Office Depot and Walmart are leveraging some new B2B and B2C strategies to try and turn the tables on Amazon
I recently wrote about Home Depot’s moves to penetrate more into the B2B distribution space (Home Depot’s acquisition of HD Supply will accelerate the blurring of the B2B and B2C lines for Distributors). Two other retailers are also making some interesting moves that caught my eye as they compete against Amazon that may have additional ramifications in B2B and B2C market. First, Office Depot has been making significant investments to transform how they go market looking to position itself as a broader B2B player and then Walmart is piloting automated fulfillment centers at their store locations to support the increase in growth of ecommerce ordering by customers with plans to roll-out hundreds of these centers in the next few years. These two retailers continue to leverage technology, their store footprint and supply chain capabilities to take advantage of the changing buying habits of B2B and B2C customers and look to capture more of the market. With Amazon quickly approaching $400 billion in annual sales and Amazon Business surpassing $25 billion in sales annually more retailers and other alternative business models are sure to follow.
Office Depot signaled this broader strategy last year with the reorganization of its business units under the newly formed company called ODP Corporation. Notice the removal of the reference to “office”. This rebranding allows them to expand into adjacent product categories and business services in the broader B2B market. ODP also recently rejected a buyout offer from Staples. This was the third time that Staples and Office Depot have attempted to merge in some fashion. The first two attempts were negated by regulatory anti-competitive concerns. Ironically with the all the changes in how B2B and B2C customers buy office supplies and the overall office supply market, this combination probably wouldn’t have concerned regulators now. This time it is because ODP is bullish on their bigger plans to continue to transform from a legacy office supplies retailer and business services provider with a strategic focus on the larger and faster growing B2B marketplace.
They have made several moves and investments to accelerate this strategy. They acquired BuyerQuest, an eProcurement platform, to obtain more of the procurement capabilities necessary for B2B buyers and hired a couple of executives who spearheaded the launch of Amazon Business to fast-track the new digital business platform into this more wide-ranging market. ODP has also partnered with Microsoft to leverage Azure for cloud operations and will make available the ODP platform to Microsoft’s Dynamics 365 Business Central customers.
Note, even with all the efforts into this digital initiative, this is not a “burn the ships” strategy. With a fleet of more than a 1,000 vehicles, a large distribution footprint and established supplier relationships, it positions ODP to leverage significant parts of their seemingly outdated business model with their digital platform to their competitive advantage.
WalMart is running a similar play as Home Depot and Office Depot to combine their physical assets and digital platform to satisfy the changing buying behaviors of consumers and take on Amazon. With ecommerce orders surging during the pandemic, Walmart stores have turned into a distribution center of sorts with workers running around the store picking and packing online orders for customers to pick up curbside or have delivered to their homes. The surging number of online orders doesn’t seem like it will subside to pre-pandemic levels even when things begin to get back to normal. With this new reality setting in for all retailers, Walmart is looking at how to full-fill these orders more efficiently.
Walmart has been automating its distribution centers over the last few years and can see the benefits. So even before the pandemic with ecommerce orders already growing, Walmart was experimenting with how to bring those automation capabilities to its stores to provide for a more efficient and predictable cost structure for fulfilling these orders. They are now looking at expanding those efforts to more and more stores. The plan is to build automated fulfillment centers, “mini distribution centers”, connected to their stores that can leverage robotics and automation to speed up the picking and packing process for online orders. These centers would stock the most popular online order items and rely on the instore stock for items it may not stock in the fulfillment center to complete an order. In their pilot they were able to full-fill orders 10 times faster, going form 100 orders a day to 1,000. This provides Walmart with more of a fixed cost structure and customers with more rapid reliable fulfillment of their orders. With that kind of speed, this channel may become a even more popular channel,
Similar to Home Depot … in this new digital world, Office Depot and Walmart are using their traditional business model with all of its physical assets (stores, distribution centers, delivery trucks, sales people) to their competitive advantage to meet the requirements of today’s B2B and B2C customers and turn the tables on Amazon.