Staples Looks to Improve Its Online Presence, But Will This Be Enough?
Nov 6th 2013 5:00PM
Updated Nov 6th 2013 5:04PM
If you're looking to invest in an office products company, then you might find it difficult to find a no-doubt winner. That said, Staples is not only the largest office products company in the world, but the second largest online retailer in the world. Yes, it's even bigger than Apple online, and it's only second to Amazon.com . Furthermore, Staples just enhanced its website, which has the potential to lead to increased sales.
When Staples was founded in 1986 by Mitt Romney, Bain Capital, and other private equity firms, no one anticipated that the company's greatest potential would be online. Today, that's the case. The company's physical stores are suffering due to increased competition and a hesitant consumer. The good news is that Staples.com is the second largest online retailer in the world. Once a company establishes such a large online presence, it's going to fight hard to keep it. Staples looks to thrive online, not just maintain its current standing.
The new website offers easier navigation, faster checkout, more product options, and more deals and ways to shop. Staples promises a faster page load time and improved search results, making it easier for shoppers to find the products they need.
The goal is for Staples to attract more small business customers and holiday shoppers. The acquisition of a software company named Runa will play a big role because this company specializes in personalizing a customer's shopping experience.
The Runa acquisition is expected to lead to more dynamic pricing for shoppers. If small business customers are happy with the setup and see that they will find what they need with ease and at the correct price, then this acquisition could pay off in a big way down the road.
For now, while Staples might be a big online player, it still must compete with Office Depot, OfficeMax, and most importantly, Amazon.
Staples vs. peers
If you're not familiar with Alexa.com, it's the global leader in website analytics. In other words, it tells you how many people are visiting a website, how long they're staying, and more. This is critical information for online retailers, because it indicates how much demand the site is creating. The numbers on Alexa.com can also provide a hint to investors as to how much interest there has been online, which then might indicate strength or weakness for the next quarter's online sales. Keep in mind there are no guarantees here, and this is for online sales, not total sales.
According to Alexa.com, Staples.com ranks No. 913 globally and No. 222 in the United States (for website traffic). Over the past three months, the bounce rate (people who visit the site and leave after viewing just one page) increased 3% to 33.90%, page-views per user increased 0.60% to 4.77, and time on site declined 6% to 4:20. These aren't great numbers. It's likely that Staples.com was well aware of its lackluster online performance lately and opted to upgrade. Although the above numbers are not impressive, they still outclass OfficeDepot.com and OfficeMax.com.
OfficeDepot.com ranks No. 2,621 globally and No. 607 in the United States. Over the past three months, the bounce rate has increased 8% to 37.20%, pageviews per user declined 1.94% to 4.54, and time on site slid 11% to 3:54. Office Depot is currently offering a Big Print Sale with deals on printers, paper, ink, and in-store printing. This is one small promotion to help drive demand, but it's not going to have a significant impact on online performance.
OfficeMax.com ranks 4,766 globally and No. 1,172 in the United States. Over the past three months, the bounce rate has increased 10% to 35.50%, page-views per user has declined 1.47% to 4.68, and time on site has slid 8% to 3:33. OfficeMax offers consistent promotions to help drive traffic. One of the latest promotions was a Flash Sale on Monday, November 4 between 11 a.m. and 4 p.m. where visitors could save up to 80% on purchases. That's certainly enticing, but not enough people are likely to know about it. Even if they did, 80% off isn't going to help margins.
It might seem as though Staples is a clear winner in this department. However, whenever you hear or read the word "retail" you should always ask yourself about Amazon's presence in the market you're talking or reading about.
Amazon offers over 1 million office products, and it ranks No. 11 globally and No. 5 in the United States. This kind of exposure is massive and a big nuisance for Staples. Staples might be able to retain small business customers, but think of how many consumers order items on Amazon. If these consumers purchase the majority of their items online then they're likely to stick with Amazon if they need office supplies. It's a one-stop shopping destination and consumers love convenience. This pattern happened once before, with Wal-Mart steamrolling over many physical retailers for the same reason.
If you would like a visual of the demand picture, consider the disparity between Amazon and the three office products companies over the past five years on the top line:
The bottom line
That chart above is telling, and Staples is the leader in its industry by a mile. While Staples has a strong online presence that is likely to improve, Amazon is still going to present a significant threat going forward. Therefore, there would be little reason to invest in Staples when Amazon is gearing up to be a major competitor in the online office supplies space.
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The article Staples Looks to Improve Its Online Presence, But Will This Be Enough? originally appeared on Fool.com.Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com, Apple, and Staples. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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