WEBVTT 00:00:00.000 --> 00:00:04.500 Welcome back to the Deep Dive. Okay, I want you 00:00:04.500 --> 00:00:05.960 to do something for me for a second. Just close 00:00:05.960 --> 00:00:08.259 your eyes. I want you to imagine a very specific 00:00:08.259 --> 00:00:12.339 smell. Okay. It's a mix of that dry, conditioned 00:00:12.339 --> 00:00:15.779 air, a little bit of cardboard, and that faint, 00:00:15.880 --> 00:00:19.019 almost sweet scent of thousands of reams of fresh 00:00:19.019 --> 00:00:21.059 printer paper. Mm -hmm. I'm in there. You're 00:00:21.059 --> 00:00:23.120 walking down an aisle. Yeah. Right? And it feels 00:00:23.120 --> 00:00:25.859 like it stretches on for miles. You're surrounded 00:00:25.859 --> 00:00:28.940 by these canyons of binders, ergonomic chairs, 00:00:29.280 --> 00:00:32.520 every kind of pen you can imagine. Gel, ballpoint, 00:00:32.799 --> 00:00:36.100 felt tip. Rollerball, the works. The works. And 00:00:36.100 --> 00:00:38.780 then somewhere in the distance, you see it right 00:00:38.780 --> 00:00:41.280 near the checkout. That big red button. The famous 00:00:41.280 --> 00:00:44.020 easy button. Exactly. The easy button. Yeah. 00:00:44.079 --> 00:00:47.340 Today we are talking about Staples. I can already 00:00:47.340 --> 00:00:49.039 hear you right now. You're probably pausing, 00:00:49.079 --> 00:00:51.159 looking at your phone, thinking Staples, the 00:00:51.159 --> 00:00:53.859 office supply store. The place I go once a year 00:00:53.859 --> 00:00:56.640 to buy. Printer ink and maybe a Snickers? Is 00:00:56.640 --> 00:00:59.119 that really worth a whole deep dive? Right. Is 00:00:59.119 --> 00:01:01.719 it? And I get the skepticism. I really do. It 00:01:01.719 --> 00:01:05.200 sounds so mundane. But if you scratch the surface 00:01:05.200 --> 00:01:08.359 of that red logo, you find one of the most turbulent, 00:01:08.760 --> 00:01:12.000 fascinating, and just really illustrative stories 00:01:12.000 --> 00:01:14.620 in modern American business. It really is. I 00:01:14.620 --> 00:01:17.420 mean, we were talking about a company that started 00:01:17.420 --> 00:01:20.680 because a guy broke his printer ribbon on a holiday 00:01:20.680 --> 00:01:23.799 weekend. Yeah. It grew into this. absolute monster 00:01:23.799 --> 00:01:26.340 that destroyed the local stationery shop, fought 00:01:26.340 --> 00:01:28.260 a 30 -year war with the federal government over 00:01:28.260 --> 00:01:31.040 monopoly laws, got swallowed whole by private 00:01:31.040 --> 00:01:34.739 equity, and is now here in 2026 trying to figure 00:01:34.739 --> 00:01:36.560 out if it's a shipping center, a co -working 00:01:36.560 --> 00:01:39.099 space, or, I don't know, an optometrist's office. 00:01:39.420 --> 00:01:41.459 It's a case study that touches on literally everything. 00:01:41.719 --> 00:01:44.019 If you want to understand the rise of the category 00:01:44.019 --> 00:01:46.879 killer retailer in the 80s and 90s, you study 00:01:46.879 --> 00:01:49.500 Staples. If you want to understand the desperate 00:01:49.500 --> 00:01:51.819 struggle of brick -and -mortar stores against 00:01:51.819 --> 00:01:54.120 Amazon, you study staples. And if you want a 00:01:54.120 --> 00:01:56.400 masterclass in modern financial engineering, 00:01:56.700 --> 00:01:59.000 I mean, how private equity firms extract value 00:01:59.000 --> 00:02:02.319 from these aging giant staples is maybe the perfect 00:02:02.319 --> 00:02:04.819 example. And just to ground us, today is February 00:02:04.819 --> 00:02:09.159 14th, 2026. So happy Valentine's Day to everyone 00:02:09.159 --> 00:02:11.860 listening. I guess nothing really says I love 00:02:11.860 --> 00:02:14.159 you like a bulk pack of manila envelopes. Or 00:02:14.159 --> 00:02:16.719 maybe some 70 % off chocolates from the impulse 00:02:16.719 --> 00:02:19.379 buy rack by the registers. Though, as we're going 00:02:19.379 --> 00:02:21.379 to discuss, those shelves look a lot different 00:02:21.379 --> 00:02:23.740 today than they did even 10 years ago. They certainly 00:02:23.740 --> 00:02:26.419 do. I mean, right now in 2026, Staples is operating 00:02:26.419 --> 00:02:29.580 around 860 stores in the U .S. Plus, they have 00:02:29.580 --> 00:02:32.560 this massive footprint in Canada and a huge B2B, 00:02:32.659 --> 00:02:35.460 a business -to -business delivery network. Right. 00:02:35.639 --> 00:02:38.180 But the road to get here, to quote their own 00:02:38.180 --> 00:02:40.659 marketing, it was anything but easy. Not all. 00:02:40.759 --> 00:02:43.159 We have a huge stack of sources today, company 00:02:43.159 --> 00:02:46.300 histories, FTC legal filings, which are fascinating. 00:02:46.500 --> 00:02:48.520 Rather great. Financial reports from the Sycamore 00:02:48.520 --> 00:02:51.240 Partners acquisition, advertising archives, and 00:02:51.240 --> 00:02:54.419 some really, really eye -opening employee accounts 00:02:54.419 --> 00:02:57.110 with the whole Amazon returns saga. Our mission 00:02:57.110 --> 00:03:00.650 today is to unpack the rise, the fall, and the 00:03:00.650 --> 00:03:03.669 very, very strange reinvention of this retail 00:03:03.669 --> 00:03:06.469 giant. I have to admit, before we dive into the 00:03:06.469 --> 00:03:08.669 heavy business stuff, I have a lot of nostalgia 00:03:08.669 --> 00:03:11.750 for this place. Back to school shopping at Staples 00:03:11.750 --> 00:03:15.030 was like a ritual for me. Oh, for a lot of people. 00:03:15.270 --> 00:03:17.569 Walking in there with your list, picking out 00:03:17.569 --> 00:03:20.090 the perfect planner. color coding your binders. 00:03:20.349 --> 00:03:22.129 It felt like you were getting your life together. 00:03:22.270 --> 00:03:24.430 It was aspirational, you know? It is. It's a 00:03:24.430 --> 00:03:27.289 very common feeling. Stationery has this psychological 00:03:27.289 --> 00:03:29.530 component to it, right? It represents order, 00:03:29.710 --> 00:03:33.409 potential, a clean slate. But the business story 00:03:33.409 --> 00:03:35.530 we're telling today is about what happens when 00:03:35.530 --> 00:03:38.409 that emotional connection runs headfirst into 00:03:38.409 --> 00:03:41.669 the cold reality of the digital age. What happens 00:03:41.669 --> 00:03:44.280 to the store for work? When work goes digital, 00:03:44.460 --> 00:03:47.020 what do you do then? So let's rewind the tape. 00:03:47.060 --> 00:03:49.360 Let's go back to the origin story. The year is 00:03:49.360 --> 00:03:53.159 1985. The hair is big. The music is synthesized. 00:03:53.360 --> 00:03:56.120 And a man named Thomas G. Stemberg is having 00:03:56.120 --> 00:03:58.939 a complete meltdown over Fourth of July weekend. 