A key office supply business is booming, with stocks and cash up by more than a third in the past month as office supply growth accelerates.
The market for office supplies, which includes office furniture, desks and office supplies such as printer cartridges, computers and scanners, is growing at a pace of about 2% a month, according to Jefferies Inc., the Wall Street firm that tracks the market.
The growth in the office supply sector is not just about the demand for office equipment, Jefferies said.
It’s also driven by the rising demand for digital products, which include tablets, smartphones and other consumer-oriented products.
“The demand for these products is going up, the demand is going to be there,” said David DeWitt, senior analyst at Jefferies.
“You can get a product and you don’t have to spend a lot of money, and it’s going to become a standard part of your life.”
The office supply industry is the fastest-growing segment of the economy, and analysts expect to see an increase in sales, profit and spending as more businesses move into the industry.
Investors are also buying office supplies from retailers like Amazon.com Inc., where the company has made some investments in office supplies over the past year.
The market is expanding faster than the economy as a whole, with demand outpacing supply, according the National Association of Realtors.
The association said in its annual survey of homebuilders in March that the number of vacancies in office supply businesses is at an all-time high of 3.4% from 3.3% a year earlier.
A key question for companies investing in the market is how long it will take to make up for the recent decline in sales.
Companies are already struggling to compete with Amazon and other online retailers that have slashed prices, and are also trying to reduce the supply of inventory that is required to meet rising demand.
More than half of all businesses surveyed by the association said they have already cut down on their inventory in recent months.
And the shortage of supplies means companies are having to pay for new supplies, with retailers cutting prices and adding new products, said Steve Smith, an analyst at Morgan Stanley.
To meet the growing demand for supply, more companies are turning to technology.
Google Inc., which has long been the most dominant online retailer, recently launched its Google Home speaker, an affordable set-top box that offers voice-activated search, music and video streaming, among other features.
Microsoft Corp. recently started shipping its Surface tablet with a built-in webcam, but the tablet is not available in stores.
The company’s other products, including a tablet computer and mobile phone, are not as widely available.
“The consumer has become very much the primary customer of technology, so there’s a huge amount of opportunity in the technology space,” Smith said.
“It’s very hard to compete in a market where people are just searching and downloading.”
The business of office supplies is growing so quickly that even as the industry shrinks, it’s still growing at an annual rate of about 3%, according to the association.
But that’s not the only reason the industry is booming.
There’s a growing number of companies selling physical office supplies and some of them are expanding into new markets.
On Monday, Amazon.co.uk, the online retailer of physical office supply goods, announced it would open its own brick-and-mortar distribution center in London.
Amazon is hoping to tap into a demand for its Amazon Prime service that lets customers save money by ordering items online and then picking them up at home.
In April, Microsoft opened its own fulfillment center in India, opening a second branch there in March.
Other companies are investing in new technology to meet the demand.
Amazon acquired online retailer Amazon.de in March and has been working on a cloud-based service to deliver products from stores.
Amazon.net, an online marketplace, has been expanding to offer products to other retailers.
The demand is growing, and companies are hoping to capitalize on it.
Some are looking to use the growth to expand their businesses.
Last month, Starbucks Corp. announced plans to open a second store in Mexico and hire 3,000 workers to build a coffeehouse and a store in the country.
Several major retailers are also building stores in emerging markets, including Walmart Stores Inc., Target Corp. and Kohl’s Corp. As more companies open stores and hire workers in new markets, there is an opportunity for them to use their new locations to grow their business.
For example, Starbucks will open a store next to its existing location in New York City in early 2020, according a company official.