Office Depot amplifies loyalty program, renews competition with Staples

Dive Brief:

Office Depot on Monday announced a a new loyalty program with expanded benefits, dubbed “Office Depot OfficeMax Rewards Everything.” In addition to 2% of spending back in rewards, customers can earn $2 in rewards by posting online product reviews, according to a company press release.
The program is designed to be helpful to anyone, the retailer said in a press release, though it’s also offering a “VIP tier” for higher-spending customers like small businesses that spend at least $500 within a year. VIP members receive free delivery with no minimum purchase, earn 5% back on ink, toner, paper, printing and copying services for 12 months and receive special promotions, a birthday offer and free product samples or services.
The new loyalty program is based on research over the past year, including a year-long pilot in several markets, Office Depot said. There’s no card to keep track of, and the points are integrated into the retailer’s mobile app.

Dive Insight:

After their merger was shot down by antitrust officials, Staples and Office Depot are stoking their competition with new fervor: Each has unloaded overseas operations to focus on North America, each is having to watch out for Amazon's growing effort in the space and each is contending with the other.

That includes Amazon's business-to-business retail efforts, an area thought to be more protected than the retailers’ consumer retail sales, Matt Sargent, senior vice president of retail at Frank N. Magid Associates, told Retail Dive in an email earlier this year.

Office Depot last month announced the launch of its “Taking Care of Business” brand platform, aimed at business and retail consumers alike. New television and radio spots feature a return of the company’s use of the Bachman Turner Overdrive song “Taking Care of Business,” which it also turned to in the 1990 s. The brand reboot follows rival Staples' launch of a new campaign in May aimed at broadening the retailer's customer base.

Staples will be making its changes out of the glare of Wall Street, thanks to a planned acquisition by private equity firm Sycamore Partners. But Office Depot is on its own for now. In its first quarter, profits showed some health thanks to cost cutting and the sales of some stores, but retail sales remain muted: Q1 retail division sales in North America were $1.4 billion from $1.5 billion in the prior-year period, due to the impact of planned store closures over the past twelve months, lower store traffic and a 5% decline in same-store sales. Overall net sales in the quarter fell to $2.68 billion from $2.88 billion, largely due to the loss of business through shuttered stores and the loss of its overseas business, which it sold off last year.

Office Depot's new loyalty effort comes on the heels of research that such programs' payoffs to retailers have fallen off as rewards to customers have declined. Loyalty programs, while still growing, have lost pace since 2015, according to Colloquy’s 2017 Loyalty Census. Although consumer enrollment in loyalty programs has increased to 3.8 billion, up 15% from 2015, growth is slowing, down from 26% in the previous measure. Consumers are most likely to use a loyalty program if it is "easy to use" (57%), followed by, "gives me great discounts" (39%) and “easy to understand" (37%). On the other hand, consumers were most likely to leave a loyalty program if it took too long to see benefits, such as earning miles or points (57%), Colloquy found.