Staples, Inc.—Analysis, Research Paper Example

A). Executive Summary. Staples has a long-established presence online, launching its first website in 1998. Since that time, e-commerce has become a vital part of Staples’ business model: the office supply retailer has incorporated e-commerce as another important retail channel, with both business-to-customer (B2C) and business-to-business (B2B) platforms. The company also offers outstanding services, such as next day delivery, which has served to further its competitive position in the industry.

Indeed, Staples has emerged as the number one company in the office supplies industry, thanks in no small part to its commitment to e-commerce. At a time when the industry is coming increasingly under siege due to reduced demand for paper and paper-associated products, and a shift from brick-and-mortar stores to e-commerce, Staples is operating an e-commerce site second only to that of Amazon in terms of size. This has come about because Staples is committed to using information gathered from customers to improve customer experiences, making its sites easier to navigate, and generally improving the online shopping experience by modeling it after the customers’ shopping experiences in brick-and-mortar locations.

The internet has driven an increasingly competitive strategic landscape, one that forces companies to place much emphasis on planning for the future and reacting to competitors. In particular, the internet has lowered the barriers to entry for many markets, making it easier for new companies to enter and challenge established ones. All in all, the internet has generally increased the bargaining position of customers, who have more information and often, more options available to them than ever before. The centrality of the internet has led to Carr’s (2003) contention that IT can no longer offer strategic advantage. However, what Carr seems to neglect to realize is that customer service is still very important in e-commerce, and better-designed sites can contribute greatly to the strategic position of firms.

C). Engagement in e-Business: Initiatives by Staples Inc., and Revenue Models Thereof

 Staples ventured into e-business with its first website in 1998, a site that already had its own growth targets and infrastructure (Epstein, 2004, p. 134). Initially the company focused on three different customer bases, each of which had an online operation devoted to meeting its needs (p. 134). This helped Staple move to establish a strong online presence from early on (p. 134). Moreover, the company was quick to realize the importance of learning about customers in order to improve their online experience (p. 134).

Since its venture into e-business, Staples has established a strong presence online, making its e-commerce an important retail channel in its own right (Datamonitor, 2011, pp. 5-6). The company has both a business-to-customer (B2C) and a business-to-business (B2B) online platform (Stair & Reynolds, 2010, p. 311). The online channel primarily exists to serve the needs of the small business and –organization sector: businesses and organizations with as many as twenty office employees (Datamonitor, 2011, p. 6). Moreover, Staples has been assiduous in developing the services that it offers through this retail channel: most online orders of office supplies have the option of next day delivery (p. 6). This has helped Staples to secure a sound, competitive position in the e-commerce sector of the office supply industry (p. 6).

This is of considerable importance, because the strategic landscape of the office supply retail industry has been profoundly altered by the advent of the internet. With the rise of the Digital Age and the Information Revolution, customer demand for paper and paper-related products has plummeted precipitously, with considerable ramifications for the office supply retail industry (Misonzhnik, 2012, p. 35). Consequently, one of the biggest strategic challenges facing office supply retailers of today is the problem of what one commentator called “’category obsolescence’”: a great deal of what is sold in office supply stores today will simply no longer be needed in the offices of the quite near future (p. 36). As a consequence, many office supply chains are already shuttering brick-and-mortar locations, and reducing the size of others (p. 36).

As things stand now, however, Staples is the clear industry leader, not least because of its embrace of e-commerce (Misonzhnik, 2012, p. 36). Specifically, Misonzhnik explained, “Staples operates the second largest global e-commerce site, after Amazon.com” (p. 36). Moreover, Staples is proactively adapting to the new strategic landscape: since e-commerce is reducing the demand at its brick-and-mortar locations, Staples is downsizing this retail channel, and also linking it with the online and mobile sales channels (p. 36). Even its brick-and-mortar operations appear to be in much better shape than those of the other two major office supply retailers, OfficeMax and Office Depot: Staples has more of them than its competitors, they tend to be in better locations, the profit margins are higher, and again, their e-commerce presence is much better (p. 36).

Staples has achieved this position through a great deal of dedicated investment in its e-commerce platform. As Krol (2005) explained, several years ago Staples re-launched its site after spending two years completely revamping it in order to make it simpler and easier to use. This facelift underscored Staples’ focus on the small-business sector: the company drew on its own research to ascertain that this sector was the company’s core group of customers (Krol).  Overall, Staples wanted the experience of shopping online to be similar to the experience of shopping offline in brick-and-mortar locations, for customer ease and familiarity. In order to be able to do this, Staples had to establish the “’life of an order’”: the company needed to figure out who was buying what, and what kinds of purchases tended to go together (Krol). Once they understood this, they were able to build a site specifically designed around customers’ actual order processes, one that included contextual selling in the form of “integrating related products dynamically, akin to Amazon.com’s personalization functionality” (Krol). And in response to a research finding that printed, mailed catalogs were driving online sales, the company stepped up the production and delivery of these, to fifty million annually (Krol).

