Office Depot, the nation's largest office supplier with $6.5 billion in annual sales, tomorrow will launch a full-fledged e-commerce site, the latest example of giant "brick-and-mortar" retailers jumping into cyberspace.
As reported earlier, the Florida-based company will sell office products online at the Web address "OfficeDepot.com" and will promote them in ad campaigns that feature the popular comic strip character "Dilbert." The site is aimed at small and medium-sized businesses as well as individual consumers.
Office Depot's actions follow the likes of big retailers such as Sears, Wal-Mart, Barnes & Noble, and Bloomingdale's, which are walking a fine line: trying to expand their sales in a new medium on the one hand, and protecting their turf against "e-commerce invaders" on the other. Some say the retailers risk undermining sales in their physical stores--known in the industry as "cannibalizing." Office Depot operates nearly 600 stores in the United States as well as offering catalog sales.
"We want to be open for business any way our customers want to shop us," said Paul Gaffney, senior vice president of systems development for Office Depot. "We don't think of it as cannibalization."
The company generates about $4.5 billion of its total annual sales from stores, Gaffney said. He wouldn't project Net sales, except to say that the company considers its online store strategy a "multiyear investment."
Office products is a category that ranks high with online shoppers, along with books and music, said Beth VanStory, vice president of online for Office Depot. She said the company's online division in San Francisco should employ 15 to 20 people. It is based in San Francisco to tap into the pool of Web talent here, VanStory said.
Retailer Home Depot so far has not gone the Net sales route. It addresses the online-shopping dilemma for big retailers in a memo, dubbed "Why can't you shop online." Its explanation: "Before launching a program of such magnitude, we need to make sure it will not prohibit us from our ultimate goal of providing you, our customer, with the best customer service possible." It concedes, however, that there is "great demand" for its products online.
Many analysts see the opening of more online retail stores as inevitable, however, with the launch of new Net businesses such as bookseller Amazon.com as well as the migration of more traditional retailers to the Web.
The office supply business is a good candidate for Net sales, because many of its customers are computer literate. Office Depot faces stiff competition, however. Although it is the largest office supply retailer, its market share is estimated at only about 4 percent. In addition, competitors such as Office Max have online stores already. Another, Staples, offers information but no online shopping on its site, akin to Home Depot's strategy.
Through a partnership, Office Depot already has a Web site in Mexico at "www.officedepot.com.mx," but it is not related to tomorrow's deal, sources said.