BUSINESS
06/28/2012 12:30 pm ET Updated Jun 28, 2012

Like Their First Backer, Mitt Romney, Office Supply Stores Fight Boring Image

In 2010, when Jessica Mickey was laid off from her job as a technical writer, she headed to her local Staples in Charleston, S.C., to make herself feel better.

"You think that there's something there that's going to help you organize your life. But the store is so depressing," said the 33-year-old photo editor. "It's bleak and everything's fluorescently lit and there's never anyone in there. It's completely soul crushing."

Back when Mitt Romney worked at Bain Capital, gargantuan warehouse-like office-supply stores seemed like a hot idea. In 1986, the young consultant helped Boston-based Staples open its first store with an initial $650,000 loan. The concept worked: Soon, Staples inspired an epidemic of office supply stores with identical concrete floors, florescent strips of lights and big crates stacked to the ceiling that seized strip malls across America.

Today, presidential candidate Romney credits himself and his team at Bain Capital with "helping start [Staples] from the ground up" and touts the company's 90,000 some jobs as one of his biggest business successes. But office supply retailers are in desperate need of a makeover. At a time when paper has become passé, day planners have been replaced by iPads and computers are cheaper online, chains like Office Depot and Staples are downsizing stores and experimenting with new products to stay afloat.

Mickey hoped that the high-quality resumé paper she found on her trip to Staples would help her secure work. "I sent out hundreds of resumés within that year. But it's the one that I sent digitally that ultimately got me a job," she said.

Numbers reflect the changing tides. At Staples, the biggest and best-performing office supply chain, sales at stores open at least a year have been roughly flat for the past two years. Office Depot, though, has not reported positive sales growth at its stores open at least a year since the end of 2006. In 2009, the company closed 121 stores.

Now, these companies are downsizing their fleets of stores. Staples announced a plan in June 2011 to shrink the size of its new locations about 11 percent and focus on selling more tablets. Office Depot, though, is pursuing a more a drastic makeover. Over the next decade, the company will remodel and shrink all its 1,123 stores. Its new prototype store, measuring a cozy 5,000 square feet, is about a fifth of the size of one of its current big boxes. OfficeMax began testing small concept stores, dubbed Ink Paper Scissors, in 2008.

Shoppers prefer a convenient selection of fewer products, according to Kevin Peters, Office Depot's president of North America. "Smaller will be better," he said on a recent tour of one of the company's new small stores in downtown Hoboken, N.J.

Peters, who took over as president in 2010, is redesigning stores to be less cluttered and retraining all employees in customer service and product knowledge. "We had become stale and boring," he said. "When people walked in the door they had to look around to see whether they were in Staples, OfficeMax or Office Depot."

Office Depot says that so far, its renovated smaller stores average 90 percent of the sales previously reported for the big boxes, even though they are stocking only half the merchandise. The stores have retained all of their employees, about 18 on average.

But costly renovations don't make dated products any more relevant, according to Oliver Wintermantel, analyst at ISI Group. "Physical media is going away. Data saved on CD-ROMs is now on thumb drives. Software is going digital," he said. For those office supplies that aren't obsolete, shoppers are increasingly turning to places like Walmart and Amazon.com, he said.

Mickey put it more bluntly: "Why am I going to go out of my way to buy office supplies if on Amazon I can just tack things onto my order of '50 Shades of Grey'?"

The digital world is not all bad news for office suppliers. Staples is currently the second largest online retailer in the world after Amazon.com because of bulk sales to businesses, which occur online. Office Depot and OfficeMax also sell products on the wholesale market, which makes up about half of company sales for each, according to Wintermantel. But none of this has provided a solution to the challenge of getting regular people to shop at office supply stores, he said.

"Smaller stores are a good strategy," he said. "Unfortunately it's too little, too late."

Best Buy is also hoping new small-format Mobile stores will save it from the big-box graveyard where Borders and Circuit City now lie. The chain has been handicapped by shoppers who test products in stores only to order them online later, a practice industry insiders call "showrooming." In April, Best Buy announced it would close 50 stores by the end of this year.

For office-supply stores, there is also the problem of blah branding. For years, Office Depot and OfficeMax had nearly identical logos: a generic typewriter font spelling out the companies' names. In 2007, OfficeMax updated its logo to include a colorful ball of rubber bands.

Staples has historically paid the most attention to branding, concocting unique, trademarked products like the Better Binder and the MailMate paper shredder. The store sold 1 million Easy Buttons, a novelty toy that barks the company's slogan "that was easy" when pressed, in the first year the product was released.

But like its competitors, Staples has also failed so far to secure merchandise from one of the best brands: Apple. "[Steve Jobs] won't take my call," CEO Ron Sargent told analysts at a conference in June 2011. Though Staples sells Apple products at its Canadian stores, it has been unable persuade the company to become a partner in the United States.

Office Depot's Peters hopes his company will one day become more like Apple, offering a memorable store experience and exciting products, he said. "We're looking at handful of people who did a really good job with intimate customer experiences like Anthropologie, Williams-Sonoma, Pottery Barn," he said. "It's not going to be a light switch."

But Office Depot's grand rebranding might have more standing in its way than a boring logo. Demand for office supplies is closely linked to the job market and the extent to which companies hire white-collar employees -- which is not very high right now, considering the 8.1 percent unemployment rate. Unless Mitt Romney manages to deliver on his promise of Staples-honed job-creation should he land in the White House, it is unlikely more people will be rushing to buy the store's 50-pack of employment application forms ($31.49 online) anytime soon.

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