Sales focus firmly on asia

Office Depot, the US-based global supplier of office products and services, is focusing on supporting sales growth in Asia to compensate for a sluggish home market caused by the financial and economic turmoil in the United States.

Nath Vongpanich, managing director of Office Club (Thai), the licensed operator of Office Depot stores in Thailand, said the licensor is providing greater support in terms of product development and expansion, know-how in direct-selling, Internet site and e-procurement, as well as in logistics.

"We have been visited by our licensor, Office Depot, led by the vice president of the international division, twice so far this year. This is quite active compared to the previous years when only one visit was made annually by the licensor," he said.

Office Depot's regional operator for product sourcing and development is based in China.

"We have received greater support from our licensor as they want to generate higher income from Asia in order to compensate for a big fall in the US market," said Nath.

Office Depot operates in 48 countries throughout North America, Latin America, Europe and Asia. This is through wholly owned entities, majority-owned businesses or other ventures in 38 countries, and through alliances in 10 others.

In Asia, Office Depot acquired a controlling interest in Best Office in South Korea and a majority stake in AsiaEC - one of the largest suppliers of office products and services in China - in 2006.

The company also participates under licensing and merchandise arrangements in South Korea and Thailand.

Office Depot's global sales in the third quarter decreased 7 per cent to US$3.7 billion (Bt129 billion). The company reported a net loss of $7 million, compared to earnings of $117 million in the same period last year.

Third-quarter sales in the North American Retail Division were $1.6 billion, down 11 per cent from a year earlier. Comparable-store sales in the 1,203 outlets in the US and Canada that have been opened for more than one year decreased 14 per cent.

The North American Retail Division had an operating profit of $12 million for the third quarter, a year-on-year decline from $80 million.

The company continues to be affected by weakening business conditions in North America. Although it appears that the decline in the sales rate in California has been consistent over the past few quarters, Florida and the other markets in which the company operates experienced a steeper fall.

Nath said that in Thailand the company expected its sales in the first three quarters of the year to grow by between 11 and 12 per cent. Office supplies, which contribute the highest portion, or 38 per cent of sales, posted satisfactory growth of 18 per cent during the period.

"We expect our sales to reach Bt2.7 billion in total this year. We also aim to grow 15 per cent to Bt3.06 billion next year," he added.

Nath said growth in the overall office-supplies market in Thailand is projected to slow to between 7 per cent and 8 per cent this year, down from more than 10 per cent witnessed annually in recent years.

"There are still great business opportunities for office products in Thailand, particularly in some potential channels such as direct selling, which is a new distribution channel to be focused on by the company," he said.

The company operates 34 stores locally following the merger with Office Centre in June. It will open its 35th outlet, at CentralPlaza Chaeng Wattana, this month.

Nath said the company would invest Bt40 million next year on opening a store in Chon Buri and renovating three existing stores. About Bt10 million of this amount will be spent on information technology, including its Internet site and e-procurement system.