Who

1
Whos My Competition in the Office Products
Channel?
Presented by David J Pydlek Integrated Supply
Consultants LLC
2
Why Develop a Business Products Vertical Market?

• Business products is currently a 270B industry!
• All combined power channel entities (OfficeMax,
  Depot, Staples, CorpEx) constitute 16 (43.8B of
  approximate 270B) of market share in North
  America
• Its still a fragmented industry
• Mass merchants
• Drug food retail chains
• Government
• Integrated suppliers
• Manufacturers direct
• E-Commerce distributors

3

Office Products Channel Market Facts

• The fastest growing on-line product category in
  sales was office products
• 10.3B on-line OP sales in 2005 (15 of total
  sales)
• Total sales among top 500 was 68.9B
• The category accounts for 2.2 merchants among
  top 500 on-line retailers
• Top 500 internet retailers experience 60 sales
  growth on-line in this category!

Source Internet Retailer Top 500 Guide
4
OP Channel Fast Facts

• 2005 total office products industry sales
  estimated at 270B overall
• Includes electronics
• Retail portion estimated _at_ 205.9B
• Projected growth of 4-5 per year for the next 5
  years
• Private label is growing aggressively
• gt30 of sales are targets for all players

SourceThe Stockwell Report
5
2005 Total Sales Revenue (B) Among Big 4 2005 Total Sales Revenue (B) Among Big 4 2005 Total Sales Revenue (B) Among Big 4 2005 Total Sales Revenue (B) Among Big 4 2005 Total Sales Revenue (B) Among Big 4
Company 2005 2004 2003 CAGR 1998-2005
OfficeMax 9.1 8.8 4.0 2.26
Burhmann/ Corporate Express 4.3 3.9 3.7 1.1
Staples 16.1 14.4 13.1 9.51
Office Depot 14.3 13.6 12.3 4.04
Grand Totals 43.8 40.8 33.1
Source Company reports and analysts
projections includes international
sales Actually saw a overall sales decline due
to divestiture of paper businesses
6
Fast OP Channel Facts Internet Retailer

• Consumers have responded to the new
  technology-driven service, thrusting office
  supplies retailers Office Depot Inc. Quills
  parent, Staples Inc. OfficeMax Inc. and CDW
  Corp. into the top 10 largest online retailers,
  according to the 2006 edition of the Internet
  Retailer Top 500 Guide to Retail Web Sites.

Internet Retailer
7
Quotes from Internet Retailer

• Indeed, fulfillment has emerged for
  multi-channel retailers in general as one of the
  keys to overall success. In a study of retail
  fulfillment practices last year by Aberdeen
  Group, more than 70 of retailers said they
  considered it very or extremely important to
  meet customer expectations for multi-channel
  purchasing and delivery options.
• But while order fulfillment has become front and
  center among the concerns of many retailersa far
  cry from the early days of the Internetits cost
  for many merchants is rising. Aberdeen found that
  46 of retailers expect order fulfillment costs
  to rise over the next two years, 29 expect no
  change and only 25 expect their fulfillment
  costs to decrease.

Internet Retailer
8
3 year Trends Among Big 3
2005 Sales Change 2004 Sales Change 2003 Sales Change 2005 Channel Share 2004 Channel Share 2003 ChannelShare
Staples 11.29 9.61 13.67 40.7 39.2 43.7
Office Depot 5.27 9.76 8.82 36.1 36.8 41.0
Office Max 3.46 NA (3.27) 23.2 24.0 15.3
Source Company reports, analysts estimates and
DSN Retailing Today research
9
Op Private Label Trends
Company Private Label Sales (B) 2005 of Total 2004 of Total Change 04-05
Staples 2.9 18 15 34.2
Office Depot 2.5 18 15 24.4
OfficeMax 1.7 19 16 22.8
6.1
Source Company reports Industry Analysis
10
Burhmann/ CorpEx Facts

• Smallest of the big players
• 4.4B 2005 NA sales
• 20.4 overall sales growth
• 9 organic growth
• 3 Divisions Australia, North America, Europe
• No retail
• Corporate Express private label represents 25 of
  total sales

Source 2005 annual report
11
Corporate Express NA (contd)

• 68 of sales comes through E-Way
• OneShopExpress
• One order, one invoice, one payment over multiple
  product lines
• 40,000 OneShopExpress orders processed in 2005
• Biggest threat to T.O.P.S. single supply chain
  solution (still not as comprehensive)
• CorpEx 18.3 Brand Power Rating (only one to
  decrease over last 3 consecutive years as
  reported by CoreBrand)
• Use salesforce.com to manage sales team

12
Office Depot Facts

• North American Business Solutions Division
  produces 30 of overall sales
• 46 is retail
• 4.2B internet sales (2 overall)
• 21 of total revenue
• 30 GP
• 25.6 operating expenses
• 273M net earnings

2005 annual report
13
Office Depot (contd)

• Viking mail order went away
• Only in Europe
• Private labels include Office Depot, Foray,
  Ativa, Christopher Lowell
• Brand power ratings are highest for OD _at_ 54.7

Reported by CoreBrand
14
Office Depot Websites

• State-of-the art public Internet sites
• www.vikingop.com
• www.officedepot.ca in Canada
• www.techdepot.com
• www.officetechcenter.com
• www.janitation.com
• www.computers4sure.com
• www.solutions4sure.com
• www.school.com
• http//bsdnet.officedepot.com

15
OfficeMax

• Primary customer Fortune 500 Companies
• Contract segment represents 45.7M with 21.9 GP
  
• 9.4 increase
• 19.7 operating costs
• Same store retail sales flat
• Store closings in unprofitable markets
• (6 overall)
• 29 of total US sales

source 2005 annual report and Internet Retailer
16
OfficeMax Facts (cont)

• OfficeMax Brand Power Rating 51.2
• OfficeMax Impress launched November 2006
• Re-branding of Document management solutions

Reported by CoreBrand
17
Staples Facts

• 1 OP company
• Projected 2006 16.08B
• 28.5GP
• North American Delivery 3 business units
• Staples Business Delivery
• Quill
• Staples National Advantage/ Staples Business
  Advantage
• 11.3 1 year sales growth
• 3.8B online sales 2005 (3 overall)
• 24 of total sales
• 27 increase over 2004

source 2005 annual report
18
Staples Facts (contd)

• StaplesLink is the B2B online ordering program
• 70 of contract sales expected to come through
  StaplesLink.com B2B website 06
• Use WebSphere Commerce version 5.4
• Staples 52.4 Brand Power Rating
• Stock approximately 13,000 items

Reported by CoreBrand
19
Key to Success A True Integrated Purchase Order
for all Services
20
eQuantum Integrated PO
21
Kramer-Smilko Integrated PO
22
Focus for the Distributor Sales Team

• You have an excellent single source, supply chain
  solution with your Forms Print legacy system
• Market proactively to your end user
• Demo to your customer on their PC and save as
  Favorite
• Highlight market your private label
• E.g. Innovera, Universal and Alera
• Use stockless model and ride on fulfillment
  partners low operating costs to serve your
  customer
• Market fulfillment excellence
• Market the fact you sell the category as part of
  your service solution portfolio

23
Conclusions How to Compete?

• Have an e-commerce solution
• Have a viable private label to compete (e.g.
  Innovera, Universal)
• Leverage low operating costs (assume distributor
  partners operating costs)
• Dont re-create the wheel and add operating costs
• Brand your company (how do your customers know
  you?)
• Market excellent fulfillment capabilities
• Make the ordinary extraordinary
• Margins are high enough to make money
• Use a variable margin matrix