UJIAN TENGAH SEMESTER GENAP TH 2020/2021

MATA UJIAN : MANAJEMEN STRATEJIK

HARI/TANGGAL : RABU, 7 APRIL 2020
WAKTU : MULAI 13.30 WIB
KELAS : S1 AKUNTANSI
PENGUJI : TIM DOSEN
SIFAT : TAKE HOME TEST ( TULIS TANGAN DI KERTAS FOLIO )

Petunjuk Pengerjaan:
Sifat Ujian adalah Take home exam. Kemandirian dalam mengerjakan adalah mutlak. Kecurangan
dalam pengerjaan akan berakibat tidak diberikan penilaian. Hasil pekerjaan tulis tangan di scan
kemudian di upload di Google Classroom. Hasil pekerjaan UTS harus sudah di upload paling lambat
Rabu, 07 April 2021, Pukul 21.00 WIB
Diminta:
Baca dengan baik studi kasus dibawah ini dan lakukan beberapa hal berikut ini:
1. Lakukan pemetaan dan identikasi hal – hal kritikal terkait permasalahan di Staples.
2. Susun Analisis sesuai tahapan kerangka berpikir Manajemen Stratejik
a. Environmental Scanning ( output IFAS-EFAS )
b. Strategic Formulation (output grand strategy)
c. Strategic Implementation (output activity plan)
d. Evaluation & Control (output KPI)
3. Analisa menggunakan acuan buku manajemen stratejik / framework wheelen hunger

Selamat mengerjakan, jaga selalu aktifitas dan kesehatan diri beserta keluarga.

Staples: The Fierce Battle Between Brick and Mortar vs. Online Sales
Alan N. Hoffman; Bentley University
Natalia Gold; Northeastern University

Company Background
In 1985, when Tom Stemberg couldn’t find a replacement printer cartridge over a holiday weekend, he
came up with the idea of making office supplies more accessible and affordable, founding Staples, Inc.
in November 1985 with Leo Kahn. The first Staples Office Superstore opened in May,1986 in Brighton,
Massachusetts, offering one-stop shopping for office supplies, computers, and furniture.
In 1989, Staples went public and raised $36 million through its IPO.1 In 1990, Staples began purchasing
products overseas and formed a subsidiary, Total Global Sourcing, Inc., to handle international buying.
By the end of that same year, Staples had expanded into Brighton, Massachusetts, California, with sales
nearly reaching the $300 million mark, then invested in its first foreign venture, The BusinessDepot,
Ltd., a new Canadian office superstore it bought out in 1994. In 1992, Staples further expanded in the
United States through the purchase of Office Mart Holding Corporation, thereby acquiring ten
Workplace stores in Florida, and competing directly with the Florida-based Office Depot. Later that
year, Staples expanded into Germany by acquiring a 48% interest in MAXI-Papier which operated in
five German cities. Staples also signed a partnership agreement with Kingfisher plc, in the United
Kingdom to further its European expansion.
By1995, Staples had bought out both Maxi-Papier and Kingfisher plc.1 Ten years later, Staples had
expanded further into Europe and launched its expansion into Latin American countries and China, then
Taiwan through a joint venture. By the time of the 2014 announcement that it would close 225 stores,
Staples had grown to be the largest office supplies superstore chain in the world, with more than 2,200
stores in Europe, Asia, North and South America, and Australia.2
In addition to acquisitions and expansion, Staples offered new innovative services. Following its west
coast expansion in 1990, Staples introduced a new retail concept known as Staples Express, designed
to appeal to small business operators in urban areas and geared towards quick trips and impulse buying
during lunch breaks or after work. These stores were typically only a third as large as the suburban
stores, with half the stock.1 The Express stores were part of Staples’s strategy to dominate the office
supplies market through three distribution channels: suburban superstores, urban mini-stores, and
phone-in direct delivery service.1
In 2003, Staples introduced its “Easy” brand which focused on converting stores from a warehouse
design to a boutique look to make it easier and faster for customers to find what they were looking
for.1 In 2010, Staples launched Staples Advantage, its business-to-business website for customers to
order everything they needed for their business from one website and have it shipped directly to their
office, reducing supplier invoices and red tape through one accountable and convenient ordering site.3
In 2011, Staples went on to make ordering even more convenient by creating a mobile app that allowed
customers to purchase all of their supplies directly from their mobile devices.
In 2012, Staples introduced “smart-size” boxes, custom-made to fit each customer’s order. This
innovative idea was more convenient for customers as they did not need to break down oversized boxes;
it reduced Staples’ carbon footprint by 30,200 tons (or 120,000 trees); and it increased operational
efficiency by allowing more shipments to fit on each line haul and more orders in each delivery truck.3

