition of Office Depot odp grow slimmer by the day, announced a series of changes, including the rebranding of its business-to-business operations on Tuesday.

The retailer is also updating its “Easy” button to make clear to shoppers that Staples is not just about stores: it claims its “Staples Easy System,” currently in testing, allows customers to place orders on any device including its Staples Easy Button at their convenience. Staples has also opened a flagship “Workplace Experience Center” store near New York that will serve as a showroom to show off its capabilities as it tries to woo prospective Fortune 1000 corporate and institutional customers. Staples is also starting to offer ancillary office services, such as break room support and janitorial supplies.

The move comes as Staples tries to convince the U.S. Federal Trade Commission to let it buy Office Depot, a mega-deal the agency has sued to block, saying the combined company would have too much market share in servicing large companies. Staples last year offered to dump $1.25 billion in commercial contracts to convince the FTC, but the consensus view is that the merger is a longshot. Staples will likely drop its acquisition plan if the FTC wins a preliminary injunction in May to block it.

All this leaves Staples in a precarious spot.

 

 

Staples has been slammed by online retailers, notably Amazon amzn as people have taken to ordering office supplies, which are essentially commodities online. Indeed Staples’s North American retail sales have fallen 19% since 2011. And it has been slimming its store fleet: Staples will close another 50 stores this year, adding to the 242 shutterings in the two preceding years.

This has made the business-to-business segment even more important to Staples: it now generates 40% of company sales, compared to 35% in 2013. What’s more, Staples’ North American B2B unit is far more profitable and looks set to surpass the retail division in the next year or two.

 

Staples CEO Ron Sargent sought to reassure investors earlier this month that he has a plan regardless of whether the Office Depot deal goes through.

“We’ve been working on kind of plan B for several months at this point,” Sargent said. That includes fueling growth and sales beyond office supplies, improving traffic, reducing costs, and closing weak stores, moves more likely to move the needle than a rebranding.

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