All of this hard work and diligence has reaped dividends for Staples in terms of customer satisfaction. A competitive research study of twelve different consumer electronics (CE) retailers found that Staples and Circuit City tied for level of service (Wolf, 2007, p. 32). Not to be outdone, Staples’ B2B platform, Staples Advantage, has launched a new e-commerce site (Business Wire, 2011). This new site is designed for a faster and more intuitive experience, and even features an array of “tools and reports designed to help organizations manage best-in-class procurement programs for a complete business solution” (Business Wire). The emphasis is on better customer service in an increasingly touch-point-rich environment: the site must be comprehensive and agile both. The new site makes finding products easier than ever before, and includes such features as alternative product recommendations and more expedite access to previous and frequent orders (Business Wire).

Staples’ success in e-commerce speaks to the tremendous changes unleashed by the Digital Revolution and the Information Age. The internet has profoundly affected the competitive strategies open to businesses in many different industries. As seen, one consequence of this for the office supply retail industry is plummeting demand for paper and paper-related products, and reduced demand for brick-and-mortar shopping centers. Staples has done an excellent job of taking its e-commerce activities and weaving them into its overall business: it is a prime example of precisely the strategy that has been recommended for major brick-and-mortar retailers (Kreitner, 2007, p. 199).

D). The Art of Internet Strategy: The Strategic Landscape of the Digital Age

Another important strategy for businesses is having the right kind of websites. As Kreitner (2007) explains, it is not enough for a website to be attractive, although this too is important, to be sure: it must have a good, high-quality, attractive layout as well as fast and efficacious service, and the right kind of information that the business’s customers will want (p. 199). Brand names go a very long way online, and here Staples unquestionably has an advantage, given how well it is known (p. 199).

Staples also exemplifies the “clicks-and-bricks” strategy: retailers’ use of brick-and-mortar locations, catalogs, and online retailing (Kreitner, 2007, p. 199). Thus, although e-commerce is an extremely important part of Staples’ business, catalogs and brick-and-mortar locations continue to offer customers choices and flexibility, which are important in essentially any business.

The internet has proved a remarkable medium for all types of business activity, from shopping to advertising to providing information on product availability and delivery schedules (Lucas, 2002, pp. 7-8). In the process, the internet has created a phenomenon of hypercompetition, to which firms must adapt if they are to succeed (p. 8). Lucas explained that in the hyper-competitive internet economy, firm-specific resources are created quickly, proliferate, and then depreciate in value (p. 8). In practice, this has forced firms to become extremely time-conscious, orienting their strategies toward developing strategic, competitive advantage, and also toward rapid response to moves by competitors (p. 9).

The five forces model of competition by Porter provides a theoretical lens for analysis of this strategic environment (Lucas, 2002, p. 14). The five forces are: “competitive rivalry, the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitutes” (p. 14). As the intensity of competition rises, prices usually fall, and management focuses more and more on strategy, and spends more time monitoring competitor behavior (p. 14). The threat of new entrants is modulated by the costs of entry into the market, and the degree of competition: in a competitor-rich environment, like many e-business sectors, it is easier for new entrants because no one firm is dominant (p. 14).

In fact, Lucas (2002) explains that the internet has done a great deal to help new companies enter markets: since the equipment and know-how necessary to creating and running a website are relatively inexpensive and readily available, and since an e-business often does not require much in the way of a physical presence, the sheer existence of the internet has worked wonders in facilitating new entrants (p. 15). The bargaining power of customers is another force that powerfully affects competition: when a customer has a lot of bargaining power, they can profoundly affect the behavior of a supplier (p. 15). In an industry such as the office supply retail industry, customers generally have considerable bargaining power, because the three major retailers—Staples, OfficeMax and Office Depot—all offer many of the same, or very similar, products. If a customer doesn’t like the prices that Staples offers for a given item, they can at least try OfficeMax or Office Depot, and competition between these three major chains will help to keep prices at a reasonable level. Typically, a supplier can only exert strong bargaining power over a customer when the customer has little to no alternative (p. 15).

The threat of substitutes is integrally related to the bargaining power of the customer: if a new substitute appears for an established product, but at a much lower cost, then the customer has a new option, one that increases their bargaining power (Lucas, 2002, p. 15). The internet has facilitated a great deal of this, even driving industry leaders such as Staples to shift towards an e-commerce led model of business (a substitute in many ways for brick-and-mortar shopping). Also, as seen the internet has driven entire categories of products that office supply stores currently offer into obsolescence, meaning that customers now have substitutes that reduce the total amount of business office supply retailers can do.

