Staples 2005 Annual Report Download - page 56

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primarily designed to reach small businesses and home offices, offering next business day delivery for most office supply
orders in major metropolitan areas. Our Internet sites provide complete transaction processing for the purchase of over
50,000 office products and services. We market Staples Business Delivery through direct mail catalogs, a telesales group
generating new accounts and penetrating existing accounts and Internet and other broad-based media advertising.
Quill Corporation: Founded in 1956 and acquired by Staples in May 1998, Quill is a direct mail catalog and
Internet business with a targeted approach to servicing the business product needs of approximately one million small
and medium-sized businesses in the United States. To attract and retain its customers, Quill offers outstanding customer
service, Quill brand products and special services.
Staples National Advantage and Staples Business Advantage: Our Contract operations focus primarily on serving the
needs of medium-sized to large businesses that often require more service than is provided by a traditional retail or mail
order business. Through our Contract sales force, we offer customized pricing, payment terms, usage reporting, the
stocking of certain proprietary items and full service account management. Our Contract operations are divided into two
businesses. Staples National Advantage is a nationwide Contract business selling to large multi-regional businesses.
Staples Business Advantage primarily sells to medium-sized and large regional companies. We initially established the
Contract business through acquisitions, and since that time have entered certain metropolitan markets through the
expanded sales and distribution capabilities of Staples Business Advantage. StaplesLink.com, which offers the highest
level of procurement functionality available on our web sites, meets the online procurement needs of our Contract
customers.
Our strategies for North American Delivery focus on customer service and customer acquisition and retention to
grow our delivery business and increase its profitability. We continue to focus on improving our perfect order metric,
which measures the number of orders that we fulfill on time and without error. We have established customer service
standards to improve recovery of service failures and to make it easy for customers to resolve any issues with their orders.
We are also working to enhance our distribution capabilities by increasing the number of multi-business fulfillment
centers and reducing the number of single business facilities, and these strategies are expected to enhance our ability to
provide next business day delivery to more markets. We intend to further improve our infrastructure in 2006 to enable us
to minimize the number of extra deliveries required. This should increase the number of orders that we ship complete,
next day and in one delivery to increase customer satisfaction and make the process easy for our customers. We continue
to expand our sales force as we increase our market share and drive penetration of existing customers. We also plan to
continue to enter new geographic markets, add new products and services and consider acquisitions opportunistically to
drive sales growth in this segment of our business. In addition, we continue to drive profitability by increasing our
customers’ average order size and the percentage of orders placed electronically.
International Operations
Our International Operations consist of retail stores, catalog and Internet businesses operating under various names
in 19 countries in Europe, South America and Asia. As of January 28, 2006, we operated retail stores in Belgium,
Germany, The Netherlands, Portugal and the United Kingdom. In addition, we operate catalog and Internet businesses
in Argentina, Austria, Belgium, Brazil, China, Czech Republic, Denmark, France, Germany, Hungary, Italy,
Luxembourg, The Netherlands, Poland, Spain, Sweden, Switzerland, and the United Kingdom.
Europe represents an important opportunity for us. We expect that over time we will achieve the level of
profitability we have attained in North America with a strong multi-channel offering, improving execution and
capitalizing on additional synergies. In our retail business, we are implementing strategies that were successful in North
America, which focus on developing relationships with small business customers and home offices by driving steady sales
of consumable office supplies. We plan to open approximately 10 new stores in Europe in 2006, compared to 8 new
stores in 2005 and 11 new stores in 2004. In 2004, we acquired 59 Office World stores (of which 13 stores were
subsequently closed) and transformed the remaining 46 stores into the Staples format during 2004 and 2005. We believe
our delivery business in Europe is one of our best growth opportunities. With our acquisitions over the past several years
in the delivery channel combined with our Staples branded delivery business, we believe that we are well positioned for
success as a multi-channel distributor of office products in Europe. We plan to implement supply chain improvements as
well as focus on better integrating our businesses to drive synergies and improve their profitability. Delivery represents a
larger portion of the market opportunity in Europe than retail due to factors such as shopping behavior, gas prices and
road networks. We plan to continue to grow our delivery business rapidly, as well as expand our multi-channel offerings.
Our goal is to focus on one private brand, Quill, to give us a stronger offering across Europe where we have doubled the
number of private brand products we offer since 2004.