Opinion: Staples' decline shows office supply needs more operational support

As we move towards an increasingly digitalised world, this decline is arguably inevitable.

Demand for stationery, particularly in the office, has decreased as the need for ink, toner, paper and other physical supplies is steadily replaced by digital methods of communication and handheld devices.

Alongside this, buyer behaviour is undeniably changing, with fewer consumers looking to purchase goods from physical store locations.

In the old economy, large stationers such as Staples established retail outlets as a route to market for business-to-business customers.

Declining footfall 

In the digital economy, business customers are increasingly online which has resulted in a significant decrease in footfall in retail outlets.

Staples’ UK arm, for example, reported pre-tax losses of more than £5m in the year to January 2015, down £2.1m from the prior year, but saw significantly better results on its online platform.

There are notable exceptions to this pattern of course, including the high street, luxury retailer Paperchase.

The brand has a significant and growing high street presence, comprised of 160 stores and concessions in the UK, and is rumoured to be considering a stock market float.

While this could be viewed as contradictory, the key differentiator is that Paperchase’s high end, fashion-focused product range targets a business-to-consumer market that the likes of Staples, which focuses on more cost-effective, practical goods, does not capture.

Private equity interest

The apparent struggles of the UK office supply space have garnered significant levels of interest from private equity investors this year.

This is particularly true of those able to deliver the significant operational re-engineering that is required to cope with the market changes highlighted.

There is clearly a continued attraction to stationery from the consumer that is being driven by new, innovative entrants

Hilco’s acquisition of Staples UK is just one of a number of deals to have been done in this space recently.

This includes the acquisitions of OfficeTeam and Office2Office by turnaround funds Better Capital and Endless respectively, as well as the acquisition of Office Depot Europe by our company, Aurelius, in September this year.

These examples demonstrate the increasing need for more hands on, operational support within the industry.

This ensures these businesses are able to survive within the current market conditions and adapt to the changing landscape and consumer spending patterns.

Office supply in 2017

While the ongoing digitalisation of the sector will continue to disrupt the UK retail scene, there is clearly a continued attraction to stationery from the consumer that is being driven by new, innovative entrants such as Australian brand Smiggle, and digital platforms like Amazon.

It will be imperative for the more traditional UK stationery businesses to adapt and innovate to survive.

• Tristan Nagler is managing director of investment firm Aurelius in the UK