Strategic Direction
Staples’ vision was to provide every product that your business needs to succeed. Its main objectives
were to provide superior value via a broad selection of products and services, and to accelerate growth
in its online businesses. The company’s focus on convenience and a wide range of product offerings
made it the world’s largest and the Internet’s second largest office supplies retailer,4 with a dominant
36.5% of the office supplies industry.
In 2012, Staples generated $24.38 billion in sales with an expected low single digit increase in 2013.
Staples carried $1.9 billion in debt with a debt to assets ratio of 16.38% [Exhibit 1].
At that time, the company employed 50,020 full-time and 35,067 part-time associates worldwide. The
company worked to achieve its goals by continuing to improve growth platforms, reshape its business,
and create funds for its future, all the time taking appropriate measures to remain the industry leader
and fulfill its vision for the future.
Competitors
Staples, Inc. was positioned in the specialty retail industry in the services sector. Its major competitors
were other high-volume office suppliers such as Office Depot and Lyreco; mass merchants such as Wal-
mart, Target, and Tesco; warehouse clubs such as Costco; electronics retail stores such as Best Buy;
specialty technology stores such as Apple; copy and print businesses such as FedEx Office; online
retailers such as Amazon.com; and additional discount retailers.5

Office Depot Inc.

Office Depot, headquartered in Boca Raton, Florida, was founded in 1986, and, like Staples, operated
in the Specialty Retail industry. As of 2014, the company, with North American Retail, North American
Business Solutions, and International divisions,6 had a market cap of 1.60 billion, 38,000 full time
employees, and 1,629 office supply stores worldwide. In the 1990s, a merger of Staples and Office
Depot was halted by the Federal Trade Commission due to the potential for near-monopoly pricing
power.7 However, in November 2013, Office Depot and OfficeMax merged, combining the second and
third-largest U.S. office-supply chains in an attempt to better compete with Staples.8 In May 2014,
Office Depot announced that it planned to close 400 stores as fallout from the merger.

W.B. Mason
W.B. Mason, the largest privately owned office products dealer in the United States, was founded in
1898 as a rubber stamp maker headquartered in Brockton, Massachusetts, and employed 1700 workers
as of 2013. Over the years, the company carved out a niche for itself largely by contracting with small-
to-midsized businesses in the Northeast and Mid-Atlantic states with the objective of providing the best
overall solution.9 W.B. Mason became competition for Staples through its office

Amazon Hints at Future Drone Delivery

Amazon.com, founded in 1994 and headquartered in Seattle, Washington, began operationsv in the
Catalog & Mail Order Houses industry in the Services sector as an online retailer in North America and
internationally. As of 2014, the company operated retail websites, Amazon Web Services, and Kindle
Direct Publishing, employing 88,400, and with a market cap of 168.98B. From Staples’ perspective,
Amazon retail websites were significant competition, offering merchandise and content purchased for
resale from vendors or offered by third-party sellers.11 Amazon’s innovative new drone technology
with the potential to deliver packages in as little as 30 minutes in a radius surrounding its fulfillment
centers could be an industry game changer, further intensifying Staples’ competition with Amazon.

Wal-mart Stores Inc.

