EB: Depot’s Dixons deal

 

Office Depot’sJohnO’Keeffe reveals more about the recent store-in-store agreement with leading European consumer electronics group Dixons.

 

opi.net spoke earlier today to John O’Keeffe, Office Depot’s Commercial Director UK and Ireland, about Friday’s news that the office supplier is trialling a store-in-store concept with leading consumer electronics retailer PC World (part of the Dixons group).

 

The move marks Depot’s first foray into the retail channel in the UK, where it operates the successful Viking Direct brand and a contract business.

 

O’Keeffe said that Depot had not been specifically looking to move into the retail space, but the opportunity to partner with Dixons was "too good to pass up".

 

"We found that our two businesses had a good fit," explained O’Keeffe.

 

"We felt that while they are the PC/hardware experts, we have the expertise in the office supplies and furniture categories. They have a strong small business customer base and were keen to develop a more comprehensive shopping experience for that type of customer.

 

"The two parts combine nicely and we are hoping that it will provide a compelling experience for customers – everything they need when they go to the store."

 

The concept provides for a fully-branded Office Depot area within the PC World store, stocking both stationery lines and furniture. The areas will range from around 1,000-2,000 sq ft depending on the size of the store. There will also be smaller format trials in a couple of Currys stores.

 

The stationery offering covers around 520 items and is a mix of Office Depot brands and national brands.

 

Furniture includes a range of seating and desk options and is backed up by an in-store CAD service that allows customers to design their office layout on the spot.

 

Depot will deliver furniture orders directly to the end-user and is also offering a full installation package.

 

For stationery, Depot is delivering directly into the Dixons supply chain which is then distributing product to its stores.

 

The stores-in store are being staffed by Office Depot employees and O’Keeffe said that there would be between 4-6 staff during peak weekend periods.

 

After the kick-off in Croydon last week, a second Depot space will open tomorrow in Bristol with a further four to follow during the six-month trial period. After creating a bit of a buzz with the local press in Croydon, a Ricky Gervais look-alike will again be in Bristol, although a decision has not been taken whether he will become a fixture at all of the openings.

 

Whether or not the Dixons/Office Depot partnership continues after the six-month pilot, O’Keeffe says that Depot will gain an important insight into the UK retail market with a strong partner.

 

"In the grand scheme of things, it’s a small trial. Having said that, it will be an invaluable learning experience for us and Dixons. It’s an exciting project and one which we will work on thoroughly."

 

This agreement with Dixons would certainly appear to represent a low-risk entry into the UK retail sector for Office Depot.

 

PC World is situated at prime retail park locations in the UK with large customer traffic. Its stores are currently being refreshed as part of a turnaround plan that it began in 2008 as news of Best Buy’s entry into the UK broke, and the group is on the up again after a difficult few years.

 

In the UK alone there are over 160 PC World stores meaning that, if the partnership was to be extended, Office Depot could potentially have a greater retail footprint in the country than Staples (around 130 stores) in a relatively short space of time. And that’s not taking into account approximately 500 Currys and Currys.digital stores in the UK and Ireland.

 

Dixons did attempt to offer an office supplies assortment a few years ago in PC World, but pulled back on the category in 2008 as it focused on its core consumer electronics lines. Partnering with Depot this time around enables it to offer customers an office supplies choice again, but with Depot’s own staff on the shop floor presumably able to offer a better customer service, and Depot able to provide merchandising and assortment expertise.

 

PC World has done something similar in the mobile phones segment, partnering with Phones4U in mid-2010.

 

Questions could be raised as to why Depot has gone to market in the UK with the Office Depot brand as opposed to the more widely-known Viking Direct brand. Not because of any image issues with the Depot brand, but from a business viewpoint the Viking name would tie-in snugly with the small business customer base that PC World has said it is aiming to cater for in this agreement. It would have also provided a timely boost for the Viking brand which Depot is trying to revamp to cater for a new, younger customer base in Europe.

 

One can only assume that Dixons had competition issues with the Viking brand already selling technology products online in the UK and other European markets.

 

John O’Keeffe would not reveal the nature of the commercial relationship between Depot and Dixons; there is likely some kind of rental/licensing agreement. What it has done, though, is to bring top level Depot and Dixons management together around the same table. Have they mooted some kind of closer rapprochement if the current pilot proves to be a success?

 

That could not be possible, given the competitive nature of the computer and consumer electronics retail sectors. Both sides might view a tie-up as a means to strengthening their positions against their two main global competitors – Staples on the one hand and Best Buy on the other – and there are also possibilities in other markets in continental Europe.

 

With rumours emanating from the US of a Depot private equity buyout or even a merger with OfficeMax, it’s not inconceivable that Depot’s shareholders might look to offload the profitable European division, although that is pure speculation at this stage.