In a surprise move, $14.4 billion office products conglomerate Office Depot on Sept. 12 said it planned to close the domestic operations of its Viking Office Products business and merge it into its Office Depot operations by early 2006.
The Delray Beach, FL-based cataloger/retailer, which acquired Viking in June 1998 for $3 billion, mails an estimated 296 million catalogs under the Office Depot, Viking, Tech Depot, and Guilbert brands. Last year its direct sales reached $4.0 billion. Office Depot said it has no plans to consolidate the Viking and Office Depot brands in Europe.
In a Securities and Exchange Commission filing, Office Depot said the distinction between its Office Depot and Viking catalog offerings “has become less clear to consumers.” Office Depot spokesperson Brian Levine says there is about 80% product overlap between the two brands.
“The Viking customer is a ‘higher touch’ customer,” Levine says, requiring more in the way of personalized attention from call center reps. As such, Office Depot spends more money servicing the Viking customer than the Office Depot customer. On the other hand, Viking customers spend more than Office Depot customers, says Levine.
Office Depot contends that it will spend less money transitioning Viking customers to the Office Depot brand than it would in continuing to operate Viking. The company will close two warehouses and an undisclosed number of call centers. Its associated charges will total about $19.3 million.
While the move will eventually improve Office Depot’s bottom line, it should also help solidify the Office Depot brand, says David Solomon, managing director and head of the New York office of investment bank Goldsmith Agio Helms. “The two brands weren’t reinforcing each other in the marketplace,” he says, “and in the end resulted in a divided marketing budget.”
Launched in 1960, Viking began mailing catalogs in 1984. It became renowned for competing on service rather than price, thanks largely to Irwin Helford, who took over as president in 1983 and ran the company until 1999. The strategy ensured loyal customers and helped Viking succeed in many international markets.
Because of Viking’s sterling reputation, some believe folding the brand is the wrong move. “The bean-counting approach will not work here,” says Mark Amtower, a Highland, MD-based consultant specializing in businesses-to-government marketing. “Office Depot is making a quantum leap in thinking they are going to migrate a significant number of buyers.” Amtower estimates that Office Depot could lose up to 40% of the Viking business. “The attrition rate is going to be a lot higher than their model says it is.”
But some folks in the industry are happy to bid farewell to Viking: its competitors. Shortly after the announcement, Lincolnshire, IL-based Quill, part of Framingham, MA-based office products conglomerate Staples, posted a banner on its home page proclaiming “Welcome Viking Customers.” A “Join the Family” link highlighted Quill’s selection, service, and satisfaction guarantee.