Wal-mart, founded in 1945 and based in Bentonville, Arkansas, segmented its company worldwide into
Wal-mart U.S., Wal-mart International, and Sam’s Club in the Discount, Variety Stores industry in the
Services sector, operating 11,000 stores in 27 countries and employing 2,200,000 people worldwide.
Wal-mart became a threat to Staples when it began to offer office supplies, office furniture, software,
paper goods, and electronics
in its extensive product mix.12

Low Barriers to Entry

Industry-wide, the office supply sector really had 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;
however, competition and market awareness were likely to threaten new entrants. The low level of
differentiation of goods between one office supply store and the next, forced new entrants to provide
either niche or specialty products to compete. On top of that challenge, industry competition came not
only from traditional office supply stores, but from discount retailers, warehouse clubs, supercenters,
and e-commerce websites that could undercut smaller businesses, making conditions difficult for new
entrants. Ultimately, new entrants found that it was relatively easy to enter the office supply industry,
but competing against large companies made it difficult to become profitable.13
Staples’ established relationships, convenience of access via its website Staples .com, and its
many retail store locations increased its brand awareness and gave the chain a competitive edge over
newer and smaller companies. Its experienced management team, helpful customer service, wide
variety of available products and services, and competitive pricing also constituted advantages for
Staples, as did its efforts to differentiate its offerings from those of its competitors. In addition, Staples
continued to invest in information technology to enhance Staples.com to improve usability, efficiency,
and overall customer experience, an important company wide goal.
Through its sheer size Staples optimized economies of scale for further competitive advantages
including enhanced efficiencies in purchasing, distribution, advertising, and general and administrative
expenses. The company believed that its network of stores and online businesses enhanced its
profitability by allowing it to leverage marketing, distribution, and supervisory costs. Staples
particularly focused on leveraging synergies between Staples.com and its retail stores with the
introduction of new concepts including ship to store, online retail store inventory lookup, reserve online
pickup in store, as well as mobile and tablet optimized websites.14

Focus on Sustainability
Sustainability was crucial to Staples’ vision. The company ranked in the top 25 of the EPA’s Green
Power Partner List. To achieve this standard Staples developed many programs over the years to
position itself as a green company including:
■ An environmentally friendly paper policy to increase the amount of post-consumer recycled
paper available for sale.
■ Phasing out products originating from endangered forests to preserve the environment in
threatened parts of the world.
■ Modifying its fulfillment center in Hanover, Maryland, to be fully powered by a 1.01
megawatt solar initiative.
By abiding by governmental standards and attempting to influence political ideals, Staples both
acquired a reputation as a green company and chalked up millions of dollars a year in savings as a
result of new power reduction strategies.
Staples also implemented sustainability strategies in its copy and print centers. The premise of
the program was that copiers would enter sleep mode in as little as 15 minutes after use. This not only
saved money but cut over 11 million pounds of carbon monoxide from release into the atmosphere,
resonating with another hot topic in the legal and political world. These programs garnered Staples an
FSSI 2, an exclusive contract with the U.S. government for office supplies. Other programs with legal
and political implications Staples participated in included AbilityOne, Eco-Conscious, and the Trade
Agreement Act. The AbilityOne program was the largest source of employment for blind or disabled
people in the United States. The Eco-Conscious program, designed to be “easy on the planet,” and the
Trade Agreement Act advocated that items not produced by countries permitted by the TAA be referred
to as “Open Market Buy” items.