00:03:59.139 --> 00:04:01.400 This is the founding myth. And it's a great one 00:04:01.400 --> 00:04:03.860 because it's just so relatable. Stemberg was 00:04:03.860 --> 00:04:06.319 a businessman. He was working on a big business 00:04:06.319 --> 00:04:09.099 proposal over the Independence Day holiday. A 00:04:09.099 --> 00:04:11.580 holiday, of course. Always. Always when things 00:04:11.580 --> 00:04:14.099 break. So he's typing away. And you have to remember, 00:04:14.240 --> 00:04:16.959 this is the era of impact printers, the dot matrix 00:04:16.959 --> 00:04:21.360 printers. Sound. Yeah. For our Gen Z listeners, 00:04:21.620 --> 00:04:24.939 a printer ribbon is kind of like, imagine a cassette 00:04:24.939 --> 00:04:27.339 tape, but it's coated in ink. If that thing snaps, 00:04:27.579 --> 00:04:29.699 your machine is just a paperweight. You're dead 00:04:29.699 --> 00:04:31.939 in the water. You can't just download a driver 00:04:31.939 --> 00:04:34.779 update. It's a physical problem. Yeah. So his 00:04:34.779 --> 00:04:37.720 ribbon snaps. Oh, no. So Stemberg needs this 00:04:37.720 --> 00:04:40.300 ribbon desperately. He gets in his car, starts 00:04:40.300 --> 00:04:43.459 driving around suburban Massachusetts. But it's 00:04:43.459 --> 00:04:46.319 a holiday weekend. The local stationary dealers, 00:04:46.560 --> 00:04:48.500 you know, the little mom and pop shops that supplied 00:04:48.500 --> 00:04:51.300 offices back then, they're all closed. They operated 00:04:51.300 --> 00:04:53.560 on banker's hours. Yeah, exactly. Nine to five, 00:04:53.699 --> 00:04:55.839 closed on weekends and holidays. They sold to 00:04:55.839 --> 00:04:58.480 businesses, not to people working late. So he 00:04:58.480 --> 00:05:00.779 finally finds a small shop that's open. And they 00:05:00.779 --> 00:05:03.040 don't have the ribbon he needs. Or they have 00:05:03.040 --> 00:05:04.860 one that's kind of similar, but the markup is 00:05:04.860 --> 00:05:07.360 just insane. He's driving from shop to shop, 00:05:07.420 --> 00:05:09.519 getting more and more frustrated, wasting his 00:05:09.519 --> 00:05:12.379 entire holiday. And right there, in that moment 00:05:12.379 --> 00:05:15.779 of frustration, the idea is born. He realizes 00:05:15.779 --> 00:05:18.480 the whole system is broken. The entire distribution 00:05:18.480 --> 00:05:22.189 model for office supplies is just... It's broken. 00:05:22.370 --> 00:05:24.389 It's inefficient. You're at the mercy of these 00:05:24.389 --> 00:05:27.310 small dealers with high prices and really low 00:05:27.310 --> 00:05:29.009 inventory. And this is where his background is 00:05:29.009 --> 00:05:31.089 so important. He wasn't an office supply guy. 00:05:31.189 --> 00:05:33.410 Not at all. He was a grocery guy. He'd been an 00:05:33.410 --> 00:05:35.930 executive in the supermarket industry. So he's 00:05:35.930 --> 00:05:38.980 looking at this problem and he's thinking. Why 00:05:38.980 --> 00:05:40.839 are we buying pens and paper? Like there are 00:05:40.839 --> 00:05:43.899 these rare specialty items. Why can't we buy 00:05:43.899 --> 00:05:46.800 office supplies the way we buy, you know, a box 00:05:46.800 --> 00:05:49.819 of cereal or toilet paper? High volume, low margin, 00:05:50.000 --> 00:05:53.899 huge selection, self -service. The supermarket 00:05:53.899 --> 00:05:56.889 model. Precisely. He teams up with a guy named 00:05:56.889 --> 00:05:59.490 Leo Kahn, who was actually a former rival of 00:05:59.490 --> 00:06:01.589 his in the supermarket world. They were competitors, 00:06:01.730 --> 00:06:03.649 but they respected each other. And they decide 00:06:03.649 --> 00:06:06.709 to apply that grocery store logic to office products. 00:06:06.870 --> 00:06:09.209 They want to build a warehouse store, a supermarket, 00:06:09.410 --> 00:06:11.689 where you grab a cart and you walk down an aisle 00:06:11.689 --> 00:06:14.689 of pens. But to build a warehouse, you need capital. 00:06:14.810 --> 00:06:18.089 A lot of it. And this is where a very, very famous 00:06:18.089 --> 00:06:20.689 name enters the chat. Bain Capital. Bain Capital. 00:06:20.790 --> 00:06:22.649 Yes, the private equity firm. They were the early 00:06:22.649 --> 00:06:24.689 backers. And specifically, you have to mention 00:06:24.689 --> 00:06:26.949 Mitt Romney. Long before he was a presidential 00:06:26.949 --> 00:06:29.209 candidate or a senator, Mitt Romney was on the 00:06:29.209 --> 00:06:31.170 board of directors for Staples. For how long? 00:06:31.230 --> 00:06:34.899 For 15 years. Wow. It's so wild to picture Mitt 00:06:34.899 --> 00:06:39.300 Romney in like 1985 sitting in a boardroom debating 00:06:39.300 --> 00:06:41.459 the wholesale price of paperclips. But he was 00:06:41.459 --> 00:06:43.879 instrumental. You know, Bain Capital didn't just 00:06:43.879 --> 00:06:45.980 write a check and walk away. They helped shape 00:06:45.980 --> 00:06:48.680 the business model. They helped refine the strategy 00:06:48.680 --> 00:06:52.500 of offering these deep, deep discounts to drive 00:06:52.500 --> 00:06:54.779 huge volume. OK, so they get the funding. They 00:06:54.779 --> 00:06:57.079 open the first store, Brighton, Massachusetts, 00:06:57.439 --> 00:07:01.720 May 1st, 1986. And it was an. Instant sensation. 00:07:01.759 --> 00:07:03.939 You have to put yourself in the shoes of a small 00:07:03.939 --> 00:07:06.379 business owner in 1986. This was like the heavens 00:07:06.379 --> 00:07:09.379 opening up. Suddenly, a ream of paper that used 00:07:09.379 --> 00:07:12.439 to cost you $10 at the local stationer now costs 00:07:12.439 --> 00:07:15.339 $4 at Staples. You could get everything, everything 00:07:15.339 --> 00:07:18.139 in one trip. It was revolutionary. So they grew 00:07:18.139 --> 00:07:20.420 fast. Fast is an understatement. They hit the 00:07:20.420 --> 00:07:25.060 Fortune 500 in 1996. Ten years. Just think about 00:07:25.060 --> 00:07:27.779 that. From opening the first door to being one 00:07:27.779 --> 00:07:30.300 of the 500 largest companies in America took 00:07:30.300 --> 00:07:33.579 just 10 years. That is absolute rocket fuel growth. 00:07:33.779 --> 00:07:35.379 And they went international pretty quickly too. 00:07:35.639 --> 00:07:39.100 Very. They expanded into Canada in 91. Originally 00:07:39.100 --> 00:07:41.019 it was called the Business Depot, which is a 00:07:41.019 --> 00:07:43.000 very literal name. I love that. Very Canadian. 