Office supply company Office Depot gave the world a look at its first co-working space in Los Gatos, California. The concept is built inside one of its supply stores and will be part of its larger effort to offer business services, including tech support and self-service printing services in many of its locations.
Office Depot boasts about 1,400 stores, 29 million active customers and, according to the CEO Gerry Smith, “5.9 million small and medium businesses that are within a three-mile radius of our stores.” They co-working offering is part of a larger initiative that Smith says: “is also focused on creating a powerful omnichannel business services company. […] services have several attractive characteristics as they are generally reoccurring, sticky and carry substantially higher margins than our traditional product offerings.
He sees this push into services as synergistic with the retail side of the business that they are traditionally known for:
“The diversification underway in our business does not mean that we’re deemphasizing our retail operations. In fact, I continue to view our retail footprint as a very important component of our omnichannel platform and it is one of our key assets that differentiates us versus online or distribution only competitors.”
Since Office Depot has a lot to gain from their product sales due to their relationships with service customers they are able to offer agreeable terms to acquire them such as a daily rate of $40. Offering a day rate like this would likely not be possible for other coworking companies like WeWork since their model requires an ongoing subscription to keep their revenue steady.
Office Depot has faired extremely well compared to other retailers that occupy large “big box” stores in retail centers away from dense urban areas. This is partially due to their “buy online, pick up in store” strategy that can allow their enterprise customers to complete large purchases with very little downtime and no shipping costs.
Even still, they likely have many stores with lots of showroom space that give very little ROI. It is this space that Office Depot plans on converting into service centers to bring in a reliable new revenue stream and increase their relationship with their small and medium business retail customers.
One of the things that Office Depot lacks, compared to co-working competitors like WeWork, is cool. Having a place to work inside of a large office supply store is nowhere near as prestigious as a hip, downtown WeWork location. But, as a office supply warehouser knows better than anyone, for a lot of businesses price and convenience are the main purchasing considerations. They are betting that if they are able to make a more affordable and flexible offering they can find a lot of clients who are willing to give up cool and work from inside an office supply store.