Staples, OfficeMax Gird for Back-to-School Slump

Sector Lays on Coupons, Deals to Coax Parents Into Opening Wallets

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NEW YORK (AdAge.com) -- The back-to-school season is important for any retailer. For office-supply specialists, it's absolutely critical.

With fewer key selling periods (spiral notebooks aren't exactly hot holiday gifts) Staples, OfficeMax and Office Depot are particularly dependent on the eight-week period that lasts from late July through September.

Bob Thacker, senior VP-marketing, OfficeMax
Bob Thacker, senior VP-marketing, OfficeMax
"It's our Christmas," said Bob Thacker, senior VP-marketing at OfficeMax, and so far it's not shaping up to be a jolly one. "It looks like a lot of kids are going back to school with last year's backpacks and worn-down pencils."

The slowdown in consumer spending has hit all retailers hard, with August marking the 12th straight month of same-store-sales declines. But the office-supply category is particularly vulnerable, analysts say, making the coming weeks that much more critical, leading the major category players to pull out all the stops with aggressive pricing, inventive cross-promotions and stepped-up marketing.

"It's a heavily commoditized category. If you can be a low-cost provider, you'll pick up some traffic,"said R.J. Hottovy, an analyst with Morningstar. Mass merchants such as Walmart and Target have also become more competitive in the space, as have dollar stores like Dollar Tree and Dollar General and even drugstores like Walgreens. Specialized tools on school supply lists are also more easily found elsewhere.

Rolling up their sleeves
The National Retail Federation is projecting sales of school supplies will fall 21% to $2.6 billion. Among the back-to-college crowd, sales are expected to drop 17% to $3 billion, while the number of shoppers visiting office-supply stores is expected to drop 5%.

Mindful of that, retailers are hammering home value messages and getting creative with their marketing efforts.

"Last year we had hot deals, but we weren't as direct and forthcoming about talking about savings. This year we really went out with a strong statement," said Christine Mallon, VP-retail marketing at Staples.

Staples lowered prices on 250 core back-to-school items, Ms. Mallon said, and it's also stepped up its charity campaign, Do Something 101, partnering with Ciara and "Twilight" star Chaske Spencer. Its popular commercial, "The Most Wonderful Time of the Year" has also been revived after 15 years, and new seasonal TV spots have been airing regularly.

"We're more visible than we were last year," said Ms. Mallon. "Everybody is doing what they can to get sales."

Staples' two main competitors, Office Depot and Office Max, have also been aggressively touting low prices, and both have partnered with footwear retailers to cross-promote their wares. Customers shopping at Office Depot receive a 20%-off coupon for Foot Locker, while those shopping at Foot Locker receive a coupon good for $10 off a $30 purchase at Office Depot. At OfficeMax, customers receive a coupon for $5 off a $25 purchase at Payless ShoeSource. And Payless shoppers receive a coupon for $10 off a $30 purchase at OfficeMax.

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