OfficeMax 2012 Annual Report Download - page 39

Retail
Retail is a retail distributor of office supplies and paper, print and document services, technology products
and solutions, office furniture and facilities products. In addition, this segment contracts with large national retail
chains to supply office and school supplies to be sold in their stores. Our retail office products stores feature
OfficeMax ImPress, an in-store module devoted to print-for-pay and related services. Our Retail segment has
operations in the United States, Puerto Rico and the U.S. Virgin Islands. Our Retail segment also operates office
products stores in Mexico through Grupo OfficeMax. The majority of the products sold by this segment are
purchased from outside manufacturers or from industry wholesalers. We also source substantially all of our
private label products direct from manufacturers. As mentioned above, we purchase office papers primarily from
Boise White Paper, L.L.C., under a paper supply contract entered into on June 25, 2011. (See Note 15,
“Commitments and Guarantees,” of the Notes to Consolidated Financial Statements in “Item 8. Financial
Statements and Supplementary Data” of this Form 10-K for additional information related to the paper supply
contract.)
As of the end of the year, our Retail segment operated 941 stores in the U.S., Puerto Rico, the U.S. Virgin
Islands, and Mexico, three large distribution centers in the U.S., and one small distribution center in Mexico.
Each store offers approximately 11,000 stock keeping units (SKUs) of name-brand and OfficeMax private-
branded merchandise and a variety of business services targeted at serving the small business customer, including
OfficeMax ImPress. In addition to our in-store ImPress capabilities, our Retail segment operated six OfficeMax
ImPress print on demand facilities with enhanced fulfillment capabilities as of the end of the year. These 8,000
square foot operations are located within some of our Contract distribution centers, and serve the print and
document needs of our large contract customers in addition to supporting our retail stores by providing services
that cannot be deployed at every retail store.
Retail sales were $3.3 billion for 2012 and $3.5 billion for each of 2011 and 2010.
Competition
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, office furniture and facilities products. We compete with contract stationers, office supply
superstores including Staples and Office Depot, mass merchandisers such as Wal-Mart and Target, wholesale
clubs such as Costco, computer and electronics superstores such as Best Buy, Internet merchandisers such as
Amazon.com, direct-mail distributors, discount retailers, drugstores and supermarkets, as well as the direct
marketing efforts of manufacturers, including some of our suppliers. 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. 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, the quality and breadth of product selection and convenient locations. Some of our competitors are larger
than us and have greater financial resources, which affords them greater purchasing power, increased financial
flexibility and more capital resources for expansion and improvement, which may enable them to compete more
effectively.
We believe our excellent customer service and the efficiency and convenience for our customers of our
combined contract and retail distribution channels gives our Contract segment a competitive advantage among
business-to-business office products distributors. Our ability to network our distribution centers into an integrated
system enables us to serve large national accounts that rely on us to deliver consistent products, prices and
services to multiple locations, and to meet the needs of medium and small businesses at a competitive cost.
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