Office Depot To Launch VAR Channel To Sell CompuCom, Business Services To SMB Customers

Office Depot is tasking former Verizon channel chief Janet Schijns with building out an indirect channel to sell services from newly acquired CompuCom to SMB customers.

Boca Raton, Fla.-based Office Depot plans to leverage value-added resellers to accelerate CompuCom's transition from servicing the enterprise market to focusing on the small- and midsize- business segment, according to Office Depot CEO Gerry Smith. The company announced the closing Thursday of its $940 million acquisition of Charlotte, N.C.-based solution provider CompuCom.

"Building out the value-added reseller indirect channels hasn't been done in this [office supplies] industry before," said Smith, who spent 11 years at Lenovo before joining Office Depot in February. "With Janet's background and my background, building this capability is extremely important."

[RELATED: 8 Financial Takeaways From Office Depot's 8-K SEC Filing After $1B Bid For CompuCom]

Schijns joined Office Depot in July as senior vice president of services, copy, print and tech following seven years in Verizon's indirect sales unit, including two as channel chief. Smith praised Schijns' ability to successfully drive customer growth and revenue in the Basking Ridge, N.J.-based carrier's enterprise, commercial and government channels.

The enterprise market CompuCom historically participated in has experienced declines due to the increased role of automation, said Smith. CompuCom, however, was faring better than the market as a whole due to its investments in automation and artificial intelligence, he added.

But the real growth opportunities within the $25 billion IT services market lie in the SMB space, which Smith said CompuCom has been attempting to break into since former Lenovo executive Dan Stone became CompuCom's CEO in November 2016. CompuCom was enjoying some early success in the SMB space with offerings such as its new Tech-Zone walk-up IT services and tech support center.

However, Smith said that CompuCom just didn't have the customer reach that Office Depot enjoys, especially as the vendor builds out a VAR channel targeted at businesses with fewer than 50 employees. The VAR channel will be tasked with capturing share in a highly fragmented sector where small, local providers make up roughly 75 percent of the market today, according to Stone.

"They have services, and we have reach," Smith told Wall Street analysts during the company's third-quarter earnings call Thursday. "We're customer-rich, and they're services-rich. And we really think that when you put the two teams together, one plus one is really going to equal three."

An indirect salesforce also limits Office Depot's cost exposure since compensation is entirely variable-based, Smith said, meaning that VARs only get paid if they sell the vendor's products and services. Smith said Office Depot hopes to achieve the top position in the IT services market through consolidation, innovation, scale and reach.

"Giving them that capability to sell CompuCom, sell BizBox, [and] sell our copy and print we already have today in a bundle for small and medium business … gets me even more excited," Smith said.

BizBox is a business services platform launched this week by Office Depot for startups and small-business leaders. The core offering includes website hosting and design; digital and social marketing; asset management; finance and accounting; customer relationship management; human resources and payroll support; and technical support services provided by CompuCom, Smith said.

"Starting and managing small businesses is time-consuming and can be overwhelming," Smith said. "Business owners are looking for a single, convenient platform to access fundamental services necessary to start, manage and take care of their business."

BizBox will be provided as a monthly subscription, which Smith said aligns with Office Depot's strategy of building new, recurring revenue services across the company. And the flexible platform will enable Office Depot to add additional services to the BizBox portfolio in the months and years ahead.

Office Depot's sales for the third quarter ended Sept. 30 fell to $2.62 billion, down 8 percent from $2.84 billion the year prior. That edged out Seeking Alpha projections of $2.61 billion.

Net income decreased to $92 million, or 17 cents per share, down 52 percent from $193 million, or 35 cents per share, last year. On a non-GAAP basis, net income from continuing operations dipped to $74 million, or 14 cents per share, down 17 percent from $89 million, or 16 cents per share, the year prior. This was in line with Seeking Alpha's expectations.

Office Depot's stock was up 11 cents, or 3.65 percent, to $3.12 in trading midday Thursday. Earnings were announced before the market opened.

For all of 2017, Office Depot expects total company sales to be lower than 2016 sales due to the impact of planned store closures, prior-year contract customer losses, continued challenging market conditions, and hurricane impacts.

However, for the quarter ending Dec. 31, the rate of sales decline is expected to improve thanks to new customer wins, customer retention efforts and growth from strategic business initiatives, the company said.