Core Competencies
Staples’ core competencies were its extensive product offerings, competitive pricing, large and
diversified market segmentation, and a strong brand perception. From its beginnings, Staples offered a
wide variety of office supplies and services as well as office machines and related products, computers
and related products, and office furniture. All products and services were marketed and delivered via
various distribution channels.
Through such a wide range of product offerings, Staples offered the distinct advantage of “one-stop-
shopping” that provided “everything your business needs,” the motive behind all its product expansion
decisions. To expand further, Staples began offering items in adjacent product categories such as break-
room and facilities; medical; safety; office décor; and packaging and shipping supplies.
In addition, Staples strongly reinforced its wide assortment of product offerings to customers
through its in-stock guarantee and strong pricing message supported by its loyalty programs. By
offering products that were competitively priced, in-stock, and easy to find (in store and online), Staples
positioned itself as the “easy” and convenient choice in comparison to its competitors. In recent years,
Staples also launched a “pricematch guarantee” initiative to compete with Amazon, its top Internet
competitor,15,16
Staples customer base could be classified into three segments [Exhibit 2]:home offices/small
businesses; mid-size businesses classified as organizations with 20 to 500 office workers; and large
businesses classified as greater than 500 office workers, including fortune 1000 companies.17
According to Staples, each of these market segments was able to benefit from separate sales channels.
For example, the retail stores and Staples .com website were most convenient for the small business
and home office segment while the Staples catalog and Staples Advantage program were best suited for
the midto large-size companies. Each of these sales avenues attracted different customers and each
customer group exhibited distinct purchasing behaviors.18 By understanding the needs and buying
behaviors of these three separate segments, Staples was better able to meet the demands of its large and
diversified market, and to better provide its customers with new products and services.
 The Staples brand, best described as “easy,” was designed to provide a “hassle-free” experience
for any and all of the company’s customers. In 2005, Staples partnered with Prophet, a strategic brand
and marketing consulting agency, to cultivate its “That Was Easy” marketing campaign. The
implementation of the “That Was Easy” tagline and the Easy button campaign led to many operational
improvements and increased brand awareness worldwide.19 Staples overtook Office Depot as the
number one office supply superstore in the United States in 2005, and remained in the number one spot
through 2013. Alongside the notion of the ease of shopping at Staples, the company also offered
customers quality products competitively priced.

Operations
The main strength of Staples’ retail store operations was the sheer number of stores in each operating
sector, so customers could easily find a Staples retail store near them. The North American Stores &
Online segment included over 1,880 stores, 1,547 in the United States and 339 in Canada,20 selling a
wide variety of office products such as ink and toner, paper, and virtually every other office necessity.
Staples’ newest strategic plan incorporated venturing further into all aspects of the office environment
to provide facilities and break-room supplies, in addition to expanding its copy and print and technology
services. Staples’ sheer number of stores created incredible distribution channels, allowing it to leverage
marketing, distribution, and supervision costs. The transition to online helped cut costs and increase
company value by developing full mobile and tablet optimized website to help customers look up
inventory for an item at any retail store and reserve online pickup at a store or ship items to a specific
store.
The North American Commercial segment’s operations were designed to sell and deliver office
products and services directly to businesses in the United States and Canada as well as the Staples
Advantage and Quill.com services. Commercial’s main operating function was expanding the retail
stores’ general sales of office supplies to customers that needed more, or a wider variety, of specific
items. Staples Advantage served mid-sized businesses up to Fortune 1000 companies which required
more than a traditional retail store could provide for their operations, products that would otherwise be
difficult to get ahold of as easily as a giant company could. Quill.com’s operations were quite different
as an Internet and catalog business focused on serving small to mid-sized businesses with very specific
needs or services. For instance, one business under Quill.com’s umbrella was Medical Arts Press, Inc.,
which provided specialized office supplies and products for healthcare companies, a totally different
market from the rest of Staples’ business.
Staples’ International Operations segment built up operations in 23 countries in Europe, Australia,
South America, and Asia. This segment was less unified and more troubled than the North American
segments. The products and services offered to the different countries across this segment varied widely
with no set standard to follow. There were 283 retail stores in the European section, largely in the United
Kingdom, the Netherlands, Germany, and Portugal. There was also a direct mail service and online
center with sales primarily in the United Kingdom, Italy, and France. Staples’ main goal was to
standardize and optimize the European segment to streamline the systems used and create a standard of
products to follow; further e-commerce sales; and expand the array of business services offered, thus
following the same plan as Staples’ North American successes. However, economic conditions in the
European Union necessitated the closing of underperforming stores and those that were creating
financial strain to improve the profitability of the European segment and secure profits. The Staples
Australia segment of International Operations fared better than Europe as it had government contracts
and customers in Australia and New Zealand to provide stable income. Staples in Asia and South
America were fragmented, but retail and delivery businesses were established in China and delivery
businesses also operated in Taiwan, Argentina, and Brazil, with an arrangement for a franchise in India
underway.