00:07:43.199 --> 00:07:45.480 And then they moved into the UK and Europe just 00:07:45.480 --> 00:07:48.899 a year later in 1992. And this rapid growth, 00:07:49.019 --> 00:07:53.459 this model, it brings us to a key... business 00:07:53.459 --> 00:07:56.279 concept that staples really i mean they basically 00:07:56.279 --> 00:07:58.600 personified it the category killer it sounds 00:07:58.600 --> 00:08:01.420 so violent it is violent in an economic sense 00:08:01.420 --> 00:08:04.240 a category killer is a retailer that specializes 00:08:04.240 --> 00:08:07.360 so deeply and so overwhelmingly in one specific 00:08:07.360 --> 00:08:11.339 sector toys electronics pet food office supplies 00:08:11.339 --> 00:08:14.480 that they can offer a selection and a price point 00:08:14.480 --> 00:08:17.500 that no general store and no small boutique can 00:08:17.500 --> 00:08:20.480 possibly match so staples did to the local stationer 00:08:20.480 --> 00:08:23.310 what What Toys R Us did to the independent toy 00:08:23.310 --> 00:08:25.529 shop. Exactly. Or what Home Depot did to the 00:08:25.529 --> 00:08:27.829 local hardware store. They basically nuked the 00:08:27.829 --> 00:08:30.470 competition from orbit. If you were running Bob's 00:08:30.470 --> 00:08:33.570 Stationery in 1990 and a Staples opened three 00:08:33.570 --> 00:08:36.250 miles away. You were done. You were finished. 00:08:36.470 --> 00:08:38.870 You just couldn't compete. Their buying power 00:08:38.870 --> 00:08:40.690 allowed them to sell products for cheaper than 00:08:40.690 --> 00:08:42.250 you could even buy them from your own wholesaler. 00:08:42.429 --> 00:08:44.269 It was a complete consolidation of the market. 00:08:44.490 --> 00:08:46.309 But here's the thing about conquering the world. 00:08:46.830 --> 00:08:48.629 Once you've killed all the small competitors, 00:08:48.970 --> 00:08:51.629 you're only left with the other giants. Right. 00:08:51.710 --> 00:08:54.929 And that leads us to the next chapter, the merger 00:08:54.929 --> 00:08:57.669 wars. Yeah. Because Staples wasn't satisfied 00:08:57.669 --> 00:09:00.879 with just killing Bob Stationery. They wanted 00:09:00.879 --> 00:09:03.259 to merge with their biggest rivals. This is a 00:09:03.259 --> 00:09:05.580 saga that spans nearly 30 years, and it really 00:09:05.580 --> 00:09:07.919 shows you how the government's view of monopoly 00:09:07.919 --> 00:09:11.580 power has and has not evolved. It starts in 1996. 00:09:12.120 --> 00:09:15.019 OK. At this point, Staples and Office Depot are 00:09:15.019 --> 00:09:17.480 the two titans. They are the Coke and Pepsi of 00:09:17.480 --> 00:09:20.080 office supplies. They announce a plan to merge 00:09:20.080 --> 00:09:22.799 into one giant company. And the Federal Trade 00:09:22.799 --> 00:09:25.559 Commission, the FTC, steps in and says, absolutely 00:09:25.559 --> 00:09:28.960 not. Right. The argument in 1996 was. Pretty 00:09:28.960 --> 00:09:31.960 traditional, pretty textbook. The FTC said, look, 00:09:32.080 --> 00:09:34.559 if you two merge, you will control the market 00:09:34.559 --> 00:09:37.159 for office superstores. Prices will go up for 00:09:37.159 --> 00:09:39.960 consumers. You'll have a monopoly. Staples argued 00:09:39.960 --> 00:09:42.320 that they competed with a Walmart in Circuit 00:09:42.320 --> 00:09:44.559 City, places like that, right? They did, but 00:09:44.559 --> 00:09:46.519 the government didn't buy it. The judge said, 00:09:46.639 --> 00:09:50.360 no, Walmart sells pens, sure, but they don't 00:09:50.360 --> 00:09:52.700 sell the specialized equipment and bulk supplies 00:09:52.700 --> 00:09:56.179 that businesses need. The court blocked it. End 00:09:56.179 --> 00:09:58.299 of story for a while. Okay, so that was 1996. 00:09:58.820 --> 00:10:02.120 Now let's fast forward to 2015. The world has 00:10:02.120 --> 00:10:04.759 completely, totally changed. Right in day. We 00:10:04.759 --> 00:10:07.500 have the internet. We have Amazon. Staples tries 00:10:07.500 --> 00:10:10.379 to buy Office Depot again. And by this point, 00:10:10.460 --> 00:10:12.159 Office Depot had already swallowed up Office 00:10:12.159 --> 00:10:14.679 Max. It was basically the final two gladiators 00:10:14.679 --> 00:10:17.539 wanting to join forces. And this time, Staples' 00:10:17.639 --> 00:10:20.279 CEO, a guy named Ron Sargent, he went in with 00:10:20.279 --> 00:10:22.480 what he thought was a bulletproof argument. The 00:10:22.480 --> 00:10:24.440 Amazon argument? The Amazon argument. He basically 00:10:24.440 --> 00:10:26.929 said, Look at the world. We are not the monopoly 00:10:26.929 --> 00:10:30.409 here. Amazon is the threat. The competitive environment 00:10:30.409 --> 00:10:32.809 is rapidly evolving. Which is just corporate 00:10:32.809 --> 00:10:35.210 speak for Amazon is eating our lunch. Please, 00:10:35.370 --> 00:10:37.850 please let us team up so we don't die. That's 00:10:37.850 --> 00:10:40.049 exactly what it was. They argued they needed 00:10:40.049 --> 00:10:42.990 to merge to achieve these cost synergies, cutting 00:10:42.990 --> 00:10:45.289 about a billion dollars in overlapping costs 00:10:45.289 --> 00:10:48.090 just to have a fighting chance against the digital 00:10:48.090 --> 00:10:50.929 giants. And look, to a layperson, that makes 00:10:50.929 --> 00:10:54.570 total sense. I mean, in 2015, I was buying everything 00:10:54.570 --> 00:10:57.090 on Amazon. My mom was buying everything on Amazon. 00:10:57.269 --> 00:10:59.690 How could the government possibly look at Staples 00:10:59.690 --> 00:11:02.950 and say, you are the dangerous monopoly? Feels 00:11:02.950 --> 00:11:05.090 like they were looking at a map from 1990. That's 00:11:05.090 --> 00:11:06.730 what Staples thought. That's what Wall Street 00:11:06.730 --> 00:11:09.929 thought. But the FTC's counterargument was fascinating, 00:11:10.190 --> 00:11:12.350 and it's a crucial detail that often gets overlooked 00:11:12.350 --> 00:11:15.450 in this story. The FTC didn't focus on you buying 00:11:15.450 --> 00:11:18.110 a laptop or a pack of pens. So what did they 00:11:18.110 --> 00:11:20.789 focus on? They focused on the B2B contract market. 00:11:20.970 --> 00:11:23.250 OK, let's unpack that. What does that mean specifically? 00:11:23.549 --> 00:11:26.149 So they define the market not as individual consumers, 00:11:26.389 --> 00:11:30.210 but as sales to large Fortune 500 corporations. 00:11:30.789 --> 00:11:33.210 Think about it. If you're a company like General 00:11:33.210 --> 00:11:35.809 Motors or Citibank, you don't just log on to 00:11:35.809 --> 00:11:37.929 Amazon with a corporate credit card to buy supplies 00:11:37.929 --> 00:11:40.500 for 50 ,000 employees. Oh, of course not. You 00:11:40.500 --> 00:11:42.799 need a negotiated contract. You need locked in 00:11:42.799 --> 00:11:44.980 pricing for the whole year. You need desktop 00:11:44.980 --> 00:11:47.799 delivery to hundreds of branch offices across 00:11:47.799 --> 00:11:50.759 four time zones. You need a complex billing terms 00:11:50.759 --> 00:11:53.840 like net 30 or net 60. It's a whole different 00:11:53.840 --> 00:11:56.220 ballgame. It's a logistics game, not just a retail 00:11:56.220 --> 00:11:59.399 game. Exactly. And the FTC argued that in 2015, 00:11:59.740 --> 00:12:02.539 Amazon business was still in its infancy. They 00:12:02.539 --> 00:12:05.320 just couldn't handle that level of complex nationwide 00:12:05.320 --> 00:12:07.919 corporate distribution yet. So the government's 00:12:07.919 --> 00:12:10.690 view was? The government's view was. If you are 00:12:10.690 --> 00:12:12.769 a Fortune 500 company, there are really only 00:12:12.769 --> 00:12:14.690 two companies in America that can service your 00:12:14.690 --> 00:12:17.529 nationwide contract, Staples and Office Depot. 