The Operational Excellence Tools Series | #20: Office Depot and the $1 Billion Turning Point.

Restructuring to get back on track, with lessons from the Operational Excellence lens.

Welcome to the unique weekend article for the Loyal Fan subscribers-only edition.

This is the #20 article of The Operational Excellence Tools Series.

Outlines and Key Takeaways

Part 1 – Office Depot: From Icon to Crisis

Part 2 – The $1 Billion Turning Point: Strategic Restructuring

Part 3 – Five Advanced Operational Excellence Tools to “Dissect” Office Depot

Part 4 – Lessons for Any Business: The 90-Day Action List

Part 1 – Office Depot: From Icon to Crisis

The golden age of American office supplies

Office Depot (ODP) was founded in 1986 in Florida, USA. In less than a decade, the company rose to become one of the largest office supply retail chains in the world, competing directly with Staples. By the late 1990s, Office Depot’s annual revenue exceeded USD 10 billion and continued to grow (ODP Historical Annual Reports).

Between 2005 and 2010, the company reached its peak: revenue in 2010 was about USD 17.5 billion with more than 1,600 stores across North America (ODP Annual Report 2010). Put simply: if an office in America needed paper, staples, pens, or swivel chairs – Office Depot was almost the number one choice.

The Amazon shock and shifting shopping habits

But starting in the late 2000s, e-commerce – especially Amazon – completely changed the game. Both corporate and individual customers quickly realized they could buy the same products online, at cheaper prices, and delivered to their doorstep.

According to a Deloitte report (2019), Amazon captured nearly 50% of the U.S. e-commerce market, causing traditional retail chains, including Office Depot, to steadily lose ground. While Amazon heavily invested in logistics and demand-forecasting technology, Office Depot was still burdened with its traditional store model and high operating costs.

COVID-19: The Fatal Punch

If Amazon was the first “push”, the COVID-19 pandemic was the knockout. As millions of people switched to remote work, demand for traditional office supplies plummeted.

In its 2023 Annual Report, ODP Corporation said its net revenue was only about $8.5 billion, down nearly half from $17.5 billion in 2010. The company also confirmed that it had to close more than 400 stores within 5 years to cut costs (ODP Annual Report 2023).

CNBC (2024) commented: “Office Depot is facing a life-or-death problem. If it does not transform, it risks becoming the next Sears – a retail icon that has failed to adapt in time.”

Why the $1 billion turning point?

Under pressure from the crisis, ODP Corporation – the parent company of Office Depot – announced a massive restructuring plan worth $1 billion (Bloomberg, 2024). The goal is no longer to maintain the old model, but to redefine the business: from a chain of stationery stores to an operating partner for businesses.