Office Depot Hopes Its Green Initiative Counters Staples' Red
What's Office Depot (ODP) doing launching a costly green initiative just as it posts a $71 million annual loss? Maybe, saving the company by differentiating its brand. At the very least, the office-supply chain should see reduced energy costs that could help its bottom line.
Just a few days before reporting that its sales sank 16 percent last year, Office Depot announced it would seek LEED (Leadership in Energy and Environmental Development) certification for all 14 planned new Office Depot stores starting in June. LEED is the industry standard for buildings that are energy-efficient and use renewable, nontoxic materials. The stores will have large skylights, more energy-efficient lighting and a reflective roof, among other features.
Having reaped "impressive energy and monetary savings" at the company's first LEED-certified store in Austin, opened in 2008, the chain is ready to roll out the initiative as it opens stores. The company doesn't mention that it'll certainly cost more in the short-term to put up green buildings -- but it's a smart move because it should pay off in long-term operating savings. The energy-efficient lighting alone should cut 30 percent from the store's light bill, probably more as the skylights installed throughout the stores will cut the need for lightbulbs as well.
The payoffs could extend beyond lower energy costs. Office Depot could use its LEED program to market itself as a vendor for socially conscious businesses. The green position could also be a good differentiator as Office Depot tries to survive against sector leader Staples (SPLS), which is exactly twice Office Depot's size and made a hefty 2009 profit.
Long considered an also-ran in the sector along with OfficeMax (OMS), Office Depot needs to work hard to distinguish itself in what has become a commodity business sector. Green could help Office Depot offer consumers a distinct alternative to Staples' with its ubiquitous red "Easy" buttons. Here's an idea: take the green initiative further and rebrand the company's stale red-lettered logo to green, to communicate how the company is focusing on environmental initiatives.
Retail consultant Burt Flickinger III has said he expects a sector shakeout in a year or two as underperforming malls hit the end of their leases and shut down. Worst-case scenario, if Office Depot does end up a victim of consolidation down the road, it'll at least have a stronger asset portfolio with state-of-the-art, energy efficient facilities to sell off.
Store photo via Flickr user hattiesburgmemory; Easy button by Flickr user Jason Gulledge