Small Office-Supply Retailer Bows to Superstores’ Power
After 35 years, Jim’s Office Center is reluctantly going out of business, unable to staunch a steady defection of clients to the Staples and Office Depot stores that opened within a half-mile of the retailer.
Business slowed, then trickled to a near standstill, when the two industry giants landed in the neighborhood in 1988 and 1991, respectively.
“We started to call customers to see why they hadn’t purchased anything lately and they said they could get their stock cheaper over at the superstores,” said Jim Hannifin, 67, who owns the store with his wife, Yolanda, 66.
In its heyday, Jim’s employed 25 workers, booked 1,400 charge accounts and took in annual revenues that topped $2.5 million. By 1994, six years after the first megastore moved in, Hannifin stopped taking a salary. In 1996, sales dipped to $900,000 and only 10 employees remained.
The Hannifins borrowed against their 12,000-square-foot Calabasas home in an attempt to save their store, but then were unable to meet their monthly mortgage payments. They ended up selling the residence and moved into a modest 1,200-square-foot condominium in Oxnard.
“We kept trying to reduce our overhead to minimize losses, but in the end we just couldn’t compete with their advertising machine,” said Hannifin. “Finally, we had to bow out.”
Together, the three industry leaders--Staples, Office Depot and Office Max--spend more than $120 million annually on print, radio and television advertising, according to Advertising Age.
Although the big three represent 12% of the $115-billion national office supplies market, in Los Angeles the figure shoots up to 20% and in Orange County, 26%, says Jim Stoeffel, an analyst at Smith Barney in New York. Los Angeles is one of the few markets that contains all three players.
Today, Jim’s is in the midst of a massive going-out-of-business sale. Fluorescent blue, green and pink stickers mark price reductions of up to 80% on everything from designer halogen desk lamps and linen writing paper to plastic school binders and scads of No. 2 pencils. Even the display cases are for sale.
The Hannifins insist that the widespread belief that superstores offer the lowest prices in office merchandise is a myth. To strengthen their bargaining position with manufacturers, they joined Office Network Inc., an Alabama-based buying group of 200 small retailers that pools its members’ orders to obtain lower prices on supplies.
The group publishes a glossy catalog of 2,000 items that are distributed through local dealers and purchases about $140 million in office products annually, according to Pete Sloan, the organization’s marketing director.
He insisted that Office Network can compete head-to-head with the big boys on price. Furthermore, smaller retailers offer more intangible benefits such as personalized service, hard-to-find merchandise and product expertise, Sloan said.
“What the small guy has to offer is knowledge,” said Sloan. “They are much more able to help a customer than a worker in a superstore who is hired right off the street.” A survey of the group’s members revealed that employees of independent retailers had between five and seven years’ experience in the office supply industry, he added.
Paul Orloff, a business consultant who is helping the Hannifins liquidate their merchandise, agreed.
“You can walk in looking for a pencil and they’ll advise you on what color to buy, how to sharpen it, how to hold it in your hand. . . . that’s their job,” said Orloff. “I guess the general public isn’t willing to pay for the service of small business anymore.”
If this trend continues, the corner stationer may soon become a nostalgic relic of American history.
“Staples is growing its revenues at 30% a year in a market that is growing at 8% a year,” said Smith Barney’s Stoeffel. “They are obviously taking market share from someone. There’s no way a buying group can compete.”
Between 1985, when the first Staples was incorporated in Massachusetts, and 1996, the number of independent retailers plummeted from 12,000 to 6,000, according to the Business Products Industry Assn., a Washington, D.C.-based trade group.
The statistics don’t reflect the personal dramas played out behind them, stories of family-owned business that have been community landmarks for decades and are replaced by slick chain stores that generate billions of dollars for out-of-state corporations.
Advising companies on how to go out of business gracefully is a tough job.
“People get very emotionally tied to their inventories. They’ve spent their life serving the community and then they lose their assets, their business, their livelihood. I see it all the time,” Orloff said.
As smaller outfits fade away, so will many unique products that are not offered at superstores, said Yolanda Hannifin.
“The superstores are wagging the manufacturer’s tail,” said Hannifin. “Manufacturers have dropped a lot of specialty products because they are slow sellers.”
On a recent afternoon, shoppers hurriedly picked their way through the store, some inadvertently spilling merchandise to the floor in their rush to get the most bargain for their bucks. Everything must go by Aug. 15.
In an upstairs office, the Hannifins reflected on the demise of the business they started together more than three decades ago as a way to spend more time with their three small daughters, who played in the store while their parents tended clients. They met in a statistics class at USC and both graduated with engineering degrees. Then they married, moved to the Valley and worked in the aerospace industry before turning to retailing.
Now they are hesitantly planning their retirement.
Jim Hannifin looks forward to a slower pace.
“I’m going to golf,” he says with a dismissive shrug.
Yolanda Hannifin plans to try her hand at writing children’s books with the help of one of her daughters, who is an illustrator.