Supply Chain
The massive size of Staples’ segments and the sheer number of Staples stores necessitated the
development of two North American supply chain networks for stocking and deliveries. However, the
North American stores and online had only four distribution centers across the United States for retail
operations, significantly cutting labor costs while saving on merchandise costs, as the centralizing of
all functions relating to replenishment created an economy of scale that allowed for huge amounts of
inventory to be dispersed quickly and efficiently. North American Commercial, on the other hand,
maintained sixty-six fulfillment centers across North America operating as a separate distribution
channel to prevent complexity in the distribution network.
The de-centralized European supply and distribution chains lacked the efficiency and depth of the North
American sector, pushing Staples to initiate measures to reduce redundancy and complexity to cut costs
and increase efficiency. The company realized that implementing centralized distribution would
streamline resupplying and distributing inventory, rendering the system significantly more efficient and
less costly.
29-11
Human Resources
Staples’ main business was its retail stores staffed by Staples associates who interacted directly with
customers, providing assistance as well as pushing sales for various products and services. As of the
end of FY2012, Staples had 50,020 full-time and 35,067 part-time associates, most of whom were paid
at or near minimum wage, saving the company money at the cost of employee apathy and high turnover
rates. The Staples workforce garnered quite a lot of publicity during the 2012 Presidential election, as
Republican presidential candidate Mitt Romney served on Staples’ board of directors, which seemed to
many an example of the rich getting richer on the backs of a minimum wage workforce. 21 However,
attempts to unionize in an effort to raise wages to the level of wages at competitor Costco wholesale
were firmly rebuffed by management, despite its large number of minimum-wage employees.22 One
Staples store successfully unionized in September 2013 and negotiated a 2% wage increase.23
In 2012, Staples updated its corporate values policy that provided guidelines for associates’
interactions with customers and each other, part of its efforts to prevent human resource issues and
avoid the kind of problems that could occur at such a low wage level. A major aspect of its corporate
values was “Staples Soul,” or responsible corporate citizenship, coordinated by its chief cultural officer
and designed to articulate how Staples’ financial success translated into benefits for its various
constituencies: associates, communities, and the planet through four aspirational goals.
First, Staples aimed to show that ethics was part of the Staples’ culture by maintaining ethical
business practices, and assuring employees that they could voice their opinions without fear of reprisal.
As part of the hiring process, the company’s training program included an ethics lesson to demonstrate
the impact of unethical decisions and the negative effect they could have on stakeholders and the
company, as well as on the reputation of the brand.
Next, Staples aimed to generate business while protecting the environment and benefiting the
community through sustainable business practices such as selling recyclable products and green
services and improving energy efficiency. The green movement provided Staples both with social
opportunities in terms of reputation and community goodwill, and with financial opportunities by
aligning the company with the green market, thus benefiting all parties involved.
The third aspect of Staples Soul, diversity, involved acknowledging that the company’s success
came from diverse people of all races, ages, sexes, sexual orientations, backgrounds, and nationalities;
and encouraging the recruitment of diverse associates to spur new opportunities for innovation and
growth.
 The last component of Staples Soul, community, focused on providing job skills and
educational opportunities such as career development to associates and literacy training and tutoring to
disadvantaged youth through financial contributions to various charitable organizations and grants from
the non-profit Staples Foundation funded by the corporation. Over the years, the Foundation assisted
6,500 organizations in local communities in 26 different countries, and worked tirelessly to encourage
customer and associate volunteer efforts in the community.

Financial Operations
For the three years from 2011 to 2014, Staples’ sales revenues were flat at around $24 billion, though
fluctuating as much as $400 million on a year-to-year basis. The company’s sales revenue derived
primarily from the sale of office supplies, which accounted for 43.9% of revenues in FY2012 [Exhibit
3]. This figure represented a fall of 0.7% from FY2011, as the company pushed further growth of its
services sector of the business, which represented only 6.7% of sales revenue in FY2012.24

