Office Depot and e-commerce giant Alibaba.com announced Monday they would create an online store to extend their reach to small businesses in the U.S.
The partnership could help the Boca Raton, Fla., office supply retailer better compete with Amazon, which also has been targeting small business customers.
The new online site is alibaba.com/officedepot, which will provide U.S. businesses opportunities to sell their products worldwide, the companies said. Alibaba customers will get exclusive and discount deals from Office Depot.
China-based Alibaba, which has a global network of 150,000 suppliers, connects businesses to other businesses. A small business in the U.S., for example, could find a manufacturer in Asia, for a part it needs or sell its goods to other companies worldwide.
In an interview Monday, CEO Gerry Smith said access to Alibaba's suppliers will help Office Depot's small business customers save money and time.
Smith said he began talking with Alibaba about a possible partnership in May, when he launched Office Depot's new strategy focusing on business, by offering new services through its stores and online.
"This is a great move for both companies," Smith said. "I've very optimistic this is going to help us grow over time." Smith said he expects to generate more sales by expanding Office Depot's online customer base with Alibaba.
John Caplan, head of North America business-to-business for Alibaba Group, said the e-commerce partnership is the first for Alibaba with a U.S. retailer, which the Chinese company sees as a "trusted brand."
A prime benefit for Alibaba will be the ability to ship goods faster to U.S. customers through Office Depot's fleet of trucks. "We don't have a local delivery platform in the U.S.," Caplan said.
One analyst said she expects Alibaba to be the "prime beneficiary" from the new partnership.
Camilla Yanushevsky, analyst at CFRA Research in New York, said she expects Office Depot to continue to struggle for growth in business-to-business sales, as well as face intensifying retail competition from Amazon and Staples, which is poised to merge with Illinois-based office supplier Essendant.
Small-to-medium businesses are core customers for Office Depot. But it was its contract business with large businesses that was the key to the Federal Trade Commission's 2016 blocking of a planned merger between Office Depot and Massachusetts-based Staples.
The federal agency argued in U.S. District Court that the merger would lead to higher prices and lower quality of service for large businesses that buy office supplies. Office Depot and Staples claimed that Amazon was scaling up its corporate supply business at a rapid pace. Office Depot and Staples ultimately called off the $6.3 billion merger in May 2016.
In a filing with U.S. Securities and Exchange Commission on Friday, Office Depot notes that both the company and Alibaba have the right to end the collaboration after 125 days.
Office Depot, which has 1,350 stores around the country, said it has more than 10 million business customers. Smith has said he views the stores as an asset to build relationships with small-to-medium-sized businesses, noting a 24 percent increase in "buy-online, pick-up-in-store" sales during Office Depot's fourth quarter.
Smith also has been adding business services, particularly in 2017 through the $1 billion acquisition of CompuCom, which provides IT services to business.
Alibaba.com is part of the Chinese online retail giant the Alibaba Group. The company reported 2018 revenue of $39.9 billion.
Office Depot had an increase of 8 percent in 2018 revenue, even though store sales declined by 6 percent. The company reported a 2018 profit of $99 million, or 18 cents a share, compared to $146 million, or 27 cents a share, in 2017.
Visit the Sun Sentinel (Fort Lauderdale, Fla.) at www.sun-sentinel.com