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Office Depot needs to reverse these trends to compete with Amazon Business

6 months ago by Jon Marino in Markets
An Office Depot in Boca Raton

Office Depot ($NASDAQ:ODP) is under pressure. 

The office supplies retailer struck a deal in 2017 bought technology services firm Compucom to help it better compete with Amazon ($NASDAQ:AMZN) Web Services. When it did so, it warned investors that this acquisition would post disappointing revenue in the quarter for which Office Depot will report earnings May 8. Shares plunged in early April as a result. 

There are other factors that the Boca Raton, Florida-headquartered company may need to reverse, in order to undo its years-long stock slide. 

Foot traffic at Office Depot stores appears to be leveling off, according to our data. Our "were here" metric tracks how many check-ins, mobile device shares, and photo location tags are made at a business.

From 2016 to 2017, "were here" counts increased 21.1 percent. Over the next 12 months, that figure increased just 17%, and by 2019, the increase had dwindled to 6.15 percent. From the beginning of 2019 until May 1, "were here" counts rose just 1.45 percent. However, it may be more critical for Office Depot to drive business over the web instead of at brick-and-mortar locations in the future, based on its newest and biggest competitor's progress. 

But Office Depot app ratings also declined over the last few years. As consumer trends are shifting more toward purchasing office supplies (and, everything else) online, Office Depot's ability to lure shoppers digitally may be critical for a rebound. Already, office retailers have taken note, and the largest one has already begun to take advantage of its dominant position in the online retail marketplace. 

Amazon shut down its AmazonSupply business in spring 2015 and launched Amazon Business, charting a more ambitious course for its B2B bulk office supply business aimed at brick-and-mortar retailers who for decades sold printers, office chairs and paper to small businesses and Fortune 500 companies alike. 

In just a short time since, Amazon Business grew into a $1 billion business by 2016, which became a $10 billion business by 2018. For comparison, Office Depot has seen shares fall nearly 75% over the last four years. This week, investors will see if Office Depot's prospects are improving. 

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Jon Marino

Jon Marino is Thinknum's finance editor, covering the impacts of alternative data on public companies and investors. Prior to joining Thinknum, Jon worked in the ...

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