In an attempt to reverse declining revenue from existing office supply sales, Office Depot is jumping on the services bandwagon.

November 7, 2017

3 Min Read
Business Evolution
Time for the next level red word on concept clock

By Bloomberg

Office Depot Inc. is launching a new division called BizBox to sell a slew of business services — everything from payroll to social-media marketing — in its bid to reverse declining sales and evolve beyond traditional workplace supplies.

The venture will be offered as a monthly subscription starting at $70 and will be powered by its own web platform. Third-party experts will help customers set up email advertising, website design, accounting functions and other services.

The launch is part of Chief Executive Officer Gerry Smith’s plan to offset a sales slump in pens and paper by becoming a services provider — a move that will bring a higher stock valuation than as just a retailer, he says. Smith, who joined the company in February from personal-computer giant Lenovo Group Ltd., kicked off the shift last month when Office Depot announced a $1 billion deal to buy CompuCom Systems Inc., a supplier of tech solutions that will be included in BizBox.

“We see it as a significant revenue driver in the future,” Kevin Moffitt, Office Depot’s chief digital officer, said in an interview. “We’re very aggressive about the value that we think this can bring to the organization.”

Office Depot is making this push after posting 10 straight quarters of declining revenue. Its shares had dropped 29 percent this year through Monday’s close. The stock took a hit when Smith announced the CompuCom deal, as investors questioned the rationale of making such a large acquisition.

Much of the retail industry is trying to figure out a way forward with shoppers buying more items online. Office Depot, and larger rival Staples Inc., have an advantage on this front because the chains already have robust units selling and delivering supplies directly to businesses. Office Depot gets about half its revenue from what it calls its business solutions division.

Small Businesses

This group of small-business customers is where both chains see lots of potential growth. They already have a relationship with millions of them, so now they are leveraging that to sell them new services.

Staples, which was acquired by private equity firm Sycamore Partners earlier this year after regulators  blocked a merger with Office Depot, has a similar initiative. The company is marketing itself as a small-business consultant of sorts with expanded offerings.

Smith wants to turn Office Depot into a platform to offer as many services as possible to small businesses. The chain’s stores will be integral to that by advertising the offerings and helping with service. The company is putting CompuCom kiosks in all 1,400 of its locations. It also plans to test placing BizBox service centers in stores.

The company considers BizBox a startup with lean staffing and a focus on getting a product out quickly and then updating regularly after feedback. The website isn’t branded Office Depot, and has just a brief mention at the bottom.

‘Fresh Start’

“This is such a different way of connecting with small-business owners” for Office Depot, Moffitt said. “We wanted to really take this fresh start.”

The genesis of BizBox came just a week into Smith’s tenure while meeting with the digital team. He talked about how one of his sons was in the process of starting a company and struggling with all the administrative and logistical work needed to get off the ground. The company then surveyed its existing small-business customers and many said they were overburdened, too. In one stunning stat, almost a third had no website.

It started as a really interesting exercise several months ago and rapidly turned into a much bigger opportunity,” Moffitt said. “There’s a significant need out there.”

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