‘Max overhaul



New OP store concepts are in vogue right now. Just a week after FedEx Kinko’s announced the roll-out of its new retail store model in Orlando, which it hopes will turn into 4,000 stores by the end of 2010, retail giant OfficeMax publicly bids farewell to its warehouse store design in favour of "an engaging, colourful environment" that highlights small- and home-office solutions.
The first store of this kind opened in mid-October in Macedonia, Ohio, with ten expected in total before year end. From 2006, all new stores will be built to the new design, the firm has said.
Ryan Vero, chief merchandising officer at OfficeMax, believes the warehouse office supply store is now outdated. "Many office supply retailers have traditionally put their own operations ahead of the customer’s needs," he told OPI. "The warehouse office supply store was developed from the standpoint of making it easier for the operator to stock a store while giving the customers what they want."


After watching what Vero claims were "hundreds of hours of video on how customers actually shopped our stores", he says that the new store concept provides a more positive customer experience and is very efficient from an operational standpoint. At no high cost – Vero says OfficeMax has "balanced new store features and costs quite well" – he believes the concept "will result in customers visiting stores more often and shopping longer while they are there".
The new stores will exist in both a "full-size" of approximately 18,000 sq ft and a "mid-size" format of around 14,000 sq ft. They will feature a central technology hub, photographic banners to better direct shoppers around the store, a combined check-out and customer service desk, colourful bulk bins, an ink filling station and a "community area" featuring an internet café.
"The design of the store allowed us to showcase our complete product range in a smaller footprint that gives the customer the illusion of a larger store," says Vero. "Warehouse stores were primarily about convenience without style. The new store brings together convenience and style with a warm, inviting atmosphere that re-captures the simple fun of shopping for office products."
OfficeMax is no doubt hoping that its new store format and new "customer-centric approach" will signal a new era for the company, after what have been a wobbly few months, marred by, among other things, a brief leadership vacuum.
Since Sam Duncan was appointed as CEO to turn the firm around in April, he has received a mixed reception from the industry and shareholders. At the time, one of OfficeMax’s major shareholders told OPI it was "fairly unimpressed by Duncan’s due diligence of the industry".
Six months on, with ‘Max having just announced that it intends to extend the terms of Duncan’s contract, hedge fund K Capital, another major shareholder that holds about 8.6 per cent of OfficeMax, claims it is "disappointed". In a letter to the company, the shareholder stated: "Duncan has never been elected to the board by shareholders and, given his position as chairman, we believe shareholders should have the opportunity to vote on his appointment …[The OfficeMax board] has inexplicably rejected numerous shareholder mandates over the years," it says.
In addition, the firm’s Q3 results, reported at the end of October, revealed a swing to a loss due to weak sales and lost revenue from the sale of its paper and forest products business. ‘Max reported a loss of $3.9 million, compared with $62.2 million in Q3 2004. Sales went down 37 per cent to $2.29 billion.


Dan Binder, SVP at Buckingham Research, believes ‘Max may be in trouble. "I think OfficeMax is stuck without a real buyer right now and is losing share," he told OPI. "Shareholders are screaming about shareholder value as they want ‘Max to sell out to Staples and Office Depot, but I don’t think the interest is there. Hence, it may go on for a while being a share donor as Staples and Office Depot gratefully take it."
The new prototype store reinforces the company’s desire to clean up, move on and add value – as does its recently announced plan to move its headquarters from Itasca, Illinois, to Naperville, Illinois, in spring next year.
Vero clearly hopes that it will signal a turning point for the retailer. "We remain committed to our relentless focus on customer satisfaction, to creating meaningful opportunities for our associates and to building long-term value for our investors…We are excited about consolidating our headquarter functions and believe it will give us better resource collaboration and help with efficiencies overall."
Going forward, Vero told OPI that ‘Max’s greatest challenges will be in anticipating the needs of customers. "When you get beyond meeting immediate needs and start to pay attention to what the customer will want in the future – needs the customer cannot even imagine today – that’s when the challenge becomes exciting," he says.
If some shareholder gripes are to be believed though, there may be larger challenges in wait.