A major obstacle to Staples’ financial strength was the goodwill impairment of $771.5 million the
company recorded in the third quarter of 2012, which resulted in a net loss of $210.7 million for
FY2012.24 The impairment was attributable to losses in the European retail and Europe catalog
reporting units, incurred as a result of ongoing economic weakness in Europe. Further impairment of
goodwill, it was feared, might arise from a variety of factors including the lessening of consumer
spending; worsening industry and macroeconomic conditions; changes in the price of Staples stock;
and the future profitability of the businesses.25 Though the goodwill impairment was a non-cash loss
on the business, it altered the balance sheet and the overall financial strength of the company. Analysts
predicted further impairment for 2013, which did not bode well for investors and pointed to the
weakness of Staples’ European business in relation to overall revenue for the company.
Another important financial risk factor for Staples was its long-term debt, ringing up at over $1 billion,
with other long-term obligations at over $700 million. This amount of debt, it was feared, could create
a substantial roadblock to financing further working capital for business operations; could disadvantage
Staples in relation to its less debtburdened competitors; could require the company to borrow at a higher
rate to secure financing; and could place it at risk should the economy face trouble or its business was
no longer sustainable, as the company would still be required to repay its obligations. This last risk was
mitigated, however, thanks to Staples’ maintaining a large cash balance. Cash from operations was
$1.22 billion in 2012, providing a balance of cash on hand of $1.33 billion, more than enough to cover
long-term financing debt if it became a liability,24 suggesting that Staples’ long-term debt was fully
under control thanks to its cash reserve policy initiated in 2012, and thus presented no real long-term
concern for the business in the future.
As of 2013, Staples’ North American segment was its largest at almost $20 billion total deriving from
two sources: its retail stores—North American Stores & Online at $11.8 billion, and North American
Commercial, previously known as North American Delivery, at $8.1 billion.24 The segment’s primary
purpose was selling and delivering office products and services directly to businesses; as such this
segment included the Staples Advantage and Quill.com service.
The North American Stores & Online segment’s sales only gradually increased yearto- year, with a
0.7% increase in sales revenue from FY2011 and a 1.7% increase from FY2010 to FY2011. However,
FY2012 included an extra week from 2012, resulting in a 53-week fiscal year that added $221.4 million
to FY2012; not counting this extra week, sales in 2012 actually decreased by 1.2% from 2011. However,
the next year FY2013’s third quarter filings showed a 5.3% decrease from FY2012 in the North
American Stores and Online: $3 billion as opposed to $3.18 billion.24 For the North American
Commercial segment, sales increased by 1.7% in FY2012, this again included the extra week from
2012; excluding the extra week, sales from North American Commercial actually decreased by 0.3%
from 2011.24 As of Q3 FY2013, sales for this segment increased by 0.7% from $2.075 billion to $2.089
billion.24

Same-Store Sales and Profit Margins: Two Major Problems for Staples
From 2010 through 2013, same-store sales consistently fell for Staples [Exhibit 5], in line with other
financial information such as sales revenue and net income. The low margin of office supplies store
sales coupled with the loss of sales from the closing of underperforming stores correlated with the
figures of consistent decreases in same-store sales in the exhibit. Thus, the majority of Staples’ positive
sales revenue numbers for the past few years came either from online sales or new store sales to make
up for the decrease in same-store sales.

Staples’ profit and operating margins were exceptionally low during this time period as well At 1.1%
for FY2012 and 4.5% for the year before, such profit margins were unlikely to attract new entrants to
the industry. Operating margins were similar at 6.4% for FY2012 and 6.5% for FY2011,24 which
explained why net income [Exhibit 4]. Was so small compared to sales revenue and why any type of
abnormal fluctuations such as goodwill impairment had a real and material effect on the bottom line.
Essentially, the only reason Staples made any type of income from the office supply business derived
from economies of scale and efficiency.
Any other kind of startup simply would not have made any real money. Thus, it became necessary for
Staples to optimize and cut costs through efficiency, or there would not be much growth in terms of net
income other than from an increase in sales volume. Staples’ stock price [Exhibit 5]. hovered in the
$11–$15 range in 2013 [Exhibit 4], in keeping with its poor performance in the five years prior to that
during which it lost about half its value.
In response, Staples heralded new business strategies for growth to gain investor confidence such as its
online restructuring. Yet its low margins, only $500–$700 million net income from $24–$25 billion in
sales, continued to dismay investors. Growth and earnings, the end-goal of all public companies, was
simply not there for Staples or for the industry as a whole. Until there was a complete overhaul of
Staples’ business plan to better manage these costs and improve margins, Staples’ stock, it was feared,
would continue to underperform.

