Big Interview: Riding the Mexican wave

The Office Depot name is alive and well in Mexico and looking to grow, says Office Depot de Mexico CEO Ángel Alverde Losada

Ángel Alverde Losada took the helm at Office Depot de Mexico 20 years ago at the tender age of 30. Since then he has overseen constant progress at the company that has included widespread store openings, international expansion and regular acquisitions.

After almost 20 years as a joint venture between Mexico’s Grupo Gigante and Office Depot in the US, Gigante took on sole ownership in 2013 in a $690 million deal. Since then, further acquisitions have been made in Mexico, Chile and the Caribbean, while earlier this year RadioShack’s Mexican operations were merged into the Office Depot de Mexico group.

With all this going on, it was high time that OPI’s Andy Braithwaite reached out to Alverde Losada, and he was more than happy to respond to our questions.

OPI: Firstly, can you give us a brief resumé of your career?

Ángel Alverde Losada: I got a call inviting me to be part of the Office Depot de Mexico project in early 1994 before the company started. At that time, I had just completed an MBA and found myself trying to decide which career path to take: work for a large corporation or start my own business from scratch. 

My choice was to take the chance with Office Depot, and here I am now after more than 21 years being part of this exciting project.

OPI: And can you summarise Office Depot de Mexico and its operations?

ÁAL: Office Depot de Mexico is a multichannel, multinational company owned by Mexican Holding Grupo Gigante. We operate in nine countries: Mexico, Guatemala, Honduras, El Salvador, Costa Rica, Panama, Dominican Republic, Colombia and Chile.

This includes 282 stores, warehouses, cross-docks and delivery centres operating under the Office Depot brand, and 25 under the Casa Marchand brand name, which is a Mexican stationery and school supplies wholesaler and retailer we acquired in 2014. In addition, we recently acquired RadioShack Mexico which has added another 247 stores, bringing us to a total of 554 locations in the region.

We also provide a specialised B2B service through a number of other fully-owned companies. These include FESA, Papelera General and Ofixpres.

OPI: What have your most recent financial results been in terms of company sales and EBITDA?

ÁAL: I’m afraid that is confidential.

OPI: OK, what about sales trends? 

ÁAL: We have seen an improvement in sales. Last year was a really tough one, and even though the exchange rate has been quite an issue in 2015, small businesses and consumers are now investing in mid-term and long-term goods including, of course, computers.

OPI: How important is Office Depot de Mexico in the overall operations of Gigante?

ÁAL: Office Depot de Mexico represents the largest part of the whole retail business of Grupo Gigante.

OPI: So your main focus is retail rather than B2B?

ÁAL: We are mainly known for our stores by the end consumer, but we are making enormous efforts to keep growing in the ever-challenging B2B market. Our goal is to make it half and half.

OPI: Why did you decide to buy out Depot’s stake in your joint venture in 2013?

ÁAL: Well, we wanted to keep expanding the business in the Latin American market.

OPI: Would this not have been possible under the joint venture?

ÁAL: Yes, it would have been possible and it actually happened already. Under the joint venture we opened in Central America and Colombia, but having full control of the region allows us to make faster decisions.

OPI: The price you paid to buy out Office Depot was significantly higher than the offer you had made a few years earlier. Are you happy with the price that you finally paid?

ÁAL: I don’t usually make decisions based on my emotions, so the term ‘happy’ does not define the nature of the transaction. I do think it was a fair price and both parties considered it to be a win-win deal. 

OPI: You have a licensing agreement for the Office Depot brand name. Does Office Depot have a lot of brand equity in your markets, or could you envisage a rebranding to a more ‘local’ name?

ÁAL: We have built the brand for over 20 years and it’s become more valuable year after year. This branding didn’t come from efforts made by the parent company in the US, so we are proud of what we have done so far, and we are planning to keep doing it.

OPI: What contact or cooperation do you still have with the Office Depot parent company in the US?

ÁAL: IT and branding are the most obvious areas of cooperation.

OPI: What has been your strategy since taking full ownership of Office Depot de Mexico in 2013? 

ÁAL: Our strategy hasn’t changed at all; we have visualised a growing company since day one. There are two ways of growing: by acquiring already established businesses and by attracting more customers – we are focused on doing both.

OPI: You’ve made some acquisitions recently, both in Mexico and in other markets. What is your external growth strategy going forward and which markets are you looking at strengthening or entering?

ÁAL: Right now, our focus is on consolidating businesses and creating synergies between companies and countries. 

Every market represents a different challenge and we have to make sure we understand the particular characteristics of each one to generate the most value we can. 

OPI: Let’s talk about your retail operations. How many Office Depot stores do you have in Mexico and in other countries?

ÁAL: Mexico, of course, is our biggest market and we have 265 stores here. Then we have a combined total of almost 50 stores in our other markets, including 12 in Colombia, nine in Guatemala and six in Costa Rica.

OPI: How big is a typical Office Depot store, on average?

ÁAL: The average size is 1,200 sq m (12,000 sq ft), with our largest stores about 1,600 sq m and our smallest stores 200 sq m.

OPI: We’ve seen office supply retailers facing numerous challenges in the past few years, closing or downsizing stores, and changing their product assortment. What challenges are you facing in Mexico at retail level?