00:12:17.769 --> 00:12:20.289 If they merge, General Motors has no one else 00:12:20.289 --> 00:12:22.830 to go to to negotiate a better deal. So because 00:12:22.830 --> 00:12:26.110 they dominated that very specific, very lucrative 00:12:26.110 --> 00:12:28.909 VIP club of big business contracts, the government 00:12:28.909 --> 00:12:31.950 blocked the deal. Yes. A federal judge agreed 00:12:31.950 --> 00:12:34.250 with the FTC. The ruling was that the merger 00:12:34.250 --> 00:12:36.470 would substantially reduce competition for these 00:12:36.470 --> 00:12:38.909 large business customers. The deal was officially 00:12:38.909 --> 00:12:42.149 killed in May of 2016. And that failure was not 00:12:42.149 --> 00:12:45.230 cheap. No, not at all. Staples had to pay Office 00:12:45.230 --> 00:12:48.750 Depot a $250 million breakup fee. What? It was 00:12:48.750 --> 00:12:51.730 a disaster for them. A huge public failure and 00:12:51.730 --> 00:12:54.330 a massive financial hit. I see in the notes here 00:12:54.330 --> 00:12:57.470 that they tried a zombie attempt more recently. 00:12:57.710 --> 00:13:00.350 They did. They just can't let it go. In 2021 00:13:00.350 --> 00:13:04.009 and into 2022, Staples now under different ownership, 00:13:04.149 --> 00:13:06.850 which we'll get to, tried again. This time, they 00:13:06.850 --> 00:13:08.990 just wanted to buy the consumer retail arm of 00:13:08.990 --> 00:13:12.840 Office Depot. In. Rejected. Again. It just paints 00:13:12.840 --> 00:13:15.100 this picture of a company that is so desperate 00:13:15.100 --> 00:13:17.399 to consolidate because they really don't see 00:13:17.399 --> 00:13:20.039 another path to organic growth. So they can't 00:13:20.039 --> 00:13:22.039 grow by buying their rival. The government has 00:13:22.039 --> 00:13:24.299 basically built a wall there. What happens next? 00:13:24.559 --> 00:13:26.340 Well, if you can't be the predator, you become 00:13:26.340 --> 00:13:28.679 the prey. And that brings us to the private equity 00:13:28.679 --> 00:13:31.220 era. This is a massive turning point in the story. 00:13:31.789 --> 00:13:34.350 In 2017, a private equity firm called Sycamore 00:13:34.350 --> 00:13:38.269 Partners buys Staples for $6 .9 billion. A huge, 00:13:38.450 --> 00:13:40.950 huge leveraged buyout. And Sycamore isn't a retailer. 00:13:41.009 --> 00:13:43.110 They're a financial firm. Their goal is financial 00:13:43.110 --> 00:13:45.470 return. And this is where the story gets into 00:13:45.470 --> 00:13:47.870 some really complex and, frankly, controversial 00:13:47.870 --> 00:13:50.610 financial engineering. It does. The very first 00:13:50.610 --> 00:13:53.049 thing Sycamore did was effectively break the 00:13:53.049 --> 00:13:55.950 company into three separate entities that just 00:13:55.950 --> 00:13:58.230 happened to share a brand name. So you have Staples 00:13:58.230 --> 00:14:00.889 U .S. Retail. That's the stores. Then you have 00:14:00.889 --> 00:14:03.409 Staples Canada. And then the most important piece, 00:14:03.629 --> 00:14:06.029 Staples North American Delivery. That's the B2B 00:14:06.029 --> 00:14:08.169 business we were just talking about. Why split 00:14:08.169 --> 00:14:10.070 them up like that? What's the strategic advantage? 00:14:10.450 --> 00:14:13.370 Because the B2B delivery business is the cash 00:14:13.370 --> 00:14:16.309 cow. That's the really valuable asset, that logistics 00:14:16.309 --> 00:14:18.649 network we just talked about. The retail stores, 00:14:18.809 --> 00:14:21.120 on the other hand. They're risky. Foot traffic 00:14:21.120 --> 00:14:24.100 is declining. Leases are expensive. By separating 00:14:24.100 --> 00:14:27.120 them, Sycamore insulates the valuable B2B business 00:14:27.120 --> 00:14:29.620 from the potential failure of the retail stores. 00:14:29.879 --> 00:14:32.759 It's a smart financial move to protect the core 00:14:32.759 --> 00:14:35.240 asset. That makes sense. But then we get to this 00:14:35.240 --> 00:14:37.679 thing called the dividend recap. I read about 00:14:37.679 --> 00:14:39.580 this in the source materials, specifically what 00:14:39.580 --> 00:14:42.019 happened in April 2019. And I had to read it 00:14:42.019 --> 00:14:43.639 three times because it sounded, well, it sounded 00:14:43.639 --> 00:14:46.159 like looting. It's a very controversial but very 00:14:46.159 --> 00:14:48.860 common private equity practice. Let's break it 00:14:48.860 --> 00:14:51.559 down properly because it's important. So Sycamore 00:14:51.559 --> 00:14:55.379 owns Staples. In April 2019, they have Staples, 00:14:55.419 --> 00:14:59.259 the company, take out a new loan, a massive refinancing 00:14:59.259 --> 00:15:03.919 package totaling $5 .4 billion. OK, so Staples, 00:15:04.019 --> 00:15:07.519 the company itself, borrows the money. The debt 00:15:07.519 --> 00:15:10.179 is on Staples' balance sheet. Correct. The company, 00:15:10.259 --> 00:15:12.460 its employees, its assets, they all now have 00:15:12.460 --> 00:15:15.539 to service this new massive debt. But what happens 00:15:15.539 --> 00:15:17.940 to the cash from that loan? That's the question. 00:15:18.200 --> 00:15:20.360 Sycamore directed Staples to pay out what's called 00:15:20.360 --> 00:15:24.360 a special dividend of $1 billion to Sycamore. 00:15:24.379 --> 00:15:26.419 Wait, wait. So they forced the company they own 00:15:26.419 --> 00:15:28.750 to take out a huge mortgage. And then the owners 00:15:28.750 --> 00:15:30.350 took the cash from that mortgage and just put 00:15:30.350 --> 00:15:31.889 it in their own pockets. That is essentially 00:15:31.889 --> 00:15:34.450 what a dividend recapitalization is. A Bloomberg 00:15:34.450 --> 00:15:36.570 report analyzed this and noted that with that 00:15:36.570 --> 00:15:39.590 one move, Sycamore recovered roughly 80 % of 00:15:39.590 --> 00:15:41.490 the initial cash they had put in to buy the company 00:15:41.490 --> 00:15:43.889 in the first place. 