OfficeMax 2009 Annual Report Download - page 10

vendors are small or medium sized businesses which are being significantly impacted by current
macroeconomic conditions, both in the U.S. and Asia, including reduced access to credit. We may
have no warning before a vendor fails, which may have an adverse effect on our business and
results of operations. Further, we cannot control the cost of manufacturers’ products, and cost
increases must either be passed along to our customers or will result in erosion of our earnings.
Failure to identify desirable products and make them available to our customers when desired and
at attractive prices could have an adverse effect on our business and our results of operations. Our
product offering also includes many proprietary branded products. While we have focused on the
quality of our proprietary branded products, we rely on third party manufacturers for these
products. Such third-party manufacturers may prove to be unreliable, the quality of our globally
sourced products may not meet our expectations, such products may not meet applicable
regulatory requirements which may require us to recall those products, or such products may
infringe upon the intellectual property rights of third parties. Furthermore, economic and political
conditions in areas of the world where we source such products may adversely affect the
availability and cost of such products. In addition, our proprietary branded products compete with
other manufacturers’ branded items that we offer. As we continue to increase the number and types
of proprietary branded products that we sell, we may adversely affect our relationships with our
vendors, who may decide to reduce their product offerings through OfficeMax and increase their
product offerings through our competitors. Finally, if any of our customers are harmed by our
proprietary branded products, they may bring product liability and other claims against us. Any of
these circumstances could have an adverse effect on our business and financial performance.
Intense competition in our markets could harm our ability to maintain profitability.
Domestic and international office products markets are highly and increasingly competitive.
Customers have many options when purchasing office supplies and paper, print and document
services, technology products and solutions and office furniture. We compete with worldwide
contract stationers, office supply superstores, mass merchandisers, wholesale clubs, computer and
electronics superstores, Internet merchandisers, direct-mail distributors, discount retailers,
drugstores, supermarkets and thousands of local and regional contract stationers. In addition, an
increasing number of manufacturers of computer hardware, software and peripherals, including
some of our suppliers, have expanded their own direct marketing efforts. The other large office
supply superstores have increased their presence in close proximity to our stores in recent years
and are expected to continue to do so in the future. In addition, many of our competitors have
expanded their office products assortment, and we expect they will continue to do so. We anticipate
increasing competition from our two domestic office supply superstore competitors and various
other competitors for print-for-pay and related services. Print and documents services, or
print-for-pay, and related services have historically been a key point of difference for OfficeMax
stores. Any or all of our competitors may become even more aggressive in the future. Increased
competition in the office products markets, together with increased advertising, has heightened
price awareness among end-users. Such heightened price awareness has led to margin pressure
on office products and impacted the results of both our Retail and Contract segments. In addition
to price, competition is also based on customer service, differentiation from competitors, the quality
and breadth of product selection, and convenient locations. Some of our competitors are larger
than us and have greater financial resources, which afford them greater purchasing power,
increased financial flexibility and more capital resources for expansion and improvement, which may
enable them to compete more effectively.
We may be unable to identify additional sales through new distribution opportunities or
replace lost sales. Our long-term success depends, in part, on our ability to expand our product
sales in a manner that achieves appropriate sales and profit levels. This could include selling our
products through other retailers, opening new stores or entering into novel distribution
arrangements. When we sell our products through other retailers we rely on those retailers to
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