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No. 2 Online Retailer Staples Takes on Chegg and Amazon

NEW YORK (TheStreet) -- At first glance, Staples (SPLS - Get Report) brings to mind its office supplies or its marketing campaigns: "Yeah, we've got that" and the "That was easy" button. However, Staples.com is actually the No. 2 online retailer in the U.S. The company continues to fight against leader Amazon (AMZN). The latest move by Staples is to take on several competitors, including the recently public Chegg (CHGG).

Staples announced that it will begin offering textbook rentals through a partnership with BookRenter.com. That will allow Staples to provide over 5.5 million different titles online to college students. BookRenter.com was the first online textbook rental company back in 2006.

Book renter rival Chegg went public in November and has since seen its stock fall by 25%. Shares now trade just over $7, as investors question whether the company can continue to grow despite this new competition. With Staples added to the mix, Chegg shares could actually fall further, as they will need to more heavily rely on diversification to other areas, like study tools.

I'm wondering if Staples will utilize its retail presence to streamline the process. Perhaps Staples could offer free shipping if the books are picked up in-store, or offer some sort of gift card to the store with an online book rental purchase. While Staples' online presence flourishes, its retail operations continue to struggle.

Staples has posted eight consecutive quarters of negative same-store sales. In the most recent quarter, Staples saw same-store sales fall 3%, and also closed 107 underperforming stores. To try to get customers into Staples locations, the company has created partnerships with the U.S. Postal Service, which has branches in 82 Staples locations. In November, Staples announced that it will sell Square Stand at more than 1,000 of its stores. Square sells credit card-reader hardware that enables businesses to accept credit card charges via tablet. Staples includes a gift card offer with a purchase from Square.

Staples continues to find itself in a war with many competitors. The company's two biggest retail rivals, Office Depot and OfficeMax, merged to form the new Office Depot (ODP). Staples has a market capitalization six times larger than this retail rival, though, thanks in large part to a huge online business and international operations.

Retail operations at Staples could continue to struggle, much like many large retailers around the country. Staples is not completely safe from this trend, but does have the added safety margin because of its online dominance. Staples continues to push the envelope with Amazon, even offering a price match through the holidays on most items found online. In the third quarter, Staples told investors it completed a big refresh to its website, which added 70,000 additional products. Staples also acquired Runa, an e-commerce personalization technology company, that could boost online incremental sales.

Staples shares trade close to their 52-week lows, which seems a little unfair. The company should continue to shine with less retail competition and an increasing online presence.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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