80%. And how long did that 00:15:43.889 --> 00:15:46.169 take? Less than two years. That seems unbelievably 00:15:46.169 --> 00:15:50.330 fast. It is lightning fast. The typical industry 00:15:50.330 --> 00:15:52.809 standard in private equity is usually five to 00:15:52.809 --> 00:15:55.509 eight years to get your return. The traditional 00:15:55.509 --> 00:15:58.769 model is you buy a company, you fix it up, you 00:15:58.769 --> 00:16:01.289 improve operations, you make it better, and then 00:16:01.289 --> 00:16:04.049 you sell it for a profit down the line. But they 00:16:04.049 --> 00:16:06.669 didn't do that. Sycamore effectively cashed out 00:16:06.669 --> 00:16:10.600 in 20 months. But doesn't that leave... It staples 00:16:10.600 --> 00:16:13.299 the actual company that employs people and runs 00:16:13.299 --> 00:16:15.679 the stores. Doesn't that leave them drowning 00:16:15.679 --> 00:16:18.159 in debt? It loads the balance sheet with debt, 00:16:18.279 --> 00:16:21.440 yes. It significantly increases the risk of bankruptcy 00:16:21.440 --> 00:16:24.159 if there's a recession or a downturn. But for 00:16:24.159 --> 00:16:26.659 the owners, the risk is now gone. They have their 00:16:26.659 --> 00:16:29.600 money back. It fundamentally changes the incentives. 00:16:29.940 --> 00:16:32.139 How so? You aren't necessarily building for the 00:16:32.139 --> 00:16:34.080 next 20 years anymore. You've already won the 00:16:34.080 --> 00:16:36.120 game. It feels like they're stripping the coppery 00:16:36.120 --> 00:16:38.000 wiring out of the house while people are still 00:16:38.000 --> 00:16:40.620 trying to live in it. That's the criticism. Critics 00:16:40.620 --> 00:16:43.500 call it asset stripping. Proponents, on the other 00:16:43.500 --> 00:16:46.879 hand, call it unlocking shareholder value. But 00:16:46.879 --> 00:16:49.259 what it means for the listener, for a story, 00:16:49.340 --> 00:16:53.120 is that from 2019 onward, Staples as a company 00:16:53.120 --> 00:16:55.559 is operating under this heavy burden of debt 00:16:55.559 --> 00:16:58.379 that it has to pay off every single month. So 00:16:58.379 --> 00:17:00.419 the company is fractured into three pieces. It's 00:17:00.419 --> 00:17:02.480 loaded with debt and it's facing an existential 00:17:02.480 --> 00:17:04.819 crisis. They absolutely have to pivot. They have 00:17:04.819 --> 00:17:07.180 no choice. And this brings us to the modern era, 00:17:07.299 --> 00:17:10.059 the era of... work -life fulfillment. That was 00:17:10.059 --> 00:17:13.279 the big rebrand in 2019. They ditched the old 00:17:13.279 --> 00:17:15.460 logo, the one with the bent staple for the L, 00:17:15.579 --> 00:17:17.579 and they introduced a new icon. It's supposed 00:17:17.579 --> 00:17:19.779 to look like a staple, but also maybe a desk 00:17:19.779 --> 00:17:22.440 or a bridge. It's very abstract. It looks like 00:17:22.440 --> 00:17:25.299 a little table to me. But that slogan, work -life 00:17:25.299 --> 00:17:26.799 fulfillment, I mean, come on, that sounds like 00:17:26.799 --> 00:17:29.039 a buzzword salad from a terrible LinkedIn post. 00:17:29.450 --> 00:17:32.190 It is extremely buzzword heavy. But the intent 00:17:32.190 --> 00:17:34.630 from the CEO at the time, Sandy Douglas, was 00:17:34.630 --> 00:17:37.609 clear. He realized they couldn't just sell products 00:17:37.609 --> 00:17:40.230 anymore. Paper usage is in terminal decline. 00:17:40.569 --> 00:17:43.069 Ink usage is in decline. They had to start selling 00:17:43.069 --> 00:17:45.750 solutions and environments. So the store itself 00:17:45.750 --> 00:17:48.609 has to become a destination. I've seen this change 00:17:48.609 --> 00:17:51.049 in some of the locations near me. They launched 00:17:51.049 --> 00:17:54.329 this Staples Connect concept. Right. They're 00:17:54.329 --> 00:17:56.809 trying to turn the store from a warehouse into 00:17:56.809 --> 00:17:59.809 a community hub. They introduced Staple Studio, 00:18:00.170 --> 00:18:02.470 which is basically a co -working space. If you're 00:18:02.470 --> 00:18:04.630 a freelancer, you can rent a desk or a small 00:18:04.630 --> 00:18:07.609 office inside of Staples. Which, in theory, I 00:18:07.609 --> 00:18:10.109 guess it makes sense. I'm there working. I run 00:18:10.109 --> 00:18:12.210 out of pens. I need to print a big contract. 00:18:12.450 --> 00:18:15.000 I'm already at the store. That's the logic. And 00:18:15.000 --> 00:18:16.660 they got even more creative. They built these 00:18:16.660 --> 00:18:18.799 spotlight theaters, which are like auditorium 00:18:18.799 --> 00:18:21.900 style rental spaces for presentations or community 00:18:21.900 --> 00:18:24.319 events. And they partnered with iHeartMedia. 00:18:24.420 --> 00:18:27.799 To install professional podcast recording studios 00:18:27.799 --> 00:18:30.380 in some of their Boston area stores as a trial. 00:18:30.640 --> 00:18:33.119 Which is incredibly meta considering what we're 00:18:33.119 --> 00:18:35.319 doing right now. Can you imagine if we were recording 00:18:35.319 --> 00:18:39.220 this deep dive inside a Staples? Amidst the sound 00:18:39.220 --> 00:18:41.599 of forklifts and the crinkling of plastic packaging. 00:18:42.349 --> 00:18:44.769 But the idea is to bring in the creator economy. 00:18:45.049 --> 00:18:47.150 If you come in to record your podcast, maybe 00:18:47.150 --> 00:18:48.890 you buy a new microphone. Maybe you buy a new 00:18:48.890 --> 00:18:51.049 office chair. Maybe you just buy a coffee and 00:18:51.049 --> 00:18:53.650 a bag of chips. It's all about driving foot traffic. 00:18:53.769 --> 00:18:56.809 And then, looking at the timeline, we have a 00:18:56.809 --> 00:19:01.309 major and very weird development announced just 00:19:01.309 --> 00:19:05.940 last year in August of 2025. I care. Eye care. 00:19:06.079 --> 00:19:07.819 This is one of the most interesting pivots of 00:19:07.819 --> 00:19:10.680 all. Staples announced a partnership with Now 00:19:10.680 --> 00:19:13.380 Optics, they run the Stanton Optical and My Eye 00:19:13.380 --> 00:19:16.700 Lab brands, to open full -service optometry and 00:19:16.700 --> 00:19:19.839 eye care offices inside Staples stores. I have 00:19:19.839 --> 00:19:23.170 to ask, why eyes? Of all the things to put next 00:19:23.170 --> 00:19:24.769 to the printers and the paper shredders, why 00:19:24.769 --> 00:19:26.730 an eye doctor? Okay, think about it strategically. 00:19:27.029 --> 00:19:29.069 What is the one thing that Amazon absolutely 00:19:29.069 --> 00:19:32.630 positively cannot do? They cannot examine your 00:19:32.630 --> 00:19:34.589 retinas. They cannot check your prescription 00:19:34.589 --> 00:19:37.549 for glaucoma. It requires a physical body in 00:19:37.549 --> 00:19:39.769 a physical room with a trained professional and 00:19:39.769 --> 00:19:43.009 specialized equipment. Amazon proof. It's completely 00:19:43.009 --> 00:19:45.710 Amazon proof. It's a high margin service that 00:19:45.710 --> 00:19:48.250 drives recurring visits. You need an eye exam 00:19:48.250 --> 00:19:50.690 every year or two. And while your eyes are dilating 00:19:50.690 --> 00:19:51.750 and you can't look at your... your phone for 00:19:51.750 --> 00:19:54.269 20 minutes. Maybe you wander the aisles and finally 00:19:54.269 --> 00:19:56.029 buy that new office chair you've been meaning 00:19:56.029 --> 00:19:58.609 to get. It transforms the store from a place 00:19:58.609 --> 00:20:01.609 you go to shop into a place you go for services. 