Staples Agrees to Buy Office Depot for About $6.3 Billion

Discussion in 'Travel Technology' started by Gargoyle, Feb 4, 2015.  |  Print Topic

  1. Gargoyle
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    Office Depot and Office max just completed their merger. Their argument against anti-trust was that then needed to be stronger to compete with Staples. Now Office Depot has agreed to be bought out by Staples. If this goes through, that pretty much owns the brick and mortar office supply business in the U.S.

    Yes, there are some small chains and mom-and-pop stores, but they don't have the buying leverage. There are heavies in the e-commerce realm, but many of us like to run in and grab something, not order for delivery one to four days later.

    http://www.bloomberg.com/news/artic...uy-office-depot-in-deal-valued-at-6-3-billion
     
  2. MX

    MX Gold Member

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    The FTC derailed this merger in 1997 as anticompetitive. Although it's even more anticompetitive now, this merger has a pretty good chance to proceed under the current regime.
     
  3. Gargoyle
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    If corporations are people, does this classify as same-sex marriage? If so Mitt Romney's head must be spinning.
     
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  4. Bay Pisco Shark
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    It is a totally different market now. Not only has it shrunk dramatically since 1997, the competition on what remains is different. The "run and grab something" portion of the business isn't what is keeping these places afloat.
     
  5. Bay Pisco Shark
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    It is more like Office Depot and Office Max will be the sister-wives of Staples, but they'll all live under one roof with one name, so no one will think anything of it.
     
  6. Betty Boop

    Betty Boop Gold Member

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    That was easy.
     
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  7. jbcarioca
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    jbcarioca Gold Member

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    I don't think this is anticompetitive since the category dominance is now including, among others, Amazon. Brick and mortar is no longer a useful definition for anti-competitive dominance IMHO.
     
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  8. MX

    MX Gold Member

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    C'mon jb, that is ridiculous. Do you go to Amazon for office paper, furniture, pens & pencils? Is one competitor enough to sustain a viable marketplace?
    Since we have a mail order super giant now, is it ok to shut down all other retail as well and still pretend to have competition?


    Btw Amazon is not an attractive place to shop for items that don't have established and highly competitive market, or anything too small or too large (when the shipping charges would erase their economy of scale).
     
    Last edited: Feb 7, 2015
  9. jbcarioca
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    OK, you asked. Yes, I do usually go to Amazon for paper and the odd bit of furnitures. pens and pencils i get from airlines, hotels and clients. One competitor is obviously not adequate, but one online competitor does, equally obviously have potentially large impact. Just ask Borders (oops they were broke and liquidated), Barnes & Noble, Circuit City (oops, broke), Radio Shack (broke again) and on and on. All of those and many others have been decimated by online sales. The office supply market is in the throes of such disarray also, which is why this merger will be approved now and was not a mere few years ago.

    As for Amazon, despite their habitual lack of profitability the Amazon Prime model is a powerful force against bricks and mortar. Fast predictable delivery, aggressive pricing and vast selection makes them formidable sector by sector. They are not the be all and end all, but they have been a true disruptive force in many sectors.

    Shutting down all other retail is not anywhere part of the equation. There's no need to exaggerate. Category Killers in a bricks and mortar sense continue to survive and will do so, but they're not the force they were before internet sales, Amazon as the prototypical example. Toys R' Us etc all feel the pressure, just check out retails sales figures. the most threatened retail category by far is the diverse middle class retail chains such as Sears, ever shrinking, Kmart (nearly disappearing) and JC Penny (ditto). Even mid range diversified retailers are having serious issues, and now high end ones are beginning to fray.

    Check out retailing guidance from any of these, and look at market shares. Like it or not physical shops have lost a huge portion of lucrative sales while retaining a lower percentage of less lucrative sales. One can see that in the demographics of online vs physical. you pick the country...it is happening everywhere.

    In some was I wish you were correct "C'mon jb, that is ridiculous". However, even in banking the famed and formerly inviolate Herfindahl Index no longer retains the pure physical network definitions it formerly did. http://www.investopedia.com/terms/h/hhi.asp The original definitions did not conceive the internet. Today one of the few types of market in which that concept can be applied as designed, for antitrust considerations also, is fast food.
     
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  10. MX

    MX Gold Member

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    I think you misunderstood why I thought the comparison was ridiculous, so I'll clarify. Amazon is not in the Office Supply business category. Staples also carries food items and cleaning supplies, but that doesn't make them a grocery or convenience store. Personally I don't understand why the Office Supply category even exists. But it does and is apparently doing well, judging from the purchase price. So we're not looking at natural extinction here, but more like monopolization.
     
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  11. satman40

    satman40 Gold Member

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    I think one would be surprised how much paper and office supplies are bought at Cosco.

    Our corporate contract supplier for many years, has been a Staples.

    OfficeMax and Office Depot carry different product, and different gift cards
     
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  12. jbcarioca
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    I understood your point. You do miss the larger issue. Amazon is certainly a major player in the office supply category; there are twenty pagoes resulting from a search for printing paper, including listing for boxes of eight reams, as well as large variety of quality and brands. There are also many others in the category.

    The confusion seems to come from the notion that a "category killer" (ck) is perforce dominant even if the penetration of the ck is not terribly large. The anti-trust logic of past decades made that assumption. Nobody does now with Walmart, Costco, Amazon and others all taking share. That is even more evident when looking at high-margin items such as printer cartridges, where the ck market loss seems to be far more dramatic than in low margin items like printer paper.

    A quick look at recent anti-trust logic shows that the former dependence on Herfindhal-like reasoning has been fairly well decimated. Despite the handsome nominal price this merger is one of two large competitors in a shrinking specialty rather than anything anti-competitive. It is not quite so ridiculous as if JC Penney, Kmart and Sears would merge, which could give some real estate sales benefit maybe, but would still not even register at a consumer competitive level. The ck's are not being totally disrupted, maybe, but smart money will not assume that the office supply sector ck's will be killing anything except their own future.
     
  13. MX

    MX Gold Member

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    I'm pretty sure this merger faces smooth sailing. One can do some fast talking to prove that leaving a single major player in a category will not affect competition, but even that won't be necessary.
     
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  14. mmmatthew85

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    One of the podcasts I listen too (Motley Fool) says that Staples is the #3 online retailer in the US. Just thought I'd throw in that tidbit since there were some comparisons to Amazon.
     
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