Store brands still growing at office supers.(hardlines: OFFICE SUPPLIES UPDATE)

It's all about the margin for the nation's leading office product superstores who are counting on increased penetration of private brands as a key driver of profit growth going forward.

That was certainly the case last year as the percentage of sales generated by private brands at Staples, Office Depot and OfficeMax reached record levels of roughly 20% or more. The three companies' total combined sales reached $42.2 billion and of that amount approximately $8.4 billion came from proprietary brand sales, nearly double the amount from just a few years ago. The increase is one of the reasons each of the office product resellers reported gross margin improvements and increased operating profitability.

While the shift is great for the retailers, it has added pressure to suppliers of branded office products, especially those whose products lack differentiation or questionable brand equity. Now the situation is set to intensify and each of the big three office products resellers has clearly communicated their intention to drive further profit growth through increased private label sales.

Staples has provided the clearest direction in this regard, indicating that 20% of last year's sales of $18.2 billion came from proprietary brands. The company also indicated its long-term goal is to achieve a 30% penetration rate. To get there, Staples last month promoted the former head of its private brand development group, Jevin Eagle, to the position of evp of merchandising where he now oversees all product categories including technology, supplies and office decor. ...