NRF: OfficeMax Seeks New Channels

The way it tends to work at the NRF BIG Show is that retailers walk the aisles searching out new and better solutions. For the first time this year, however, one major retailer, OfficeMax, tried out the view from the other side of the exhibitor desk, pitching its store-in-store program to retailers in a variety of verticals.

More than four years in development, OfficeMax’s New Channels division currently provides 25 retail customers with a complement of services including office supplies category management, product analysis, merchandising and private brands. Among its clients are A&P and Safeway. The division, run by a staff of 40, claims to have delivered "double-digit growth in sales and profits in the office supply aisle for both retailers."

Matt Gruber, national account manager new business development for OfficeMax, told RetailWire that the new division first does analytics on the retailer’s existing assortment, this assuming they stock office supplies; in some cases it’s a first-time category for the client.

"We do a little research as to where they’re at regionally," said Mr. Gruber, "what their price points are, what channels they’re in, and then we come back to them with a customized solution to help optimize their sales and grow their margins as well."

OfficeMax packages the program as an "all-in category approach," informed by SKU analytics, case pack optimization and price point analysis.

"We might say, ‘Hey, maybe XYZ retailer you had 120 feet. Based on our analysis we think you could shrink that space down to 60, thus optimizing your inventory, your productivity, your turns … and by the way, if you decide to go this route, here’s our pricing that would correspond to our recommendation.’"

Branding strategy is customized to the retailer and situation. Some New Channel customers see benefit in "screaming the OfficeMax name" whereas others "want to be a little more discreet about it," according to Mr. Gruber.

Pricing is also customized region-to-region, retailer-to-retailer, and channel-to-channel. "It’s really localization to the utmost extreme," said Mr. Gruber, "and our retailers who are capable of doing that enjoy certain margin benefits in regions where price elasticity is more welcome."

office max aisle

In A&P’s case, OfficeMax is currently servicing all the company’s banners with office and school supplies assortments. The aisles are branded as OfficeMax in those stores.

OfficeMax’s strategy in exhibiting at trade shows is to find new "test and learn environments." Surely there are new challenges and lessons to be learned with each channel they tackle, learning that can be undoubtedly folded back into other company initiatives.

BrainTrust

Discussion Questions

How do you see OfficeMax’s store-in-store program affecting its overall business? Do you see this strategy working for other category specialists in retailing, such as in pet, DIY or electronics?

Poll

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Dave Wendland
Dave Wendland
11 years ago

I personally think this is a good strategy for OfficeMax. And, yes, it should be considered for others … I predict accelerated collaboration across retail to better serve shoppers.

Joan Treistman
Joan Treistman
11 years ago

Scratching my head on this one. Don’t manufacturers typically try to influence point of sale merchandising…to the advantage of the retailer and marketer, of course?

If I am not mistaken, it’s been up to the brand to prove itself worthy of (or pay enough for) shelf space in the grocery store. I’ve worked with many brand managers who sought research to justify their claims of improved sales and profits for retailers who enlisted their approach to displaying the category. This research has covered point of sale display materials, signage, re-aligning packages, e.g., vertical vs. horizontal, etc.

Perhaps OfficeMax is the first retailer to institutionalize the effort. I’ll be interested to see how they handle private label vs. national brands in their categories. Whose profits are paramount?

David Livingston
David Livingston
11 years ago

Sounds a bit hyped up. Going into low volume A&P stores is not very impressive. If they were in stores that do a million plus per week it would mean a lot more. Bragging about double digit sales growth tells me they are not doing much in sales to begin with and are touting the percentage and not the actual dollars.

Personally I still can’t seem to remember the difference between OfficeMax and Office Depot.

Overall I don’t see this adding much to OfficeMax simply because they are not disclosing hard actual sales numbers and their best effort name dropping are under-performing brands like A&P and Safeway, who I’m sure would love to have someone fill up their under-utilized sales area square footage.

Dick Seesel
Dick Seesel
11 years ago

This idea takes category management to a new level by putting it in the hands of a second retailer. But in a sense, it’s not a big leap from the OfficeMax strategy to the “shop-within-a-shop” concept from brands like Apple (inside Best Buy) or Coach (inside Macy’s). There is some risk of cannibalization for OfficeMax, but in total it’s a winning strategy to gain share.

Given the big box stores’ problems squeezing productivity out of their “category killer” real estate, this is a good move.

Steve Montgomery
Steve Montgomery
11 years ago

Based on the results quoted OfficeMax’s programs sounds like a win/win. OfficeMax secures new business on what are likely their fastest moving SKUs and the retailers no longer have to manage a department that may not be truly within their area of expertise.

Those that want to emphasize the store with the store concept are free to do so and those that want to maintain their own image are allowed to. However, nothing in the article indicates the impact on OfficeMax’s financials. It is a big company that finds itself in some trouble and the issue is can these mini-stores make a big enough difference to right the mother ship? Time will tell.