ÁAL: The most important thing is that we need to stay attractive and relevant to customers. We need to hear them permanently and see what they want. Improvements we have made include constantly updating our assortment, merchandising product in an attractive way in stores, running appealing promotions, training our great staff, and generally providing a pleasant shopping experience. 

OPI: What opportunities do you still see to increase your market share in the retail channel?

ÁAL: Positioning the stores as a one-stop shop for everything you need for the office – tech included – is one of them.

OPI: Who are your main competitors? 

ÁAL: We compete with many different formats: specialists, department and convenience stores and, of course, online stores – we are all trying to make customers develop a certain loyalty to our concepts.

OPI: Our readers will be familiar with OfficeMax – is that your main rival? How do you try and differentiate Office Depot from that particular competitor?

ÁAL: We do not focus on any specific store or format. Our customers are used to buying in many different types of stores, online and offline, local or international. They are not loyal to only one store or marketplace, they are loyal to the concept that satisfies their needs and that best understands those particular needs.

We are specialists around life at school and in the office and we do the best we can in those areas. At the end of the day customers always recognise a passion for service. Another area where we have done an outstanding job is in human resources and by hiring and retaining talent. People join us and they stay. In fact, we are number nine in Mexico among the top companies that people want to work for. This is the first step in the whole circle and I am really proud of the whole team. 

OPI: To what extent is the online channel becoming more important in Mexico (and your other markets)?

ÁAL: Online is growing in Latin America at double-digit rates. Nevertheless, several studies have revealed that many Mexicans still mostly buy through traditional channels and through  ‘mom and pop’ stores.

OPI: What investments have you made in your e-commerce capabilities? 

ÁAL: I’m sorry, that is classified information.

OPI: Is omnichannel something that is important to develop, such as order online and pick up in-store?

ÁAL: Omnichannel is quite important, and I am certain that we have only reached ‘the tip of the iceberg’ right now. The near future will give us a much clearer idea of what omnichannel and the exploitation of big data really is.

OPI: What investments have you already made in this area?

ÁAL: We have created a new department in the company dedicated to e-commerce, and, of course, have made huge investments in IT.

OPI: How important is the back-to-school period for you?

ÁAL: It’s the most important season.

OPI: So how successful was the most recent BTS season?

ÁAL: It was a good season. Our product assortment was a great driver – the stores looked colourful and were well stocked.

OPI: Where is your B2B focus: SMBs, government/public sector, large corporate accounts, etc?

ÁAL: The main focus is SMBs, generally ranging from 10-100 employees.

OPI: You don’t do any business with the public sector or large corporate accounts?

ÁAL: Yes, we do, but in Mexico nine out of ten businesses are SMBs.

OPI: How big is your B2B sales team?

ÁAL: About 250 sales executives.

OPI: Is it a traditional model with sales reps on the road visiting clients?

ÁAL: That is correct.

OPI: To what extent is the one-stop shop concept present in Mexico, and how are you expanding into other categories such as breakroom, cleaning, safety, etc?

ÁAL: We see specialist stores being created in Mexico. People value time – it’s a non-renewable resource – and especially in big cities customers like it when a store fulfils all their needs. We are growing cleaning, breakroom and safety in both space in the stores and in SKU count. Our strategy is to continue stocking everything an office and a school need, and (of course) what office employees and students require so we can offer a one-stop shop for productivity.

OPI: Does this mean that you are reducing shelf space of some of the more traditional products?

ÁAL: Not really. Office and school supplies have not had significant shelf changes in the past 20 years. It is mostly technology that has evolved over time.

OPI: How has the overall office supplies market been performing in Mexico?

ÁAL: It keeps on growing; a large proportion of the population is teens or young adults, and in general they tend to consume more than kids. 

OPI: Are there any particular challenges the market is going through?

ÁAL: In some products and categories piracy can become a problem. We do our best to offer a good price-quality ratio. We communicate to our customers the true value of buying original products and how it affects the virtuous circle. Another issue is that Mexico is quite a big country and logistics are still challenging for retail chains.

OPI: What about the secular declines we are seeing in many markets, resulting in the demand for traditional office products falling. How is this phenomenon affecting the Mexican market?

ÁAL: In general, those trends have not yet been reflected in Mexico. In some cases, when technology has caused a true substitution of a product line, some categories have been affected, such as paper trays or large filing drawers.

OPI: Why was the RadioShack acquisition done through Office Depot de Mexico and not as a standalone transaction through the Gigante group?

ÁAL: Mainly because we are able to generate the best synergies in areas such as IT, warehousing, logistics, marketing and, in particular, merchandising where we share some product categories.

OPI: Do you see any synergies directly at store level?

ÁAL: All of the synergies are from the back office. We will maintain the stores as they are now and keep their concepts consistent.

OPI: In some ways, RadioShack and Office Depot compete with each other – so what was the rationale for this acquisition?

ÁAL: RadioShack is more focused on entertainment while Office Depot concentrates on productivity. Office Depot sells predominantly on weekdays while RadioShack performs best during the weekend, so we don’t really see the two brands competing head on.

OPI: Where do you want to take Office Depot de Mexico over the next five years?

ÁAL: We want to double the size of the company in that time.

OPI: And how do you envisage achieving that goal?

ÁAL: By further consolidating, maximising opportunities, creating synergies and continually delivering a great experience to the customer. 

OPI: And where do you see yourself in five years’ time?

ÁAL: I see myself listening to my team trying to find a way to keep the company growing more.