00:20:01.930 --> 00:20:04.710 That is the only way for big box retail to survive 00:20:04.710 --> 00:20:07.250 in the long run. You have to offer things that 00:20:07.250 --> 00:20:09.849 cannot be put in a cardboard box and shipped 00:20:09.849 --> 00:20:12.609 to a doorstep. You know, we've talked a lot about 00:20:12.609 --> 00:20:15.009 business strategy and finance, but we can't do 00:20:15.009 --> 00:20:17.309 a deep dive on staples without talking about 00:20:17.309 --> 00:20:19.970 their marketing. Because for a company that sells 00:20:20.349 --> 00:20:23.670 arguably the most boring products on earth, paperclips 00:20:23.670 --> 00:20:26.930 and toner, they've had some truly iconic and 00:20:26.930 --> 00:20:29.470 memorable advertising. They really have. They 00:20:29.470 --> 00:20:31.809 somehow managed to give a personality to office 00:20:31.809 --> 00:20:34.789 supplies, which is not easy to do. We have to 00:20:34.789 --> 00:20:36.369 start with the slogan we mentioned at the top. 00:20:36.470 --> 00:20:39.769 That was easy. That launched in 2003. And before 00:20:39.769 --> 00:20:42.250 that, their slogan was, yeah, we've got that. 00:20:42.430 --> 00:20:45.069 Which is functional. It's fine. It's boring. 00:20:45.269 --> 00:20:48.140 It's a statement of fact. That was easy was an 00:20:48.140 --> 00:20:50.740 emotional promise. It acknowledged that office 00:20:50.740 --> 00:20:53.099 work is frustrating, technology is annoying, 00:20:53.400 --> 00:20:56.599 things break, and Staples is the antidote to 00:20:56.599 --> 00:20:58.880 that frustration. And the easy button itself, 00:20:59.160 --> 00:21:02.799 the story behind this is just... Great. It wasn't 00:21:02.799 --> 00:21:04.440 even supposed to be a real product, was it? Not 00:21:04.440 --> 00:21:06.599 at all. It was just a prop in a series of TV 00:21:06.599 --> 00:21:09.359 commercials. The ads would show people facing 00:21:09.359 --> 00:21:11.880 these complex problems. They'd press this big 00:21:11.880 --> 00:21:14.579 red button and a poof, the problem would magically 00:21:14.579 --> 00:21:17.019 solve itself. But then people started calling 00:21:17.019 --> 00:21:19.920 the stores. Yes. Customers started calling and 00:21:19.920 --> 00:21:22.400 walking in asking, where can I buy the button? 00:21:22.460 --> 00:21:24.819 I need the easy button. I love that human instinct. 00:21:25.000 --> 00:21:27.519 Just give me the magic button that fixes my life. 00:21:27.839 --> 00:21:30.200 So Staples realized they had lightning in a bottle. 00:21:30.700 --> 00:21:33.480 In 2005, they actually manufactured it. It sold 00:21:33.480 --> 00:21:36.700 for about $5 to $7. All you do is press it, and 00:21:36.700 --> 00:21:39.240 a voice says, that was easy. And that's it. It 00:21:39.240 --> 00:21:41.460 doesn't connect to Wi -Fi. It doesn't order pizza. 00:21:41.759 --> 00:21:44.309 It doesn't turn off the lights. It does absolutely 00:21:44.309 --> 00:21:47.349 nothing of any practical value. And they sold 00:21:47.349 --> 00:21:49.730 millions of them. Over seven and a half million 00:21:49.730 --> 00:21:52.089 dollars worth. And the really cool part is that 00:21:52.089 --> 00:21:53.970 the proceeds went to the Boys and Girls Clubs 00:21:53.970 --> 00:21:56.150 of America. That's great. They even made international 00:21:56.150 --> 00:21:58.890 versions. In Germany, the button said, Einfach 00:21:58.890 --> 00:22:02.930 Easy. It became this desk toy icon. But they 00:22:02.930 --> 00:22:04.470 had some weirder stuff, too. Do you remember 00:22:04.470 --> 00:22:07.789 the Snowbot? Oh, that's a deep cut from the 90s. 00:22:07.789 --> 00:22:11.170 The little robot snowman? Yes. I found this in 00:22:11.170 --> 00:22:13.329 the advertising archives, a commercial about 00:22:13.329 --> 00:22:15.890 a robot snowman who falls in love with a printer. 00:22:16.049 --> 00:22:19.650 It was very quirky, very 90s humor. The snowbot 00:22:19.650 --> 00:22:21.829 would cling to the printer box, and when the 00:22:21.829 --> 00:22:23.690 customer tried to take it to the checkout, the 00:22:23.690 --> 00:22:26.750 robot would just say, weeping, meeping, in this 00:22:26.750 --> 00:22:29.490 monotone robot voice. It was bizarre, but it 00:22:29.490 --> 00:22:31.329 was memorable. People remembered it. And then, 00:22:31.430 --> 00:22:34.130 the absolute gold standard of back -to -school 00:22:34.130 --> 00:22:37.380 ads, Alice Cooper. The school's out campaign. 00:22:37.700 --> 00:22:40.180 This one flipped the script entirely. You know, 00:22:40.220 --> 00:22:42.720 usually back to school ads show these happy kids 00:22:42.720 --> 00:22:45.039 with their new backpacks. This ad was all about 00:22:45.039 --> 00:22:48.059 the parents. It's the dad dancing down the aisle, 00:22:48.180 --> 00:22:51.140 joyfully tossing supplies into the cart while 00:22:51.140 --> 00:22:53.119 the song It's the Most Wonderful Time of the 00:22:53.119 --> 00:22:56.099 Year plays. And the kids just look miserable. 00:22:56.380 --> 00:22:59.210 It's hilarious because it's true. But the 2004 00:22:59.210 --> 00:23:01.589 sequel with Alice Cooper himself was even better. 00:23:01.750 --> 00:23:04.549 A grumpy teenage girl is shopping with her dad 00:23:04.549 --> 00:23:06.650 and she says, I thought you said school's out 00:23:06.650 --> 00:23:09.589 forever. And out of nowhere, Alice Cooper appears 00:23:09.589 --> 00:23:12.190 from behind a stack of binders. And he corrects 00:23:12.190 --> 00:23:15.750 her in full makeup. He says, the song goes, school's 00:23:15.750 --> 00:23:19.089 out for summer. Nice try, though. It gave the 00:23:19.089 --> 00:23:20.910 brand an edge. It showed they had a sense of 00:23:20.910 --> 00:23:22.710 humor and weren't just some boring corporate 00:23:22.710 --> 00:23:26.549 warehouse. However, not everything has been funny 00:23:26.549 --> 00:23:30.180 or easy. We have to pivot now to the darker side 00:23:30.180 --> 00:23:32.799 of this deep dive, the modern controversies and 00:23:32.799 --> 00:23:34.740 the operational struggles, because in the last 00:23:34.740 --> 00:23:36.980 few years, things have gotten really messy. Every 00:23:36.980 --> 00:23:39.380 big retailer struggles, but Staples has faced 00:23:39.380 --> 00:23:41.359 some really unique challenges as they try to 00:23:41.359 --> 00:23:43.660 adapt. The biggest one recently has been the 00:23:43.660 --> 00:23:46.279 Amazon returns saga. This started around 2023, 00:23:46.519 --> 00:23:48.299 and it's still a huge part of their operation 00:23:48.299 --> 00:23:53.279 here in 2026. The deal is Staples accepts unpackaged 00:23:53.279 --> 00:23:56.339 Amazon returns for free. On paper, this looks 00:23:56.339 --> 00:23:58.640 like a strategic home run. Amazon desperately 00:23:58.640 --> 00:24:01.759 needs physical drop -off points. Staples desperately 00:24:01.759 --> 00:24:05.259 needs foot traffic. The idea is simple. You walk 00:24:05.259 --> 00:24:07.519 in with your unwanted Amazon item, Staples ships 00:24:07.519 --> 00:24:09.180 it back for you, and while you're there, maybe 00:24:09.180 --> 00:24:11.799 you buy a notebook or a new mouse. A win -win. 00:24:12.079 --> 00:24:15.950 But the reality for the employees. It has been 00:24:15.950 --> 00:24:18.069 described in internal forums and news reports 00:24:18.069 --> 00:24:21.390 as a retail horror story. There was a petition, 00:24:21.529 --> 00:24:24.430 right? Yes, a petition signed by over 5 ,000 00:24:24.430 --> 00:24:27.289 employees. And they coined a term for these customers 00:24:27.289 --> 00:24:30.130 that is just, it's so vivid. They call them Amazombies. 