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29-1
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
I. CASE ABSTRACT
Staples was the world’s largest office supplies retailer with a focus
on convenience and a wide range of product offerings. The office supply
sector had almost no barriers to entry as capital costs were low compared to
other retail industries. No licensing requirements were necessary, easing the
burden on new entrants. The low level of differentiation of goods between one
Decision Date: 2015 FY Sales: $23 billion
FY Net Income: $620 million
II. CASE SUBJECTS AND ISSUES
Low Barriers to Entry Online Shopping
Strategy Formulation Competitive Advantage
Strategy Implementation Sustainability
III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
29-2
IV. CASE OBJECTIVES
1. To discuss Staple’s challenge to compete online with Amazon.com.
2. To discuss what to do about Staple’s large investment in brick and
mortar retail stores.
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. This is an excellent case for instructor-led discussion.
2. This is an excellent case for an exam or written case analysis.
VI. DISCUSSION QUESTIONS
1. Should Staples close stores and focus more on “online sales?”
2. How can Staples differentiate itself rather than competing on price
with Amazon and Wal-Mart?
VII. CASE AUTHOR’S TEACHING NOTE—Not Available
VIII. STUDENT STRATEGIC AUDIT
I. Current Situation
A. Current Performance
• Tom Stemberg and Leo Kahn founded Stapes, Inc in November
1985 and raised $36 Million in its IPO in 1989.
• Staples is the largest office supplies superstore in the
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
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• Staples stock price has dropped 52 percent since March 2010.
• In 2013 sales were down 5.2 percent and gross profit was down
.5 percent.
B. Strategic Posture
1. Mission
• To offer every product a business needs in an ‘easy’ one-stop
shopping fashion.
2. Objectives
• Maximize profit
3. Strategies
• Focus on convenience
• Offer an extremely wide range of products at a large number
of locations.
• Increase brand awareness.
4. Focus on corporate responsibility and corporate values.
• Diversity at work
• Environmental, sustainable products
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
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II. Corporate Governance
A. Board of Directors
• Eleven total members, ten external
• Ronald L. Sargent is Chairman and Chief Executive Officer
started with Staples in 1989. Has been Chairman since 2005
• Basil L Anderson has been a director since 1997. Focus is
corporate finance, also has strategic planning and
international experience.
• Robert Nakasone has been a director since 1986. Former CEO of
Toys R Us led expansion into Europe, Asia, and the Middle
East.
B. Top Management
• Seven total officers, two officers focus on North American
Sales and the third focuses on European sales.
• Ronald Sargent, CEO joined Staples in 1989 has been CEO since
2002.
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
III. External Environment: Opportunities and Threats (SWOT)
A. Societal Environment
1) General Environmental Forces:
1. Economy
a. Global Recession (T)
2. Technology
a. Online shopping (O)
i. Increasing numbers of online shoppers looking for
supplies (O).
3. Political—Legal
a. Products are not patented.
i. Office supplies are easy to reproduce, creating low entry
barriers (T).
b. Government contracts in Australia and the US(O).
i. FSSI two exclusive agreement for US government office
supplies.
US.
4. Sociocultural
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
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a. Increasing number of shoppers do all their shopping online
(O/T).
i. Stores suffer decreasing profits with less traffic (T).
ii. Costs of retail stores no longer worth the expense,
margins already low (T).
2) These forces are consistent worldwide.
B. Task Environment (Industry)
1. Threat of New Entrants: Moderate
a. Low barriers to entry.
b. Brand recognition
i. Difficult to succeed against established brands.
c. Shrinking market
i. Global recession
ii. Decreased demand from consumers and businesses.
2. Bargaining Power of Buyers: High
a. Market Share 36.5 percent
i. Competitors such as Office Depot and Amazon as
alternatives.
b. Sales breakdown
i. Office Supplies 44.0 percent
ii. Services 5.3 percent
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
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3. Threat of Substitute Products: Low
a. Basic office supplies are always needed.
4. Bargaining Power of Suppliers: Low
a. Common products that can be bought from many suppliers.
b. Products sourced from Asian manufacturers.
5. Rivalry Among Competing Firms: High
a. Direct Store Competitors: Office Depot/Office Max, Lyreco,
W.B. Mason, Walmart, Target,and BestBuy.
6. Relative Power of Unions, Governments, Interest Groups,
etc. : Low
a. Attempts by employers to unionize strongly rebuffed.
i. One store unionized, received 2 percent wage increase
ii. Abiding by US green and disability laws gained staples an
exclusive office supply contract with the US Government.
EFAS (External Factor Analysis Summary)
Key External
Factor
Weight
Rating
Weighted
Score
Comments
Opportunities
Internet
Shopping
.5
3
1.5
More and
more
customers
are going
online for
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
Government
Contracts
.3
5
1.5
Government
contracts
provide
massive
amounts of
sales
Green
Technology
.2
4
.8
Savings
from green
tech and a
positive
reputation
Threats
Online
Shopping
.5
3
1.5
Online only
competitors
. like
amazon,
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
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Low Margin
Products
.2
3
.6
In order to
make
profits ,
Staples
needs to
sell
massive
quantities
of its
goods. Any
decrease in
sales is
very bad.
IV. Internal Environment: Strengths and Weaknesses (SWOT)
A. Corporate Structure
• Founders: Tom Stemberg and Leo Kahn
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
B. Corporate Culture
• Staples updated its corporate values policy in 2012 to engage
• “Staples Soul” aimed to articulate how the company’s success
translated to the well-being of the community (employees,
society, and environment). Key components of Staples Soul:
a) Ethical business practices, ability of employees to
voice their opinion without fear of reprisal.
b) Sustainable business practices such as selling
C. Corporate Resources
1. Marketing
a) Three distinct customer segments:
i. Small or home office
b) Separate sales channels for each market segment:
i. Retail stores and Staples.com targeted small and home
office.
ii. Staples catalogue and Staples Advantage program
addressed mid-large businesses.
c) Staples branding strategy was built around the phrase
d) Marketing Stapes’ online presence:
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
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i. Lacked consumer-facing marketing to direct consumers
to its website.
ii. Strategy to promote Staples online was to
2. Finance
a) Global sales revenues flat around $24 billion from
2011—2014.
i. Office supplies count for approximately 44 percent of
sales.
b) Ratio Analysis:
i. Staples had a net loss of $210 million in 2012 (ROE
10.1 percent) and turned a profit of $620 million in
2012 (ROE -3.4 percent).
Financial Ratio Analysis: Liquidity
Ratios
2013
2012
Current Ratio
1.56
1.40
Quick (acid test) Ratio
0.86
0.88
CASE 29
STAPLES: THE FIERCE BATTLE BETWEEN BRICK-AND-MORTAR VERSUS
ONLINE SALES
29-12
Financial Ratio Analysis: Profitability
Ratios
2013
2012
Net Profit Margin
2.68%
-0.86%
Gross Profit Margin
26.10%
26.62%
Financial Ratio Analysis: Activity
Ratios
2013
2012
Inventory Turnover
9.93
10.54
Days of Inventory
49.75
47.21
Net Working Capital Turnover
12.35
13.68
Asset Turnover
2.07
1.99
Financial Ratio Analysis: Leverage
Ratios
2013
2012
Debt to Asset Ratio
45.0%
50.0%
