STAPLES BAGS TOP GROCERY CHAINS 2004-11-08 (2)

CHRISTINE BLANK

QUINCY, Mass. -- Office supply chain Staples is making a move into supermarkets.

Stop & Shop Supermarket here is in the process of switching office supply chain partners from Office Depot to Staples, Framingham, Mass., SN learned. Meanwhile, Staples told SN it has embarked on a test of similar sections in stores of Kroger, Cincinnati.

The Ahold-owned chain opened its first Staples "store-within-a-store" last month in Walpole, Mass. Other stores, such as the ones in Rhinebeck, N.Y., and East Meadows, N.Y., were expected to convert to Staples by early November, store employees told SN. Stop & Shop partnered with Office Depot, Delray Beach, Fla., on in-store sections back in 2002. Industry observers noted the relationship may have soured as the chain started opening major new stores without the Office Depot sections. The recent acquisition of Shaw's Supermarkets, West Bridgewater, Mass., by Albertsons, Boise, Idaho, which also has Office Depot sections, may have been another factor, sources said.

Neither Stop & Shop, Albertsons, Kroger, nor Office Depot responded to requests for comment. While the status of Albertsons' relationship with Office Depot could not be determined, some Albertsons' stores in the original test, including a Jewel-Osco on North Ashland in Chicago, still feature the Office Depot sections, said a store employee.

Additionally, Staples said Kroger began testing Staples departments in some of its Smith's Food and Drug Stores in Las Vegas and Salt Lake City late this summer.

The pilot, in six Smith's stores in Las Vegas and seven in Salt Lake City, includes a wide range of Staples' office supplies, including ink and toner cartridges and copy paper. Kroger executives did not return calls for comment on the initiative. The test is part of "Staples' ongoing efforts to make it easy for customers to buy office products," a spokeswoman told SN.

At Stop & Shop, industry observers expect the 15 to 20 stores with Office Depot sections to switch to the Staples brand. Some new stores with Stop & Shop's "new prototype" format will add the Staples sections.

The sections are typically found in Stop & Shop's larger stores -- 50,000 square feet or more -- that emphasize one-stop shopping, with a Toys "R" Us section, a "Bestsellers" media department, restaurants and, in some cases, a dollar section.

As a result of Stop & Shop's move to add office supply sections, other New England-area supermarket chains are building up their office and school supply departments, said Al Jones, senior vice president of procurement and merchandising for Imperial Distributors, Auburn, Mass.

"They are certainly expanding category and footage way beyond what you would normally see in supermarkets. You see people doubling linear footage, expanding to both sides of a full aisle," Jones said.

In some cases, grocers are testing larger office items, such as file cabinets, lamps and ready-to-assemble office furniture, Jones added.

Meanwhile, Office Depot may be able to hang on to Albertsons' stores that have been carrying its products since late 2003, but it is unclear whether it will be adding new stores to the list.

Albertsons converted its school and home office supply sections in 18 stores in Chicago, Los Angeles and Phoenix into branded Office Depot sections in late 2003. Simultaneously, it partnered with several other chains on store-within-a-store sections. These chains include Starbucks, Krispy Kreme Donuts and Toys "R" Us.

In the pilot project, the Office Depot store-within-a-store featured more than 700 stockkeeping units of copier paper, ink jet cartridges, mailing materials, school supplies and other items.