00:24:30.609 --> 00:24:32.970 Amazombies. That's perfect. The image it creates 00:24:32.970 --> 00:24:34.750 is perfect, right? You have these lines of people 00:24:34.750 --> 00:24:36.690 just shuffling into the store, staring at their 00:24:36.690 --> 00:24:38.910 phones, holding a loose toaster or a single shoe 00:24:38.910 --> 00:24:41.369 without a box or a used blender with stuff still 00:24:41.369 --> 00:24:43.470 in it. They march up to the shipping counter, 00:24:43.609 --> 00:24:45.690 hold out their phone. with the QR code and expect 00:24:45.690 --> 00:24:48.390 instant service. And the employees are stuck. 00:24:48.789 --> 00:24:51.329 They aren't selling high margin tech or consulting 00:24:51.329 --> 00:24:53.970 on office furniture. They are basically acting 00:24:53.970 --> 00:24:57.009 as unpaid UPS workers. And the friction is really 00:24:57.009 --> 00:24:58.910 high. The customer just says, here's my code, 00:24:58.970 --> 00:25:01.630 take it. But the employee has to scan it, find 00:25:01.630 --> 00:25:04.829 the right size bag, bag it, print a label, stick 00:25:04.829 --> 00:25:08.190 it on, and then sort it into these huge overflowing 00:25:08.190 --> 00:25:10.529 bins in the back. It's time consuming. It's messy. 00:25:10.670 --> 00:25:13.640 It's low value work. And what's the critical 00:25:13.640 --> 00:25:16.240 data point here, the conversion rate? Are the 00:25:16.240 --> 00:25:18.900 Amazon bees actually buying anything? The internal 00:25:18.900 --> 00:25:22.220 reports and employee accounts suggest. Not really. 00:25:22.319 --> 00:25:24.140 The conversion rate is apparently very, very 00:25:24.140 --> 00:25:26.480 low. Most of these people drop off their return 00:25:26.480 --> 00:25:29.819 and walk straight out the door. So from the employee's 00:25:29.819 --> 00:25:32.359 perspective, Staples is burning out its workforce 00:25:32.359 --> 00:25:34.680 to bring in foot traffic that doesn't spend any 00:25:34.680 --> 00:25:36.920 money. It really highlights that classic tension 00:25:36.920 --> 00:25:39.859 between a corporate strategy looking at a spreadsheet 00:25:39.859 --> 00:25:42.339 that says foot traffic is up 20 percent and the 00:25:42.339 --> 00:25:44.460 on the ground reality of the floor staff dealing 00:25:44.460 --> 00:25:46.900 with the chaos. Absolutely. And speaking of chaos, 00:25:47.059 --> 00:25:49.339 we have to talk about cybersecurity. This is 00:25:49.339 --> 00:25:51.660 a really bad look for a company that is trying 00:25:51.660 --> 00:25:55.059 to pivot to selling tech services to businesses. 00:25:55.359 --> 00:25:57.640 They want to be your IT department, but their 00:25:57.640 --> 00:26:00.119 own IT has had some massive failures. There was 00:26:00.119 --> 00:26:03.099 the big one back in 2014. That was malware they 00:26:03.099 --> 00:26:04.759 found in the point of sale systems, the cash 00:26:04.759 --> 00:26:09.079 registers. It affected 115 stores and compromised 00:26:09.079 --> 00:26:12.349 over a million customer credit cards. That really 00:26:12.349 --> 00:26:15.450 hurts consumer trust. But the attack in 2023 00:26:15.450 --> 00:26:18.470 seemed even more damaging, at least operationally. 00:26:18.529 --> 00:26:20.710 Oh, that was a complete disaster. It happened 00:26:20.710 --> 00:26:23.509 during Cyber Week, literally the busiest online 00:26:23.509 --> 00:26:25.549 shopping week of the entire year right after 00:26:25.549 --> 00:26:28.190 Thanksgiving. A cyber attack disrupted their 00:26:28.190 --> 00:26:30.569 internal systems, their delivery processing, 00:26:30.809 --> 00:26:32.670 their online ordering, their customer service 00:26:32.670 --> 00:26:36.869 tools. For days. Imagine being an office supply 00:26:36.869 --> 00:26:39.390 company and your entire digital operation goes 00:26:39.390 --> 00:26:41.549 dark during the Super Bowl of e -commerce. It's 00:26:41.549 --> 00:26:43.690 a terrible, terrible look. If you are pitching 00:26:43.690 --> 00:26:45.589 yourself to small and medium -sized businesses 00:26:45.589 --> 00:26:47.809 saying, let us handle your tech infrastructure, 00:26:48.190 --> 00:26:50.430 you cannot be the company that gets taken down 00:26:50.430 --> 00:26:52.970 for days during Cyber Week. The hypocrisy is 00:26:52.970 --> 00:26:55.089 just too glaring. And there's one more controversy 00:26:55.089 --> 00:26:56.670 I want to touch on, even though it's from back 00:26:56.670 --> 00:26:59.430 in 2012, because it really speaks to how these 00:26:59.430 --> 00:27:02.710 big data -driven companies think. The price discrimination 00:27:02.710 --> 00:27:05.559 study. This was a landmark investigation by the 00:27:05.559 --> 00:27:07.359 Wall Street Journal. They found that Staples 00:27:07.359 --> 00:27:10.180 .com was displaying different prices to different 00:27:10.180 --> 00:27:12.920 people for the exact same product at the exact 00:27:12.920 --> 00:27:15.559 same time. And it wasn't just based on shipping 00:27:15.559 --> 00:27:19.099 costs or sales tax. It was a dynamic pricing 00:27:19.099 --> 00:27:22.380 algorithm. Right. The algorithm would look at 00:27:22.380 --> 00:27:24.660 your computer's IP address to figure out your 00:27:24.660 --> 00:27:27.720 approximate physical location. Then it would 00:27:27.720 --> 00:27:30.119 calculate your distance to a competitor's store, 00:27:30.240 --> 00:27:33.230 like an OfficeMax or an Office Depot. within 00:27:33.230 --> 00:27:37.069 say 20 miles of a competitor staples .com showed 00:27:37.069 --> 00:27:39.470 you a lower price they knew you had other options 00:27:39.470 --> 00:27:41.490 so they had to be competitive and if you were 00:27:41.490 --> 00:27:44.430 in a store desert if you were in a rural area 00:27:44.430 --> 00:27:46.730 where staples was the only game in town you saw 00:27:46.730 --> 00:27:49.309 a higher price for the exact same item that feels 00:27:49.309 --> 00:27:51.710 incredibly cynical it's the ultimate downside 00:27:51.710 --> 00:27:55.089 of that category killer mindset if we've successfully 00:27:55.089 --> 00:27:57.450 killed all the competition in your area we can 00:27:57.450 --> 00:28:00.769 charge you a premium And the journal's analysis 00:28:00.769 --> 00:28:03.450 noted that this often meant that lower income 00:28:03.450 --> 00:28:06.569 rural areas were effectively subsizing the discounts 00:28:06.569 --> 00:28:09.450 being given to wealthier suburban and urban areas 00:28:09.450 --> 00:28:12.450 where there was more competition. It was legal, 00:28:12.549 --> 00:28:15.869 but from a PR perspective. It was ugly. It felt 00:28:15.869 --> 00:28:18.349 fundamentally unfair to a lot of people. So before 00:28:18.349 --> 00:28:20.089 we wrap up, I want to look at their environmental 00:28:20.089 --> 00:28:22.210 record. I mean, we are talking about a company 00:28:22.210 --> 00:28:25.170 whose primary product for decades was paper. 