J. Peter Deeb
J. Peter Deeb
11 years ago

This initiative by OfficeMax is using the highest traffic channel to broaden its consumer following and this can only be good for them. At best, the exposure and potential success of product offerings can help differentiate OfficeMax from its main competitors and help drive consumers into their own boxes for their broader purchases. At worst, the departments will not deliver the desired results for grocers and Office Max and the valuable shelf space will go to another use.

Mark Heckman
Mark Heckman
11 years ago

From a consumer standpoint, these “stores within stores” can make a lot of sense. They bring a reputable brand name into the aisles of a larger store, such as a supermarket and provide an added and much needed reason for the shopper to visit the interior aisles of the store. For the brand, it represents an efficient way to extend their reach. But as with all things retail, there are “watchouts” that can lead to big problems when you engage in this strategy.

First, having the right amount of selection and inventory on hand. Secondly, pricing. Supermarkets tend to extract very healthy margins from categories like office supplies, whereas OfficeMax and Staples tend to be more price competitive overall. If the host store decides these items are candidates for 40% margin, the pricing strategy could hurt both the host retailer and the brand involved.

Lastly, but not insignificant is how these store-in-store programs are promoted and showcased. If the host retailer makes a big deal out of the partnership and both host and brand can agree upon a steady stream of promotions and sales events to bring traffic to the section, I believe there is a great hope for a profitable and long-lasting relationship. Otherwise, I have seen these initiatives disappoint all involved.

Robert DiPietro
Robert DiPietro
11 years ago

OfficeMax’s store-in-store is a positive for its overall business. It is a no brainer for supermarkets to have the office supply expert run that aisle for them. It’s a win for both as most of those items are a convenience purchase for the customer.

I think pet is the next logical choice. It would be interesting to see a carve out for pet services at the supermarket. Have your dog groomed while you shop. Probably need a separate entrance for that one!

David Slavick
David Slavick
11 years ago

It is very smart. Why not give this space over to the category expert? It is a convenience category for many retailers—grocery or drug store for example. Expands the awareness/reach of the OfficeMax brand and opens up new channel for sales revenue. I don’t see this having a significant impact on OfficeMax year over year performance, but a very smart initiative.

Adrian Weidmann
Adrian Weidmann
11 years ago

This is an innovative approach that makes tremendous sense and given the quoted success they’ve had, will definitely be mimicked by other category retailers. The digitally-connected, empowered shopper has flattened the world of shopping and has disrupted the status quo for the ‘brick and mortar’ sales and merchandising channel for retailers.

Any opportunities that retailers/brand can provide efficacy and relevancy to the channel all the while providing value to the shopper create a ‘win-win-win’ situation. Congratulations to OfficeMax for thinking outside (and then inside) the box!

Zel Bianco
Zel Bianco
11 years ago

It’s a strategic move on OfficeMax’s part—it makes sense for shoppers and can expand store awareness while increasing sales and revenue. This strategy has been used before, such as Apple at Target, so why not try this in other categories? Retailers need to keep rethinking and changing their strategies to keep their share of the market.

Martin Mehalchin
Martin Mehalchin
11 years ago

Great strategy for OfficeMax and it should be a win for the consumer and for the retailers they are partnering with. Big office stores are a tired category and the New Channel division provides OfficeMax with an avenue for growth without the upfront investment that would be required to pilot new store concepts or open new standalone locations.

Carlos Arámbula
Carlos Arámbula
11 years ago

The concept makes sense. The workplace environment has changed and will continue to evolve; grocers need to be ready to cater to the needs of the work-from-home mom or dad who might need to pick up dinner and printer ink in one efficient shopping trip.

It’s not a new concept. Banks, coffee shops, dry-cleaners, etc. have been doing it for a while, and is a better option to the mega-grocer with underperforming departments.

Lee Kent
Lee Kent
11 years ago

Sounds like a win-win to me and may bring a valuable differentiation to certain retailers.

Mark Burr
Mark Burr
11 years ago

I see the store-in-store brand growing OfficeMax’s overall business as it now becomes even more of a brand. It is taking its brand to a completely new level. Further, providing special order items not found in these channels but delivered there would make a great next step.

Will it work for other categories? Sure. Craftsman products are a great example. Even though I see them in Costco, I still think Sears. Will it work for other categories? Maybe, if approached with innovative thought as to how they best fit and what value is brought to the customer by doing so.

If I want a cartridge for a printer and I can order it at my local supermarket and get it tomorrow when I pick up a gallon of milk—why not? That service in addition to what they carry in their limited assortment at that channel is a completely different offering.

Ed Rosenbaum
Ed Rosenbaum
11 years ago

An innovative approach to increasing business from a company that has been slow to grow over the past several years. It is good to see them taking an aggressive and positive step.

Carol Spieckerman
Carol Spieckerman
11 years ago

OfficeMax has been doing this for a while and really put a lot of effort and thought into its New Channel division. I like many things about what they are doing including:

  • Deconstructing platform capabilities to suit particular clients and opportunities rather than insisting on “all or nothing” solutions.
  • Making its private brands part of the package, or not, depending on what makes the most sense for the partnership.
  • Being proud of the effort and dedicating resources rather than treating it as an unmentionable or a sideline.

A terrific example of leveraging an existing platform.