Staples and OXO: Poor Timing or Strategic Boon?

The recession could challenge Staples' pricey new co-branded products from OXO, but the partnership may also set the retail chain apart

By Reena Jana

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How's this for bad timing? Staples (SPLS) just introduced 25 co-branded office products from OXO Good Grips that cost up to five times more than Staples' own brand. The retailer's customers are in no mood to spend, however. Staples' same-store sales dropped 8% in North America in its most recent quarter. As Ronald L. Sargent, its chairman and chief executive officer noted recently, the chain is "in a very tough sales environment."

Andrew Schneider, Staples' director of global brand management, concedes that the premium line fit better with consumer sentiment in 2007, when the company first approached OXO about a license and design deal. "It's not ideal launching in a sluggish vs. a strong economy," he says. But he says early indications are the new staplers, scissors, push-pin containers, and such are selling.

The exclusive arrangement may yield strategic gains as well, differentiating Staples from its main rivals: Office Depot (ODP), OfficeMax (OMX), and Wal-Mart Stores (WMT).

The Staples-OXO partnership is something more: It shows how companies can collaborate for mutual benefit and how to do that cheaply and quickly. As the recession forces businesses to reevaluate their priorities and spending, the development of the office products line could become a model for others.

OXO's Cult-Like Following

Staples began looking for new products that would draw customers to its 2,200 stores and Web site three years ago. Step 1 was internal research into brands that had hugely loyal fans. OXO was an obvious candidate, says Schneider, thanks to the cult-like following of its kitchen and household devices that are known for their ergonomic design. Staples also knew OXO's appeal from the OXO Good Grips products it carried, such as a $29.99 roller mop.

OXO's reaction? It snubbed the Framingham (Mass.)-based chain. "We didn't want to become the Pierre Cardin of the housewares or office-supply industries," explains OXO Chief Executive Alex Lee, referring to the fashion designer whose brand lost cachet in the 1970s and 1980s after allowing too many department stores to flood the market with licensed apparel.

Staples didn't give up. Its representatives showed Lee and his lieutenants a Staples in-house invention to prove the two companies were kindred spirits. The product was the "Better Binder," which allows users to open its rings with a one-finger mechanism vs. the traditional two-hand motion. The trigger made it possible for the very young or old or people with disabilities to use it. Lee reconsidered.

There were bottom-line considerations, too. Staples claims to have invented the office-products superstore in 1986 and today is the sector's leader with 2008 sales of $23.1 billion. A partnership would expose the OXO brand to a larger audience in a new category, giving the company, a 50-employee unit of Helen of Troy, a maker of personal-care products based in El Paso, Tex., potential for expansion.

Learning from "Pain Points"

OXO's long record of product innovation helped speed things along. Designers from Staples and OXO followed OXO's well-tested process of learning from user complaints. They gathered comments from reviews on staples.com on traditional hole punchers, pens, rulers, and other everyday desk items to see "people's 'pain points' when using office products," says Schneider.

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