Staples 2003 Annual Report Download - page 37

hassle-free returns; reduce operating costs to the lowest level consistent with providing quality merchandise and service;
and offer an easy-to-shop store environment with quality products that are in-stock and easy to find, fast checkout and
courteous, helpful and knowledgeable sales associates.
Our retail stores display inventory according to a plan-o-gram that graphically designates the place each item in each
section of the store is displayed and specifies the quantity to be stocked. Related items are typically grouped together for
customer convenience. Associates in our stores are available to consult on purchases, particularly in our furniture,
business machines and technology sections, where customers often need assistance in decision making. Beginning in
fiscal year 2000, Staples began offering retail customers the ability to make purchases on-line through in-store internet
access points to acquire products that are not available in our stores. Internet access points are now in all of our U.S.
stores, and our customers can pay for these purchases at the register or through Staples.com and have the product
delivered to their home or business.
During 2001, we introduced a redesigned layout of our stores called the ‘‘Dover’’ format. This design was created to
improve the appeal of the store to the customer and to open up the interior of the store to give the customer a better
view of our vast array of products. In addition, in fiscal 2002, we reduced the size of our new stores to 20,000 square feet
from our previous 24,000 square foot store format. At February 1, 2003, we had 263 Dover stores, and we plan to open all
of our stores in the United States in 2003 using the Dover format. We also plan to remodel up to 50 existing stores in the
United States into the Dover format during 2003. We continue to improve our Dover store format focusing on
refinements in product placement, store design and adjacencies. In select urban markets, we operate a smaller store
format, ‘‘Staples Express’’, which offers a more focused assortment of products. These smaller stores, ranging from 6,000
to 10,000 square feet, give us the opportunity to meet the office supply needs of customers in a store format that is
efficient and economical in an urban environment.
We continue to execute a more conservative store growth strategy. Our goal is to expand our store base in a prudent
fashion to produce strong sales and yield high returns on our investments. We believe that our network of stores, catalog
and internet businesses in various metropolitan markets enhances our profitability by allowing us to leverage marketing
costs, distribution expense and supervision costs. In determining where to open new retail stores and actively market our
catalog, we evaluate the concentration of small- and medium-sized businesses and organizations, the number of home
offices, household income levels, the availability of quality real estate locations, competition and other factors. While
most of our retail stores have been located in conventional strip shopping centers, we have also successfully converted
non-retail properties to Staples stores. Although we often lease second-use properties, we have also entered into ground
leases where we plan to build a store or arrange to have landlords construct free-standing buildings to our specifications.
In addition, we have on numerous occasions acquired lease rights from prior tenants. We believe that this flexibility in
selecting sites will assist us in securing additional locations in the challenging real estate markets in which we operate.
We plan to open approximately 75 to 90 stores in North America in 2003, versus 72 new stores in 2002 and 117 new
stores in 2001. The growth program for fiscal year 2003 will continue to focus primarily on existing markets, with fewer
new market entries, as we fill in markets we entered during 2000 and 2001. We have also focused on improving under
performing stores in our store portfolio. Many of these stores are in new markets and did not fully benefit from initial
marketing programs that build brand awareness and drive customer traffic. We are re-launching our initiatives in some
markets and are giving more latitude to some store managers to improve profitability by implementing strategies that are
unique to their marketplace.
North American Delivery
Our North American Delivery segment is comprised of two principal operations: our catalog and internet
businesses, operating under the names ‘‘Staples Business Delivery’’ and ‘‘Quill Corporation,’’ and our contract stationer
businesses, operating under the names ‘‘Staples National Advantage’’ and ‘‘Staples Business Advantage.’’
We are implementing a number of strategies focusing on customer service and retention to grow our delivery
business and increase its profitability. These strategies include: focusing on our perfect order metric which measures the
number of orders that we ship without error; enhancing our distribution capabilities; expanding the size of our sales
force; reducing the number of small orders; and increasing the percentage of orders placed electronically.
Staples Business Delivery: Our Staples Business Delivery operations combine the efforts of our direct mail catalog
business, operating since 1990, and our Staples.com and Canadian e-commerce sites. Our direct mail catalog business is
designed to reach all targeted segments of the office products market seeking the convenience of telephone ordering and
free next business day delivery for orders over $50. Staples.com, which began in 1998, is our core electronic marketplace
for small businesses, home offices and power users. The web site provides complete, on-site transaction processing for
3