00:28:25.430 --> 00:28:28.440 Lots and lots of paper. They have made some genuine 00:28:28.440 --> 00:28:30.839 measurable strides here. They are consistently 00:28:30.839 --> 00:28:34.359 ranked as a top 25 EPA green power partner. They 00:28:34.359 --> 00:28:37.000 have massive solar panel installations on their 00:28:37.000 --> 00:28:39.039 fulfillment centers. The one in Hanover, Maryland, 00:28:39.140 --> 00:28:41.960 is a great example. And they have a sleep mode 00:28:41.960 --> 00:28:44.000 initiative for all their copiers and printers 00:28:44.000 --> 00:28:45.900 in the copy centers that they estimate saves 00:28:45.900 --> 00:28:48.279 nearly a million dollars a year in electricity. 00:28:48.680 --> 00:28:51.259 That's significant. But I have to ask about the 00:28:51.259 --> 00:28:54.099 ink recycling. Because I used to save my empty 00:28:54.099 --> 00:28:56.420 cartridges like they're a gold bullion. You bring 00:28:56.420 --> 00:28:59.019 them in and get store credit. That program has 00:28:59.019 --> 00:29:00.940 changed, and not in a way that customers have 00:29:00.940 --> 00:29:02.960 loved. It used to be a very generous rewards 00:29:02.960 --> 00:29:06.720 program. But as of 2025, they've capped the rewards 00:29:06.720 --> 00:29:08.799 pretty significantly. It's down to a maximum 00:29:08.799 --> 00:29:11.359 of about $6 a month for most rewards members. 00:29:11.740 --> 00:29:13.599 That's a big drop from what it used to be. Why 00:29:13.599 --> 00:29:16.039 the cut? Well, it's the economics of a declining 00:29:16.039 --> 00:29:18.440 category. Plain and simple. People are printing 00:29:18.440 --> 00:29:21.579 less. The value of the recycled plastic and metals 00:29:21.579 --> 00:29:24.059 fluctuates wildly on the commodities market. 00:29:24.910 --> 00:29:27.430 And let's go back to our earlier point about 00:29:27.430 --> 00:29:30.170 private equity. When you are owned by a firm 00:29:30.170 --> 00:29:32.650 that is intensely focused on cash extraction 00:29:32.650 --> 00:29:35.829 and maximizing profit, generous customer rewards 00:29:35.829 --> 00:29:37.849 programs are often one of the first things to 00:29:37.849 --> 00:29:39.690 get trimmed back. So let's try to bring this 00:29:39.690 --> 00:29:41.990 all together. We have gone from Thomas Stemberg 00:29:41.990 --> 00:29:45.470 driving around in a panic in 1985 to this massive 00:29:45.470 --> 00:29:49.269 fractured debt laden entity in 2026 that's dealing 00:29:49.269 --> 00:29:52.369 with Amazon bees and giving eye exams. What's 00:29:52.369 --> 00:29:54.640 the big takeaway from this whole journey? I think 00:29:54.640 --> 00:29:56.480 the takeaway is that Staples is the ultimate 00:29:56.480 --> 00:29:59.779 survivor, but it has survived by constantly mutating. 00:29:59.900 --> 00:30:02.619 It started as a retail revolution that changed 00:30:02.619 --> 00:30:05.200 how we buy things. Then it tried to become a 00:30:05.200 --> 00:30:09.019 government thwarted monopoly. And now it is essentially 00:30:09.019 --> 00:30:12.680 a logistics network. That B2B delivery arm is 00:30:12.680 --> 00:30:14.900 the real engine keeping the whole thing alive 00:30:14.900 --> 00:30:19.880 with a retail face that acts as a sort of a waiting 00:30:19.880 --> 00:30:22.660 room for the digital world. A waiting room. I 00:30:22.660 --> 00:30:24.380 really like that metaphor. A place where you 00:30:24.380 --> 00:30:26.480 go to drop off your Amazon package, maybe get 00:30:26.480 --> 00:30:28.240 your eyes checked, maybe record a podcast, you 00:30:28.240 --> 00:30:30.700 grab a pen while you wait. Exactly. They are 00:30:30.700 --> 00:30:32.880 betting that physical presence still has value, 00:30:33.000 --> 00:30:35.259 even if the reason for that physical presence 00:30:35.259 --> 00:30:37.799 has completely changed. They are trying to become 00:30:37.799 --> 00:30:39.940 the physical infrastructure that supports a digital 00:30:39.940 --> 00:30:42.039 economy. But I have to end with a provocative 00:30:42.039 --> 00:30:44.400 thought here. We know private equity firms operate 00:30:44.400 --> 00:30:47.119 on a timeline. Sycamore already pulled out their 00:30:47.119 --> 00:30:48.900 billion -dollar investment in that dividend recap 00:30:48.900 --> 00:30:52.160 years ago. Do they actually care if the Staples 00:30:52.160 --> 00:30:54.839 brand survives for another 20 years? And that 00:30:54.839 --> 00:30:57.119 is the multi -billion dollar question, isn't 00:30:57.119 --> 00:30:59.380 it? When you extract your initial investment 00:30:59.380 --> 00:31:02.319 that quickly, the pressure to ensure the long 00:31:02.319 --> 00:31:04.660 -term multigenerational health of the company... 00:31:05.099 --> 00:31:08.220 can diminish is staples being rebuilt for the 00:31:08.220 --> 00:31:10.480 next 50 years or is it just being managed to 00:31:10.480 --> 00:31:13.420 squeeze out the last drops of value before the 00:31:13.420 --> 00:31:15.839 lease runs out on the whole enterprise the eye 00:31:15.839 --> 00:31:18.160 exams and co -working spaces suggest they're 00:31:18.160 --> 00:31:20.559 trying to find a future but the debt load and 00:31:20.559 --> 00:31:22.460 the cost cutting suggests they are walking a 00:31:22.460 --> 00:31:25.859 very very high tightrope a tightrope walk over 00:31:25.859 --> 00:31:29.319 a warehouse full of paper Well, next time you 00:31:29.319 --> 00:31:32.279 drive past that red El Stato logo, take a second 00:31:32.279 --> 00:31:34.880 look. It's not just an office supply store. It's 00:31:34.880 --> 00:31:37.359 a battlefield of modern retail. And as we've 00:31:37.359 --> 00:31:39.380 learned, absolutely nothing about its history 00:31:39.380 --> 00:31:41.779 was truly easy. Thanks for listening to The Deep 00:31:41.779 --> 00:31:43.559 Dive. We'll catch you on the next one. Goodbye, 00:31:43.640 --> 00:31:43.859 everyone.