Office Depot Inc (ODP) and OfficeMax Incorporated (OMX) are Tying the Knot

Industrial Trends and Why This Deal Shouts “Run” Long Term

As previously noted, OfficeMax and Office Depot have suffered declining sales since the global recession and are struggling to generate a 3% profit margin, compared with a margin of 8% or more at Staples.

The office retailing sector is facing many attacks on several fronts.  Online retailers like Amazon as well as big retailers like Costco are invading the office supply market’s turf – and are pretty successful in doing so.

Amazon has exploded in exponential growth over the past few years because the company has effectively tapped into the growing online retailing business.  Costco has been able to grow because of its fairly simple business model and vast variety of products that the company’s large warehouse stores offer.  Office Depot, Office Max, and Staples are comparatively undiversified.  Amazon and Costco have massive empires relying on several different sectors.  Office supply stores rely on more outdated models of revenue generation.

Conclusion

The new marriage between Office Depot and Office Max does make smart business sense.  However, with the ever-increasing acceptance of online sales and big box retailers, the traditional brick-and-mortar chains of both Staples and the merged Office Depot/Office Max company will most likely struggle to grow significantly for the long term.

The article Office Depot and Office Max are Tying the Knot originally appeared on Fool.com and is written by Evan Buck.

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