THE Rx THAT DELIVERS THE MAX

Discount Store News, Dec 8, 1997 by Mike Troy

The Power Merchants: Jim Mastrian, OfficeMax

Mike Troy

As OfficeMax's new senior executive vp of merchandise/marketing, Jim Mastrian faces a relatively simple challenge: Close the sales gap that exists between OfficeMax and its rival office supplies superstore operators, Office Depot and Staples.

This year OfficeMax surpassed the store count of its two main competitors, but when the fiscal year ends for all three next month, sales at OfficeMax will come up short against the anticipated numbers for Office Depot and Staples. OfficeMax is expected to end this year just shy of the $4 billion mark, compared to Office Depot's annual sales of $6.7 billion and Staples' annual sales of $5.2 billion. Even discounting total revenues from Office Depot's sizable delivery and contract stationer sales and Staples' delivery business, OfficeMax's per store productivity lags behind the competition.

Part of the reason for the performance gap is the chain's immature store base. OfficeMax accelerated its expansion plans last year to take advantage of protracted merger proceedings between Staples and Office Depot. This year, it opened 150 new stores. A more troublesome explanation for the gap, which only time is expected to reveal, is whether OfficeMax's rapid growth has come at the expense of quality real estate. If that's the case, Mastrian's job will be even more difficult.

Either way, it will be up to Mastrian to prove the skeptics wrong, and already a fair number believe he can succeed. When his appointment was announced this past summer, it was hailed as a positive step. Mastrian came to OfficeMax from the Revco drugstore chain where he served as executive vp of marketing. Not only did OfficeMax pick up Mastrian from Revco, the chain also hired former Revco execs John Pollock as divisional vp of merchandising and Paul Grilli as divisional vp of merchandise planning. All three found themselves looking for work after Cleveland-based Revco was acquired earlier this year by the CVS drugstore chain.

'[The addition of Mastrian and others] substantially strengthens OfficeMax's merchandising group and brings all merchandise, marketing and advertising under the direction of a premier merchant with vast experience,' OfficeMax chairman and ceo Michael Feuer said at the time.

Feuer can be expected to say that, but analysts who follow OfficeMax also hailed the move.

'OfficeMax has significantly strengthened its management team with the addition of the senior merchandising talent from Revco,' said Gary Balter, an analyst with Donaldson, Lufkin & Jenrette. 'We expect to see the positive results of that impact beginning in the second half of this year.'

Ursula Moran with Bernstein Research added, 'We are optimistic that the addition of the group of executives who recently joined OfficeMax from Revco is a major step in the right direction.'

Expectations that the strengthened merchandising team headed by Mastrian will be able to boost sales and profits may be high, but how he plans to get it done is still unknown. So far, he has offered no insight into any initiatives he might spearhead at OfficeMax. In addition, he is not well known among the vendor community that serves the office products superstore industry. Nevertheless, the track record he compiled while head of merchandising at Revco says much about the strengths he brings to his new employer and an ability to achieve results.

Mastrian, who has a pharmacy degree, joined Revco in 1990 as vice president and general manager of marketing. It was a crucial time for Revco, as the chain had filed for bankruptcy in 1988 and would not emerge from Chapter 11 protection until 1992. When it did, the company had the systems in place that would allow it to post results that would cause Revco to be regarded as one of the premier operators within the chain drug industry. For several years, Revco posted sales and earnings growth among the highest in its industry, and Mastrian played a key role. Revco posted net earnings growth of 35% on a 14.8% sales gain that pushed the chain over the $5 billion mark during its 1996 fiscal year. Those results and similar ones in previous years were also achieved on a mature store base.

Now, as he prepares to accomplish similar goals at OffficeMax, Mastrian has undoubtedly discovered that drugstores and office products superstores share a few similarities. According to Feuer, margins, product velocity, presentation and customer service are similar at both formats.

'The pharmacy is not much different than CopyMax in that it is an intense customer service business and traffic generator,' Feuer said.

There are also numerous differences, many of which should benefit OfficeMax's new head merchant. For starters, OfficeMax stores, which average about 23,500 sq. ft., are considerably larger than the 10,700-sq.-ft. Revco prototype. Theoretically, Mastrian will have more room with which to experiment with creative, sales-building merchandise presentations, something he was known for while at Revco. Innovation is something else OfficeMax can expect from Mastrian. While at Revco, he helped develop the chain's prototypical freestanding drugstore with angled gondolas and a drive-thru pharmacy window. That was in 1993. Today, every major chain drug operator pursues a similar strategy as they strive to be convenient.