Heightened competition from discount stores will temper the industry's postrecession recovery
Los Angeles, CA (PRWEB) February 01, 2013
The Office Supply Stores industry has fought through tough conditions in the five years to 2013, with revenue expected to decline at an average annual rate of 1.2%, despite the moderate 2.2% growth expected in 2013 to total $21.2 billion. Weak consumer confidence, low disposable income and poor corporate profit deterred households and businesses from making discretionary purchases during the recession, causing office-supply demand to fall substantially over the period. Furthermore, according to IBISWorld industry analyst Dale Schmidt, “encroaching competition from discount stores, warehouse clubs, supercenters and e-commerce websites have increasingly taken customers away by offering convenience and low prices.” This competitive pressure has led to falling profitability; as industry operators lowered their markups to remain afloat, average profit margins have dropped substantially from 2008 levels.
Falling sales during the recession have also brought about some changes in the industry's landscape. Prior to the economic downturn, big-box stores like Staples, Office Depot and OfficeMax rapidly gained a large share of the market by leveraging their large size and national buying power. However, when sales volumes dropped, 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,” says Schmidt. In response, Staples and Office Depot reduced the size of their storefronts to achieve higher space utilization and lower costs. Nonetheless, the Office Supply Stores industry remains highly concentrated, especially as increased external competition squeezes smaller companies out of the industry or forces them to consolidate with the major industry players.
Though revenue is still expected to decline overall, the Office Supplies Stores industry's outlook is slightly better than the past five years. Armed with higher disposable income and corporate profit, households and businesses are expected to increase spending on office supplies and equipment that they delayed during the recession. However, competition is projected to stay high during this period, keeping the number of new entrants to a minimum. Over the five-year period, the number of enterprises is forecast to continue decreasing as companies consolidate or exit the industry. 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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