Despite heightened competition from discount stores, renewed spending will boost demand
Los Angeles, CA (PRWEB) September 11, 2012
The Office Supply Stores industry has fought through tough conditions in the five years to 2012. Over this period, revenue is expected to decline at an average annual rate of 3.6% to $20.8 billion, despite moderate growth of 1.6% expected in 2012. According to IBISWorld industry analyst Dale Schmidt, “during the recession, weak consumer confidence, low disposable income and poor corporate profit have deterred households and businesses from making discretionary purchases, including upgrading and replenishing office supplies.” Furthermore, encroaching competition from discount stores, warehouse clubs, supercenters and e-commerce websites have increasingly taken customers away from the industry by offering convenience and low prices. This competitive pressure has hurt industry profitability; as industry operators lowered their markups to remain afloat, average profit margins dropped to about 1.4% of revenue in 2012, from about 2.2% in 2007.
Falling sales during the recession have also brought about some changes in the industry's operating landscape. Prior to the economic downturn, big-box stores like Staples, Office Depot and OfficeMax quickly gained a substantial share of the market by leveraging their large size and national buying power. When sales volumes dropped, however, these larger players quickly realized that the big-box format led to higher operating costs. Also, the need for large real estate hindered them from entering densely populated urban markets, depriving them of potential sales. In response, Staples and Office Depot reduced the size of their storefronts to achieve higher space utilization and lower costs. Furthermore, “these larger stores have increasingly focused on their online operations to generate additional sales,” says Schmidt. While the Office Supply Store industry remains concentrated at the top, the remainder of the industry is highly fragmented; a substantial number of operators in this industry are nonemployers, which are stores without hired employees.
In the five years to 2012, industry concentration has been on the rise, primarily due to heightened external competition. Other retail industries, including discount stores, warehouse clubs, supercenters and e-commerce websites, have increasingly eroded sales away from office supply stores by providing convenient shopping experiences as well as low prices. This trend has caused under-performing operators to consolidate or exit the industry, leading to an overall decline in the total number of enterprises.
The Office Supplies Stores industry's outlook is slightly better than the past five years, with revenue forecast to increase marginally in the five years to 2017. Armed with higher disposable income and corporate profit, households and businesses are expected to increase spending on office supplies and equipment that they delayed buying during the recession. Competition is projected to stay high during this period, though, keeping the number of new entrants to a minimum. Over the five-year period, the number of enterprises is forecast to remain stagnant. For more information, visit IBISWorld’s Office Supply Stores in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes stores that primarily sell stationery, school supplies and office supplies. Stores may also sell a combination of new computers, office equipment, furniture and supplies. This industry does not include general merchandisers or electronic retailers.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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