Staples expanding in-store marketing

Staples has signed a deal with News America Marketing to put a greater focus on in-store marketing:

Through the partnership, announced this month, News America will design coupon machines, shelf messaging, floor ads and sampling programs in more than 1,500 Staples stores nationwide. The in-store media will launch next month.

The deal is an expansion into a new market for News America, which has been concentrated almost entirely on the food and drug channels. News America notes, though, that they have working relationships with many of Staples' suppliers.

This is another example of the growing intrusion of CPG marketing practices into other channels. In early 2007, I posted an item titled HP goes CPG that involved, by coincidence, Staples:

Hewlett-Packard is employing tactics from the world of consumer packaged goods, demonstrating once again something I (and others) have been noting for a while – the growing convergence of the two wings of trade promotion in consumer products, CPG and consumer durables.

BusinessWeek reported recently that HP is making payments to retailers to get them to stop selling private label cartridges for HP printers:

Those executives say the company has approached chain stores that sell store-brand cartridges compatible with its printers and offered them incentives if they end the practice.

Staples is offered as an example. The article goes on to raise questions about the legality of the practice, which is of interest, of course. But I was more struck by how HP, an iconic company in the high-tech arena, is using a marketing tactic more identified with the selling of canned peas.

This is not necessarily because CPG has the better set of tactics (a strong case could be made for the contrary), but because the nature of trade promo has always been driven by the nature of the channel, and the durables channels today are becoming more similar to the mass, grocery and drug channels. As retail concentration increases, therefore, we will likely see more coupon dispensers and floor ads in unexpected places.

On a somewhat related note, Brandweek had an article entitled "OgilvyAction's Roth Explains Shopper Marketing", which I read eagerly in the hopes of having Shopper Marketing explained to me (heck, I'd settle for having it clearly defined). I was, alas, disappointed, although some good examples were cited. Interesting, though, how much interest ad agencies are showing now in in-store marketing. Do you think it might be related to declining revenues from traditional media?

SEC closes OfficeMax investigation

The day after I posted the item below, concerning possible vendor allowance problems at Office Depot, the two-year-old SEC investigation of OfficeMax finally ended, with no action against the company, which had cooperated with the Commission and fired six people who were involved in the alleged falsification of documentation.

The Naperville, Ill.-based company had launched an internal review in December 2004 after receiving claims from a vendor alleging that OfficeMax employees requested inappropriate promotional payments and falsified supporting documentation.

The internal investigation was conducted under the direction of the company's audit committee and was completed in March 2005. Six employees were fired in connection with the probe.

In June 2005, the SEC started its investigation, with which the company cooperated. OfficeMax said Thursday in an SEC filing that it was notified last month that the agency had completed the investigation.

Office Depot: more vendor allowance problems

Office Depot announced last week that it was delaying its Q3 report because of an internal investigation of possible problems in accounting for vendor allowances.

Office Depot Inc. on Monday delayed its third-quarter earnings report due to its audit committee's independent review of vendor program funds, a development that one analyst said raised questions about the nation's second-largest office supplies retailer's financial statements.

Its shares fell more than 14 percent.

The review primarily relates to the timing of the recognition of certain funds, the Delray Beach-based company said. Office Depot had been scheduled to release its third-quarter results Tuesday; a new date wasn't released.

Numerous other retailers have had similar problems in the recent past, including competitor Office Max. In fact, it's amusing to note that such problems are so common that the AP article I linked quotes an analyst as minimizing the impact on the basis of "what the heck, they all do it" (or something like that:

Lehman Brothers analyst Brad Thomas stressed that it was too early to tell how this affects Office Depot, but he said delays related to the timing of reporting vendor funds happen rather often in the retail industry. Suppliers enter into agreements with retailers for rebates and advertising allowances, which companies must account for.

"This often has been a one-time issue rather than something that impacts growth rate and cash flow," Thomas said.

The legal vultures took note quickly, and several shareholder lawsuits have already been filed.

OfficeMax eliminating rebates

OfficeMax says it will eliminate mail-in rebates. I predicted when Best Buy announced last year that they were phasing out rebates that others would feel the pressure to join in.

It's a major customer satisfaction issue -- rebates annoy the consumer.

The decision was the culmination of almost uniformly negative feedback regarding the lengthy and often-frustrating process of mailing in a rebate form and proof of purchase, followed by weeks of waiting for a check, a company spokesman said on Friday.

"Rebates were the No. 1 customer complaint we were getting," said Ryan Vero, OfficeMax's chief merchandising officer.

More downsizing: Office Max

In line with the Toys R Us post below, Office Max has also announced that they are slimming down. The #3 office supply chain will close 110 of its 950 locations.

Being #3 is a bad position to be in these days.

Thursday Update: Yesterday's link included a sentence saying, "Its largest shareholder, K Capital Partners LLC, demanded in November that the board of directors take immediate steps to improve its "dismal" financial and operating performance."

Now, K Capital has asked in a filing with the SEC that the company be sold:

"We believe the best path forward for your shareholders is obvious," K Capital said in a letter on Tuesday and included in Wednesday's filing. "Why should a company's shareholders have to run a proxy contest to convince its board to do the right thing?"

Stockholders upset with Office Max

It's never a good day when your largest stockholder says, "It's rare to see a turnaround plan so horribly botched."

That's what the Chicago Tribune reports about Office Max. The article is interesting, but I think the telling point for Office Max is that they are a poor #3 in their category, with both Staples and Office Depot 50% or more ahead of them (both are around $14b-15b in sales, with Max at $9b). I've been coming to the conclusion that there's no room for a #3 anymore, except maybe if you can define a niche for yourself. Each category will soon have two players, and possibly just one plus Wal-Mart.