February 20, 2013

Office Depot / OfficeMax Merger

By now, you've heard that Office Depot and OfficeMax are merging (click here).

This raises so many interesting questions about the future of retail.

On one end of the spectrum, we have experts who tell us how retail and e-commerce and mobile all fit together in a wonderful blend called "omnichannel".  These folks paint a bright future, one where modern technology helps retailers (click here for one example).

On the other end of the spectrum are the digital elite.  They tell us that retail is dead (click here).

In-between are the Web 1.0 companies who are branching out into retail ... Google, for instance (click here) ... Microsoft ... and Apple, too.

Who is right?  Everybody!

The omnichannel camp is right to integrate all aspects of retailing.  The omnichannel camp cannot prove that their thesis leads to an increase in sales and profit.  Saying that omnichannel customers spend more is ridiculous ... any customer that does more of anything is more valuable than a customer only buying one time in one channel.

The digital elite are right to suggest that a small decline in retail sales is fatal for most retailers, given the debt load most retailers are saddled with.  But the digital elite fail to account for the reality that retail still drives 90%ish of total commerce ... if e-commerce was so amazing, wouldn't e-commerce represent half of total commerce?  Exactly.

These viewpoints represent "small battles".  Folks love to focus on small battles, because small battles don't have a right or wrong answer.  There's no downside to being on the losing end of a small battle.

Here's the difference between a small battle and a real question.
  • Small Battle Argument:  "Can the combined Office Depot / OfficeMax can beat Staples and Amazon with a comprehensive omnichannel strategy?"
  • Real Question:  "What customer problem does the combined Office Depot / OfficeMax solve better than any other company?"
If you cannot provide a valid answer to the real question, the small battle argument is pointless.

Since it is really hard to answer the real question, we focus on small battles.

In the comments section, try to answer the real question.