Staples’ pragmatic decision
Staples swoops to tie up agreement in Russia after Lyreco partnership breaks down
There was obviously more than met the eye to Lyreco’s announcement in mid-October that its partnership with Russian B2B operator Pragmatic Express had come to an end. Just 24 hours later, Staples announced its own strategic alliance with the Moscow-based reseller, marking the global number one’s entry into the Russian market.
In its pre-emptive news-strike, Lyreco was unusually critical of its former partner, stating that it had "clearly been disappointed with the commercial development of the sales alliance" and that Pragmatic had been "unable to raise the standard levels in Russia to the ones that Lyreco provides worldwide to its customers".
This drew an equally stinging response from Pragmatic Managing Director Renata Szostak, who was said to be "disappointed and surprised" by the Lyreco comments.
"Pragmatic Express has always been interested in learning from the best," she stated. "We severed our Lyreco agreement in August to join forces with the world’s leading office products company."
She continued: "This new alliance gives us a unique opportunity to access Staples’ knowledge in serving large accounts worldwide that will help us better serve customers in this area. Staples’ global experience combined with Pragmatic’s experience in the Russian contract market will bring our clients many benefits and a high level of satisfaction."
Staples Europe’s VP of Contract, Christian Horn, told OPI that Staples had not tempted Pragmatic out of its Lyreco agreement, but had grabbed the opportunity once it knew that Pragmatic was open to discussions.
"Our contacts with Pragmatic go back to before they entered into their Lyreco alliance," said Horn. "During one of our recent moments of contact we discovered that they had terminated the alliance with Lyreco and were open to discussing an alliance with us. This tied in with our interest in strengthening our global network."
The speed with which the alliance came about may seem unusual, but Horn says that this was due, in part, to Staples’ previous pre-Lyreco contacts with Pragmatic. "We knew that Pragmatic is a well-managed, successful and focused business with a strong track record in servicing medium and large customers. During our discussions with their shareholders and management team, this impression was confirmed, and we discovered that their business and management philosophy is similar to ours."
The move will be a boost to Staples’ global accounts capabilities and Horn noted that many of the firm’s international customers had been enquiring about the Russian market for some time.
"Many of our current and future customers have a significant presence in Russia and, as they extend the scope of their international procurement efforts to include Russia, they are looking at us to help them include this market in our global account programmes," he said.
Staples also said that it would be working with Pragmatic to exchange best practices. OPI understands that this will include providing best practice insight and experience sharing in areas such as supply chain or tools and systems. In return, Staples gets an inside view of the workings of the Russian market.
The choice of Pragmatic makes sense because it operates a purely B2B model and has its main activities in Moscow and St Petersburg, where many of the decision-makers are based, although it does have the capabilities to extend beyond these two cities. It’s therefore no surprise that Staples was so quick to tie up a deal.
In a statement, Lyreco CEO Eric Bigeard commented: "Lyreco is keenly interested in developing business opportunities in Eastern Europe and specifically in Russia, but we are aware of the challenging trading practices that sometimes exist."
Staples’ Horn was keen to play down any suggestions that his company would partner with a firm that did not adhere to international business standards. He told OPI that Staples would not have entered into such an agreement unless it had taken every care to choose the right type of partner, and would certainly not leave itself open to prosecution under the US Foreign Trade Practices Act.
Where next for Lyreco?
Bigeard is now faced with the prospect of finding another partner in Russia, but told OPI that he expected to make an announcement by the end of the year. He would not be drawn into revealing with which company this might be, but number one Russian OP business Komus would appear to be a potential candidate, although its multi-faceted business model does not seem to be such a straightforward fit as that of Pragmatic.
Staples’ pragmatic decision