Staples to invest $10 million in Net unit

Office supply chain Staples will create a stand alone business unit for its online store, which opened just 30 days ago, and invest an additional $10 million in the fledgling operation next year.

The Staples site is targeted specifically at the small-business market, a category of customers most likely to shop in Staples' 900 stores.

In addition, the office supplier runs QuillCorp.com, a site it acquired earlier this year, that targets mid-sized companies. Staples uses electronic data interchange (EDI) over private networks for many large customers.

"We have been cautiously optimistic about e-commerce in the short term, but the response to Staples.com has been overwhelming," Staples spokesman Dan Kaferle said. "It far exceeded our expectations; and the ramp-up has been significantly faster than we expected." He declined to disclose sales or traffic figures.

Forrester Research last month estimated Internet sales of paper and office products to be a $1.3 billion market this year, growing to $2.9 billion in 1999, and more than doubling every year through 2003, when Forrester expects office supplies to be a $65.2 billion category.

But physical-world rivals Office Max and Office Depot Online have been on the Net for some time, with Office Depot launching in January 1998. In August, online-only store OnlineOfficeSupplies.com launched.

"Staples is little overdue--Office Max has been out there almost four years," said Forrester analyst Eric Schmitt. "I don't think they had a lot of choice."

"We're all pursuing the small business category," said Office Depot Online's Keith Butler, executive director of marketing, calling office supplies "a beautiful opportunity and a product set" for online sales. His site does "millions of dollars a month," but he declined to be more specific. Staples.com's launch has not affected his site's growth, Butler said.

The real-world office suppliers are joining a rush of brick-and-mortar merchants to sell online, ranging from the nation's largest book chain, BarnesandNoble.com to video chain Hollywood Online's purchase of Web video store Reel.com, to lingerie shop Victoria's Secret. Wal-Mart is upgrading its online presence too, announcing today that it will sell software supplied by online distributor Digital River.

Kaferle said Staples had already committed $10 million to $12 million to its online store, so the additional investment will push that figure about $20 million.

Staples today announced a $140 million cash purchase of Claricon, a telecom services company, to push further into the small-business market. The company also said it's upgrading 58 of its oldest stores over the next year.