Global Operations
Staples’ overseas operations in 26 countries—18% of its revenues (31% consolidated revenues)—often
exposed the company to global conditions. In 2012, Staples recorded $36.6 million in currency
translation loses. Staples’ international operations represented a loss of $21 million in 2012 net income.
In 2013, Staples began working on creating a more efficient distribution system in Europe by
consolidating its facilities, an opportunity to increase margins and make operations more profitable.
However, building its overseas distribution network required significant capital, raising the concern that
the company might overspend in expanding its global presence.
The International Operations segment sales decreased by 10.2% from 2011, including $80.8 million in
sales from the extra week in FY2012; excluding this week, International Operations sales in 2012
dropped by 11.8%. The continued decline of European and Australian business sales as well as a $180.6
million negative impact due to unfavorable exchange rates accounted for much of this sharp drop in
sales figures. Importantly, $303.3 million and $468.1 million, respectively, in goodwill impairment
attributed to the European Retail and Europe Catalog reporting units was not included in these figures.
Additional losses included over $177 million in restructuring costs from the closing of retail stores
across Europe.24 Given these losses, it became clear that the European side of Staples’ International
Operations was not faring well and might face continued restructuring costs from the closing of stores
as well as continued goodwill impairment as the value of these European sectors continued to fall.

Many Challenges Facing Staples

Staples’ greatest weaknesses were its difficulty in competing in the online realm and the company’s
lack of e-commerce and mobile intelligence, weaknesses stemming from its reactive nature and behind
the curve thinking. As the retail industry had been trending towards online sales for quite a while, and
Staples’ traditional brick and mortar stores were costing Staples a pretty penny, Staples’ new
reinvention strategy was aimed at reducing square footage and transitioning in-store customers to online
customers.
These steps were necessary to ensure a fighting chance against online superstores such as Amazon,
which had begun offering the same products as Staples at rock-bottom prices. By investing in online
and mobile technologies, Staples demonstrated its promise to meet customers’ needs. Yet, Staples
lacked consumer-facing marketing that would direct customers to its website rather than its retail
outlets. Its game plan to convert its in-store customers to online customers was to promote purchasing
online while customers were in still in the store. For example, Staples planned to equip sales associates
with tablets to constantly check inventory and help customers order online.
When customers first entered the “omnichannel” store, they would be greeted by a “business lounge”
decked out with computer workstations, charging stations, and kiosks so they could browse the online
store.26 The decision to use the retail stores as the place to encourage online purchases was Staples’
solution for transitioning its existing customers to online sales. Overall, Staples planned to combat its
marketing weaknesses by reducing square footage and tripling the size of its e-commerce and IT staff,
fundamental shifts necessary for Staples to remain the number one office supply superstore.
By 2014, an important challenge for Staples was decreasing product margins across all three of its
market segments. Staples’ low product margins meant that in order to really be profitable it needed to
sell huge quantities of products and services. In 2012, Staples had sales revenue of $25.02 billion and a
net-income of $984.66 million for an effective profit margin of approximately 3.9% of sales revenue.
Staples’ main challenge was its complacency as the global office supplies industry leader. Many
analysts concurred that Staples spent too much time and effort reacting to a changing industry and
merely maintaining leadership, rather than focusing on innovation and driving change in the industry.
In recent years, Staples began restructuring through the closing of stores and centralizing of its European
distribution system, but these were seen as efficiency measures to adapt to a changing industry, not
growth strategies addressing the company’s stagnant sales.
In March 2014, Staples announced that it would close 225 stores by the end of 2015 to focus on its
online business. In May 2014, Office Depot announced that it would close 400 stores due to its merger
with OfficeMax. The entire office supply industry was changing and under pressure from online
retailers.