Differentiation: superstores carve clear identities in order to survive shakeout threat - office supplies warehouse stores; includes related articles - Home Office Merchandising

Discount Store News, Jan 8, 1990 by Pete Hisey

DIFFERENTIATION

Superstores carve clear identities in order to survive shakeout threat

Office products superstores are sweeping the country, but storm clouds are forming on the horizon. The very growth that has taken the industry from infancy only two years ago to becoming a highly aggressive player in the retail market has inevitably brought major players into head-to-head competition.

To survive the expected shakeout, office supply chains are struggling to differentiate themselves from one another.

That's because, from initial results, head-to-head competition is not good news for the chains in this business.

Unlike apparel off-pricers, discount stores, and other product categories like home fashions, office products discounters don't create any synergy when they cluster together. Since most carry roughly the same merchandise, the only motivation for a consumer to comparison shop is price. And nothing will shake an industry out faster than a good old-fashioned price war, like the ones brewing in several markets nationwide.

Staples, more or less the grand-daddy in a three-year-old industry, will find itself competing head-to-head in Baltimore with newcomer Office Stop later this year, and in the Tampa/St. Petersburg market, another "venerable" retailer, Office Depot, has moved in on WORK-place, which has opened five stores in the market over the past year.

While there is some competition in other major markets, like Denver, San Francisco, Philadelphia and some others, the Tampa market may be a harbinger of things to come. War has been declared in this Gulf Coast Florida city. After challenging WORKplace in Tampa proper, Office Depot opened a unit in nearby Branden less than a block from a recently opened WORKplace outlet. Then, it plastered the unit (and its own catalog) with large signs claiming that it beats WORKplace prices by at least 15 percent.

WORKplace responded with aggressive local advertising featuring slick color presentation and some eye-popping prices on office electronics, prestige gift items and a few staples.

But according to Steve Westerfield, president of WORKplace, price alone will not be enough in the long run. "We're differentiating ourselves by offering products and services our competition doesn't," he said. A few examples: an executive gift department, a full-service business services and print shop section, flashy color advertising, free gifts to members, seasonal goods and more.

The most visible difference may be the company's approach to store design. Most office supply stores (including Office Depot) borrow heavily from membership wholesale club prototypes, with warehouse-like shelving, unadorned or even cement flooring, very little service, and a bare-bones approach to decor.

WORKplace, on the other hand, takes its direction from consumer electronics superstores. Westerfield, former president of the nation's No. 3 CE chain, Silo, brought many of that industry's approaches to WORKplace.

"At Silo, one of our fastest growing areas was home office electronics," he noted. "So here at WORKplace, we're making a commitment to computers, software, fax machines, and other electronics."

The stores feature a clean, race-track-type layout, extra lighting, and wider aisles.

"I'll compare our stores to any great retailer in the U.S.," Westerfield said. "Other chains aim at the small office user, but we're aiming just as much at the home office user and even the casual consumer; the woman who wants to buy a deluxe set of crayons for her children, for instance."

In keeping with the consumer approach, WORKplace also offers more merchandise than the average superstore. At 9,000 sku's, the chain has roughly 25 percent more items than most of its competitors, although many of the surplus sku's are found in the leased Egg-head department.

And, as the company builds larger stores (present models are about 30,000 square feet, newer ones due this spring will approach 50,000 square feet), certain areas will be expanded. Print shops will grow (and become two-level, to highlight on-site capabilities), RTA furniture will nearly double and office electronics will also increase in square footage, to about 6,000 square feet.

WORKplace is also establishing itself as a service oriented outlet. "The walk-in customer is very important to us," Westerfield said. "We try to turn them into core customers." To maximize that traffic, WORKplace consciously places itself in close proximity to superstores in other product areas, like Circuit City and Sports Authority.

Westerfield claimed that Office Depot has not hurt WORKplace's business. "After they opened in Tampa, our business went up 60 percent," he said. However, that may be due as much to consumers discovering the concept as to anything else.

"Florida is an ideal market for this concept," Westerfield said. "With advances in technology, a lot of people are relocating here and working out of their homes. For instance, there are a lot of stockbrokers in the area--through phone lines, they can be as efficient as they would be in New York."