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Friday, October 31, 2014

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Staples’ head man promotes social responsibility

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Steve Matyas

The interview with Steve Matyas, president of Staples Canada, went pretty well right until the very end. As I shut my notebook, he noticed that it bore the distinctive green and white colours of arch rival, Grand & Toy.

Ooops. Talk about a Seinfeld moment, something akin to wearing an Orioles ball cap to a Yankees’ private box.

Make sure you bring a Staples notebook the next time, Matyas quipped, with a broad smile on his face.

With Staples a market leader in so many fields, Matyas can take the unintended slight with a healthy dose of good humour. After all, Staples is Canada’s leading office supply vendor, and the country’s biggest online retailer, outselling the likes of Amazon by a wide margin.

It’s also a multiple recipient of business awards: Marketing Magazine’s Marketing/Leger corporate reputation survey placed the company in its top 10 for the sixth year in a row.

The company’s reputation has been built on several ingredients: it has gained recognition for its efforts to be environmentally responsible by promoting recycling; it donates dated, but still quite valuable computer equipment to schools and it promotes the concept of corporate social responsibility.

All the while, the mega-retailer has racked up sales in the billions. According to the 2012 annual report of parent company, Staples Inc., Staples Canada’s more than 330 stores recorded sales of $3.15 billion, up from $3.07 billion in 2011 and $2.29 billion the year before.

By contrast, the U.S. operation, serving a country 10 times the size, achieved sales of $16.8 billion in 2012.

Office supplies continue to account for the bulk of sales: 43.9 per cent; services, amount to 6.7 per cent; office machines and related products, 29.7 per cent; computers and related products 14.1 per cent; and office furniture, 5.6 per cent.

When Matyas first got involved in the office supplies business more than 20 years ago, he joined the Business Depot and he was the company’s first employee. Staples Inc. was a minority shareholder. The company focused on office supplies and paper products. But times changed and so did consumers’ shopping patterns. Adapting to customers’ needs, the company brought in technology items, like computers and tablets while broadening its offerings to make it a one-stop shopping experience for those looking to outfit an office.

“It’s always the result of what the customers want,” explained Matyas, 58, who in over 19 years with Business Depot served as vice-president of operations, human resources and store planning, as well as vice-president of sales and operations.

Office supplies remain the most profitable segment; margins on electronic items are much thinner, he added.

To ensure the company stays ahead of the curve, it constantly scopes out new products. Staples’ buyers head to Asia regularly – particularly Japan and South Korea – to see what’s new on the technology front. They spend a week or so at a technology show in Las Vegas, while additional input is solicited from “online panels,” virtual focus groups. From time to time, the company “takes a flyer on what the customer might want,” Matyas said.

That strategy worked particularly well with the Notebook mobile computing solution, which Staples was the first to import and sell in Canada. The company did so “long before people realized they wanted or needed them,” he said.

There’s really no secret to the company’s success, he continued.  It’s a combination of several things, starting with “a value proposition” that makes prices up to 40 per cent lower than those of competitors. Add in the selection – triple that of its biggest competitors – plus “a manic focus on customer service” – and you end up with Canada’s largest office supply retailer.

When the Business Depot opened for business in 1991, expectations were they’d do well, but the firm’s growth surprised even him. At the time, he expected it would max out at 26 stores and $500 million in business.

But aided by the growth of home offices and small businesses and its commitment to remaining “brand agnostic,” never putting its eggs in a single basket, the company grew and grew.

Staples Inc., a minority shareholder, held warrants to purchase outstanding shares at a set multiple of EBITDA (Earning Before Interest, Taxes, Depreciation and Amortization), so with profits soaring, they stepped up in August 1994 and acquired the 58 per cent it did not already own.

With so many years in the retail business, can he predict what the future holds?

Matyas won’t answer that question, except to point out he’s the guy who thought they’d top out at 26 stores.

Nevertheless, he was pretty forward looking years ago when he decided to help the planet when it was far from fashionable to do so. In the early years, he purchased a rather expensive bailer to crush and bind cardboard. He paid someone to haul it away for recycling. The easier solution was to do what everybody else was doing – put it in the trash to be dumped in landfill.

Environmental sustainability has long been the company’s credo, and to this day, Staples will accept batteries, worn out electronic devices, even pens and other writing implements purchased elsewhere, for recycling he said.

The company expresses its “social responsibility” by supporting the Special Olympics, providing the organization with more than 15 per cent of its operating revenues. And last year, Staples spent more than $1 million to help children in need by providing school supplies.

“I felt a strong responsibility by the company to give back to the communities in which we operate. It’s the right thing to do,” he said. “By the way, that’s something I learned from Murray Koffler.”

That’s a reference to his career before office supplies, working in several positions for several subsidiaries of Koffler Associates. Among them were Super-Pharm and Shoppers Drug Mart. From 1986-87, he lived in Herzliya Pituach, working as chief operating officer of Super-Pharm.

“It was fabulous,” he said. “I really enjoyed that.”

It was a great learning experience, as well, seeing how a retailer could market products in an inflationary environment.

Israel suffered from hyper-inflation in those days, yet the company introduced the don’t pay a cent event. “We used it here with great success,” he said.

Business practices were quite different in the two countries, he continued. Matyas recalled one sales rep from a major supplier missing an 8:30 a.m. meeting, but showing up at 4:30 expecting to go on as if nothing had happened. Stepping into his office, the salesman looked left and right, didn’t see anyone and pretty much said, let’s start the meeting. “That was my lesson on chutzpah,” Matyas joked.

For Matyas, that sojourn in Israel marked the second time he lived in the Jewish state. Born in Romania, the family fled the Communist regime when he was just a kid. They settled in Israel, where they lived for three years.

In 1960, the family moved to Canada, settling in Windsor.

It appears that even with the passage of time, he’s retained a soft spot for chutzpah, even if it’s inadvertently displayed with a competitor’s notepad.

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