Office Depot, Alibaba Collaborate To Support U.S. SMBs Growth

Office Depot, Inc. (NASDAQ:ODP) plans to collaborate with Alibaba (NYSE:BABA) Group to promote growth of U.S. small- and medium-sized businesses (SMBs). Per the deal, both the companies will launch a new e-commerce site from where these SMBs can access the global supplier network of Alibaba that offers variety of products. Notably, the global e-commerce market is touted to be worth $23.9 trillion, per the U.S. International Trade Commission. Apart from this, SMBs will be able to access selective products and services of Office Depot.

The deal will enable Alibaba to leverage Office Depot’s 10-million U.S. customers along with 1,800 sales professionals. Although Alibaba offers same-day delivery services in China, the company lacks the same facility for customers outside China. Office Depot’s solid supply-chain network and next day delivery services in the United States will mitigate this headwind. At the same time, the company will gain from Alibaba’s strong product base, manufacturing capabilities and global network of more than 150,000 suppliers. With such upsides, both the companies will help SMBs sell products to customers in the United States and the rest of the world via Alibaba’s platform.

In fact, major U.S. retailers and brands have already been benefiting from Alibaba’s e-commerce platform that provides global access to 700 million Chinese customers via its two market places, namely Taobao and Tmall. Moving on, the deal marks Alibaba’s first business-to-business partnership with a major U.S. retailer. Prior to this, the Chinese e-commerce giant had signed a deal with Kroger (NYSE:KR) , per which the latter will sell its products on Alibaba’s e-commerce platform.

We expect such moves to empower Office Depot and help combat stiff competition from players like Amazon (NASDAQ:AMZN) . Moreover, the company is making efforts to transform into a product and services-driven enterprise. That said, we believe that this collaboration will help Office Depot progress in achieving this goal.

In a bid to widen its domain of offerings, this Zacks Rank #3 (Hold) company acquired CompuCom Systems that is helping it acclimatize to the fast-changing retail landscape along with providing enterprise-level tech services and products to customers. The company is also incorporating Tech-Zone services desk across its stores. It also launched a subscription-based business services platform, BizBox to assist start-ups and small businesses on host of things such as website designing, financing and accounting service, HR/payroll support, and others. We believe that improvement in Business Solutions and CompuCom divisions is likely to benefit the company, going forward.

Such well-chalked efforts to boost portfolio and provide impetus to the business have been fueling investors’ optimism in the stock. Shares of this company gained 11.9% in the past three months, outperforming the industry’s growth of 2.7%.

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Bed Bath & Beyond Inc. (NASDAQ:BBBY) , which carries a Zacks Rank #2, has long-term earnings growth rate of 1.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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