Merger speculation hits the office supply segment

A financial analyst who covers the specialty retail industry is talking up the benefits of an acquisition of Office Depot by Staples. (This follows the recent merger of Office Depot and Office Max.) There are arguments to be made for and against, and I discuss the issue in a recent RetailWire comment:

A merger of Staples and Office Depot would provide economies of scale in a mature business, although it would be under the same regulatory microscope as any pending merger of dollar stores. The bigger issue for Staples — whether or not it acquires its top competitor — is the rapid change in big box specialty stores, driven by more online competition like Amazon.

But the office supply store has unique challenges as a result of technology. Consumers simply aren’t using PC’s and laptops as much, and likewise the market for printers, paper and ink is shrinking. Staples (and Office Depot) ought to be accelerating its small-format and cloud service businesses, because the decline of the big box format is tough to reverse.

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