Office superstore expansion in high gear

Discount Store News, Oct 20, 1997

NATIONWIDE DSN REPORT -- The grand opening of an office supplies superstore is nearly becoming a daily occurrence thanks to the ramped-up expansion plans of the big three office product superstore chains.

Staples, OfficeMax and Office Depot opened a total of 121 new stores during the first half of the fiscal year, and during the last half another 189 new stores are planned. Many of the new units yet to open this year belong to OfficeMax. The chain is on track to open a total of 150 stores this year with between 30 and 35 stores opening during the third quarter and another 55 to 60 units opening during the fourth quarter. Roughly 70% of those stores will be open by Thanksgiving to take advantage of the holiday season. The chain will end the year with a total of 714 stores, and spokesman Mike Weisbarth said, "We are on target to do that."

OfficeMax opened 57 stores during the first half of the year as part of an expansion plan that was accelerated after the proposed Office Depot/Staples merger was announced roughly a year ago. Even though that deal fell through, OfficeMax hasn't slowed the growth of its store base. In 1998, another 120 to 150 OfficeMax stores are on the drawing board, which would leave the chain with approximately 850 stores by year-end 1998.

Not far behind OfficeMax in terms of total openings planned for this year is Staples. The chain opened 70 stores during the first six months and has 60 planned for the second half of the year for a total of 130. OfficeMax may have opened more stores this year, but Staples has indicated it will one-up its rival next year with 150 openings. Staples is expected to end 1998 with a total of 837 stores, just a dozen units shy of OfficeMax's 850 stores.

Despite Office Depot's failed merger with Staples and the departure of personnel from its real estate department, Office Depot still managed to open four stores during the second quarter. Another 36 stores are planned during the last half of the year, with most of the openings taking place during the fourth quarter. Office Depot expects to resume an even more aggressive expansion next year with 80 to 100 stores due to open. The chain's chairman and ceo, addressing shareholders at its recent annual meeting, said its store expansion plan is on track as well as 120 store renovations. If Office Depot opens a full 100 stores, it will end 1998 with approximately 710 stores.

While the 1997 opening schedule for the three chains may seem aggressive with 320 planned stores, store counts really ratchet up in 1998 and 1999 when combined new store openings increase to a projected 350 units annually. It's growth accelerated in part by a belief among the retailers and investment analysts that the U.S. marketplace will only support a limited number of office product superstores.

The exact number is subject to some debate, however estimates range from a low of 2,700 to as many as 3,500 stores. The three chains ended 1996 with a total of about 1,700 stores. Add to that amount the 320 store opening in 1997 and the approximately 700 stores scheduled to open during 1998 and 1999, and at the end of the millennium there will be an estimated 2,700 superstores.

"There will be close to 3,000 stores in North America before the market is saturated," Staples ceo Tom Stemberg wrote roughly a year ago in his book, "Staples for Success."

OfficeMax chairman and ceo Michael Feuer noted, "The one thing Tom Stemberg, David Fuente (Office Depot chairman and ceo) and I agree on is the number of stores is much greater than we ever thought."

With continued expansion of the small business and home office marketplace and consolidation among those serving it, today's saturation estimates may once again prove to be on the low side.