A discussion draft of the Online Sales Tax Simplification Act of 2016 is expected to be introduced in Congress soon.
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Aside from content, part of the preparation period is technical. Although it staffs and buys locally, Office Depot has centralized servers for European e-commerce in Ireland. The servers for Australia and Japan are in a U.S. Office Depot facility on the West Coast. Office Depot choose the U.S. because it is the most cost-effective location and Ireland because of its pro-business government and its strong, educated labor force, Nelson says.
Before launching a site, several technical details must be addressed, such as translating error messages. “Somebody has to go in and say ‘invalid customer number’ in Japanese,” Toews says. Office Depot sets up a test site and a quality team checks the content.
Finally, all the back-end systems are as close to the markets as makes sense. That means placing distribution and call centers where they are needed. The company has 15 warehouses outside the U.S.: the U.K. has three; Australia, Germany, France and Japan have two each; and Ireland, The Netherlands, Belgium and Italy have one each. The company has four other warehouses in Mexico, Poland and Israel that either are joint ventures or franchise agreements.
Office Depot’s approach to warehouse locations makes sense to analysts. “To fully compete, you can’t deliver product from the U.S.,” Zrike says. “You can do a certain amount of your business, such as hard-to-find products, that way. Some consumers are willing to wait longer and pay more to have items delivered from the U.S., but that is a small opportunity.”
So far, Office Depot has been satisfied with its web approach. “The way we structure web sites, we are almost profitable from day one,” Nelson says. Part of the reason is Office Depot does not spend much to advertise its web presence because it gets mileage from cross marketing through its catalogs. This is especially true with the Viking name because of the many catalogs mailed to small businesses. Office Depot does, however, buy premium spots on search engines.
Now with a strong global foothold, Office Depot does not feel bound to the physical presence first, web presence second model. The company plans to open in a new country this fall (but will not say where), and when it does, its web site will launch immediately. “We will have the web site up the day we open,” Nelson says. “It may not be retail in the beginning, but there will certainly be a warehouse and distribution center and an infrastructure.” Simultaneously opening in a country speeds the process of preparing the web, Nelson says. “As we build product content, we’re building it with the thought in mind that we are going to have a web site.”
As these modern-day Sinbads and Columbuses lay claim to new lands, they are learning the importance of letting their roots run deep in new foreign soils.
Staples’, Office Max’s global plans
While Office Depot has the most ambitious plans to go global via the Internet, its major competitors aren’t standing still. Ohio-based Office Max is forgoing Europe in its international movements because it believes the South American and Asian markets are riper. Office Max entered Mexico in 1996 with retail stores, then moved to catalogs and in 1999 launched a retail web site. Its only other international web site (information only) is in Japan. Office Max believes the office supply markets in South America and Asia are comparable to the U.S. 15 years ago-small stores with small product offerings. Although Office Max is looking to bring its increased product offering and customer service to those markets, an international presence remains a low priority.
Framingham, Mass.-based Staples has European stores and in April 2000 opened two Canadian web sites-one in English, the other in French. The company plans to launch an international web site this year, but will not say where. When it does go global, Staples will run its entire back-end operation from its Brussels headquarters, because of its central location and educated work force.
Office Max estimates that all office supplies run from $200 billion to $250 billion per year worldwide, with Office Depot, Staples and Office Max accounting for $25 billion to $30 billion. Office Max also estimates the value of all online sales to be $1.3 billion. Online office supply sales, including procurement orders from government agencies and large corporations will likely increase 4-5% in the next three years, says Duif Calvin, senior retail consultant with Atlanta-based iXL. Online sales to the small-business/home-office market will probably account for 0.5% of the market at that time, she says.