Shift in small business spending may curb Staples-Office Depot growth

Wed Feb 4, 2015 8:28pm EST
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By Nathan Layne and Nandita Bose

(Reuters) - It's the changing spending patterns of small business owners like Thomas Kean that helped prompt Staples Inc (SPLS.O: Quote) to buy Office Depot (ODP.O: Quote). It also may limit their post-merger growth prospects.

Staples announced on Wednesday that it would buy Office Depot for $6.3 billion, combining the top two U.S. retailers of office supplies. The companies said the deal would enable them to better serve customers and make them more competitive on costs..

Kean, the owner of a property broker that employs 10 people in the Chicago suburb of Park Ridge, said he stopped shopping regularly at the nearby Office Depot years ago and only buys from Staples when they advertise a really good deal.

"For normal stuff like paper, pens, folders and ink, I go to Costco and Sam's," Kean said, referring to membership-only bulk seller Costco Wholesale Corp (COST.O: Quote) and its rival Sam's Club, a unit Wal-Mart Stores Inc (WMT.N: Quote).

"I think most small business guys do the same thing."

Office Depot declined to comment for this story. Staples did not immediately respond to a request for comment.

While analysts say the merged firm should be able to keep, or even strengthen, business serving larger firms directly, some warned that stemming the decline in its retail business - which is underpinned by demand from small business owners -- would prove a more difficult task.

Kean was one of 15 small business owners and managers interviewed by Reuters in the town of Park Ridge, all within a short drive of a Staples, Office Depot and Office Max, and the outlets of key competitors Costco, Walmart and Sam's Club.   Continued...

A shopping cart is seen outside a Staples office supplies store in the Chicago suburb of Glenview, Illinois, February 4, 2015. REUTERS/Jim Young