All in all, Staples seems to have done very well for itself with regards to online commerce. It has made good use of what Plant (2000) identified as the four “positional factors” of technology, service, market, and brand (p. 32). As seen, Staples has the technology to provide outstanding customer service online, with a customer service experience that is informed by data and feedback. This has helped Staples to stay on top of the market as the number one office supply retailer, thereby supporting its brand image.

Staples has also displayed good use of the three “bonding factors” of leadership, infrastructure, and organizational learning (Plant, 2000, p. 32). The firm remains the industry leader in the office supply market, with an impressive infrastructure: it has more and better-situated brick-and-mortar stores than any of its competitors, and its e-commerce site is second only to Amazon’s in terms of the size of its business. Staples’ significant refurbishing and revamping of its site several years ago also displays a commitment to good infrastructure and to organizational learning, since the site was designed with the aid of data gathered through feedback. Staples is clearly committed to online retailing, and it has adapted well to the novel challenges unleashed by the paradigm change of the Internet Revolution.

E). The Writings of Carr, and Recommendations

Carr (2003), however, argues that IT no longer has the kind of value that merits it being classified as strategic: instead, it has become simply a part of what a business must do if it is to succeed (p. 6). As with practically every other major technology in modern history, Carr explains, the advent of IT saw a handful of enterprising, forward-thinking companies seize at its considerable strategic advantages and achieve great success (p. 6). From a strategic advantage in its very early days, however, IT has been diminished in terms of strategic value because it is now so ubiquitous and so inexpensive—or so Carr argues (p. 6). IT, Carr avers, is such a commodity now that it is only at the macroeconomic level where it can make a difference: more developed countries will have more IT and thus a competitive advantage over less developed nations, the argument goes (p. 7). There is no longer any real competitive advantage to be had for an individual company with regards to IT (p. 7).

However, some of the very sources drawn upon here cast aspersions of doubt upon this proposition. True, the shift to e-commerce is becoming quite the imperative in the office-supplies sector, and in many ways it would appear to be little more than a commodity input. However, Staples’ emphasis on customer service with its websites, and its use of recommendations, would seem to undermine Carr’s claims somewhat. If it is not the case that an individual firm can expect to gain any appreciable strategic advantage from IT, what about the acclaim given Staples’ new site, praised for its ease of use? The central problem with Carr’s argument is that it seems to lack any appreciation of the human aspect of customer service by means of IT. Looking towards the future, the office supply retail industry will doubtless witness an ongoing trend of penetration by e-commerce. The precipitous cascade of changes inaugurated by the internet will continue to prove definitive in the quest for competitive advantage, and it is likely that other office supply retailers, like OfficeMax and Office Depot, will follow the lead of Staples. Accordingly, Staples must continue to develop and expand its online presence. The internet will prove the battleground of competition for customers, so Staples must be ever-vigilant against the encroachments of other companies. Another key recommendation: given the category obsolescence of many office supplies, Staples must be a pioneer in the development of new products and services for today’s offices. Paper and paper-related products are out, but software, apps, and cloud computing are in. The more Staples can market towards the needs of such offices, the better it will be able to safeguard its position in the industry.

References

Business Wire. (2011, November 16). Staples Advantage brings easy to business-to-business e-commerce with new website. Business Wire. Retrieved from http://search.ebscohost.com/

Carr, N. G. (2003). IT doesn’t matter. Harvard Business Review, 5-12.

Datamonitor. (2011). Staples, Inc. Datamonitor, pp. 1-9. Retrieved from http://search.ebscohost.com/

Epstein, M. J. (2004). Implementing e-commerce strategies: A guide to corporate success after the dot.com bust. Westport, CT: Praeger Publishers.

Kreitner. (2007). Management (10th ed.). Boston, MA: Houghton Mifflin Company.

Krol, C. (2005, March 14). Staples preps easier e-commerce site. B to B, 90(3), n.p. Retrieved from http://search.ebscohost.com/

Lucas, H. C. (2002). Strategies for electronic commerce and the internet. Boston, MA: Massachusetts Institute of Technology.

Misonzhnik, E. (2012). Survival of the fittest. National Real Estate Investor, 54(8), pp. 35-36. Retrieved from http://search.ebscohost.com/

Plant, R. T. (2000). Ecommerce: Formulation of strategy. Upper Saddle River, NJ: Financial Times.

Stair, R. M., & Reynolds, G. (2010). Principles of information systems (9th ed.). Boston, MA: Course Technology.

Wolf, A. (2007, August 20). e-Tail study cites ‘best’ CE sites. TWICE: This Week in Consumer Electronics, 22(17), p. 32. Retrieved from http://search.ebscohost.com/