RETAIL SPECIAL.... GLOBAL STATIONERY CHAINS SHIFT FOCUS TO OFFICE SUPPLIES

GLOBAL STATIONERY CHAINS SHIFT FOCUS TO OFFICE SUPPLIES 
 

Office Depot, Staples Concede Fight to Kiranas, Pack Up Retail Plans

    The legions of tiny neighbourhood stores selling pencils, staplers and other stationery may be oblivious to it, but they are forcing multinational stationery retailers that have ventured into the country to shut shops, sell out or change strategies.
Reliance Retail is folding up all four retail stores of American office supply chain Office Depot, while Staples Inc is in the process of selling most of its 49% stake in its cash-andcarry joint venture with Future Group.
Prior to that, a third US stationery retailer, Office 1 Superstore International shut its India franchisee operations run by New Delhibased Indo Rama Group. In 2008, Indo Rama had said it planned to open about 200 Office 1 Superstore stores by 2011.
“The business model was not scalable,” said an executive at Reliance Retail, which has a wholesale joint venture with Office Depot. “Consumers won’t walk into high street stationery shops to buy a few pencils. It’s not worth our while,” the person added.
Reliance Retail did not respond to an email questionnaire sent on Saturday till late on Monday.
A spokesperson of Future Group said, “At this point in time we will not be able to comment on our discussions with Staples.”
Experts say India’s . 10,000-crore consumer stationery market is ruled by tiny stationers in crowded neighbourhood bazaars, and consumers don’t seem particularly keen to buy stationeries from branded stores in malls. “The customers orientation in India is rather to go to a nearby local stationery store,” Balkrishan Ladha, former national lead for retail at Staples Future Office Products, said. Even most small to mid-level offices generally purchase office products through local dealers who supply those products at the doorsteps of offices, he said.
Abhishek Malhotra, a partner with consulting firm Booz & Co, said the stationery retail category is too small to scale up. “In a neighbourhood market if you find 20 grocery stores, you will only find one stationery store. So the category per se is minuscule and it’s a tough market for global retailers to break into,” he said.
Another challenge for big retailers, he said, is that office products manufacturers too are a fragmented lot in the country. “If you buy shampoo or soap you go to the P&G or Hindustan Unilever and extract maximum margins but here you don’t have that advantage because of the fragmented nature of the manufacturers,” Malhotra said.
All this is making global players change their India strategy.
Staples, which reported $25-billion (approx . 1,35,000 crore) revenues in 2012, will sell a significant part of its share in its wholesale joint venture to partner Future Group.
A person close to the development said the US firm will remain invested in the venture with a minuscule stake.
The Kishore Biyani-owned firm — which operates Staples retail outlets through a franchisee deal as multi-brand retailers were not allowed to sell directly to consumers — is unable to make much headway in consumer retailing.
“Brick-and-mortar stores catering to consumers contribute less than 10% revenue even after several years of operations,” the person said, adding that the company will not expand much on retailing and will focus on selling to corporations and other institutions.
Reliance Retail, which opened all its four Office Depot stores in Bangalore, has already closed three of them and is currently in the process of closing the last one.
A person close to the company said the joint venture, Office Depot Reliance, will only sell through online and other institutional channels, but they will not maintain consumer store presence in India. At the time of its India entry through an equal joint venture with Reliance Retail in 2008, Office Depot termed India as one of the top 15 office products markets in the world. But Office Depot stores could not make a mark in the consumer stationery market.

RASUL BAILAY ET130319