Friday, June 06, 2003

American office superstores invade Europe Office Depot, the second leading American and world office supplies retailer ($11.3 billion in 2002), recently purchased Guilbert S.A., the leading office supplies retailer in Europe. Like its new parent company, Guilbert sells standard office supplies, computer products, and office furniture. Guilbert is a major force in the UK and France, and also sells in four other European countries. Its 2002 gross revenues were 1.7 billion dollars. In 2002, Staples, which is the world's largest office supplies company, bought Guilbert's mail order business. Staples had been slightly larger, with $11.5 billion of revenue in 2003, but Office Depot will leapfrog past with the new acquisition. Staples and Office Depot go head-to-head across North America, and are starting to compete strongly in Europe, where Staples is opening stores in several countries. Staples, Office Depot, and OfficeMax ($4.7 billion in 2003) are the "big three" of retail office superstores. But there is a lot of growth potential. The overall market in the US is estimated as over $300 billion), while the European market is well over ($100 billion). But in direct retail these companies have only one real rival, Wal-Mart, which sells more office supplies than the two leading superstores combined. Given their relatively small position in the overall market, some observers were surprise In 1997, the Federal Trade Commission in the U.S. denied a bid for Office Depot and Staples to merge, even when the stores offered to sell over 50 stores to OfficeMax. The case hinged on what constitutes the market segment in which a trust is being defined. As one writer puts it, "the biggest battle in antitrust merger cases is always over market definition, with the government arguing for a restrictive decision and the firms arguing for a broader definition." The question is whether to judge these two companies in the whole world of office supplies, or narrowly in the category of office superstores, where they are together dominant. It would be interesting to see what would happen now, with a Republican-controlled FTC. In any case, both of these companies seek to increase in market share, however you define the market, and gain the added power from being a dominant power. 6:53:16 PM

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