Staples 2015 Annual Report Download - page 82

PART I
4 STAPLES Form 10-K
Staples Australia serves primarily contract and government
customers in Australia and New Zealand. In addition, we
operate a public website which targets small business and
home office customers. Our strategies focus on improving
sales force productivity by increasing customer acquisition and
retention, and by providing customers with a broad assortment
of products and services, including office products, facility
and breakroom supplies, technology, business furniture and
print management.
We continue to build a foundation for growth in Asia and South
America. We operate delivery businesses in China, Argentina,
Taiwan and Brazil.
Merchandising and Marketing
We sell a wide variety of office supplies, business technology
products, facilities supplies and breakroom supplies,
computers and mobility products, copy and print services, and
office furniture. Our merchandising team constantly reviews
and updates our product assortment to respond to changing
customer needs and to maximize the performance of our key
categories. Ink and toner remain important categories, and
we offer our customers a wide assortment of these products
at competitive prices which are supported by our loyalty
programs. One of our top priorities is to continue to expand
our product offering beyond office supplies. Over the past few
years we have had success driving growth in adjacent product
categories, such as facilities supplies and breakroom supplies.
These positive results have reinforced our strategy and we
continue to broaden our offering.
Our merchandising team uses integrated systems to perform
the vast majority of our merchandise planning and product
purchasing centrally. Some of our business units, particularly
Quill.com, our Canadian operations and our international
businesses, leverage our global buying and merchandising
staff along with local staff to meet their specific buying and
merchandising needs. We purchase products from thousands
of vendors around the world and we believe that competitive
sources of supply are available to us for substantially all of the
products we carry.
Our product offering includes Staples, Quill, and other
proprietary branded products, which represented
approximately 28% of our sales in 2015. We offer more
than 10,000 own brand products and services, including
an assortment of products with various environmentally
friendly attributes, which includes our “Sustainable Earth”
brand products. Own brand products deliver value to our
customers with prices that are on average are at least 10%
lower than the national brand, while generating higher gross
margin rates on average than national brands. Our own brand
strategy is based on offering a portfolio of products that meet
our customers’ needs across a variety of product categories
and price points. The largest portion of our portfolio focuses
on offering national brand quality at lower prices. We have
developed a selection of opening price point products for
more price conscious customers. We have also developed a
number of unique and innovative own brand products to help
differentiate Staples in the marketplace. Our sourcing office in
Shenzhen, China supports our own brand strategy by driving
higher quality and lower costs, and by bringing new products
to market more quickly. In addition to our proprietary branded
products, we also differentiate our core product offering
through exclusive third-party relationships.
In addition to products, we also offer a broad array of services,
which represented 9.5% of our sales in 2015. This includes
copy and print services that we provide to our retail and
delivery customers, as well as technology services that we
provide through our “EasyTech” business in North American
Stores & Online. As with the markets for our products, the
market for these services is highly fragmented, and we believe
we have a significant opportunity to offer these services to
existing customers and acquire new customers.
See Note P - Segment Reporting in the Notes to the
Consolidated Financial Statements for a summary of our sales
by each major category.
Our “Make More Happen” brand campaign utilizes a variety
of marketing vehicles to drive brand awareness and sales of
products and services to new and existing customers. These
vehicles include television, radio, newspaper circulars and
internet advertising, including mobile applications and social
media. Increasing our presence in social media is important as
this is a new and growing way for Staples to interact with and
serve our customers. We also utilize e-mail marketing, loyalty
programs and sophisticated direct and digital marketing
capabilities. In addition, we market to larger customers through
a field sales force. We change the level of marketing spend, as
well as the mix of media employed, depending upon market,
customer value, seasonal focus, and cost factors. This flexible
approach helps us to optimize the effectiveness and efficiency
of our marketing expenditures. We continue to improve our
systems and capabilities to track our customers’ multi-channel
purchasing behaviors, execute more effective personalized
and dynamic offers, and promote enhanced direct marketing
and customer loyalty programs to drive higher sales across all
our channels.
Supply Chain
We operate two networks to fulfill the majority of our
replenishment and delivery needs in North America. Our
network of 61 delivery fulfillment centers supports our North
American Commercial and Staples.com operations. We
currently fulfill the majority of customers’ orders through this
distribution network. As we expand our assortment, we are
increasingly relying on third parties to fulfill orders and deliver
products directly to our customers. We operate a separate
network of four large distribution centers to support our U.S.
retail store operations. Our retail distribution centers provide
us with significant labor and merchandise cost savings by
centralizing receiving and handling functions, and by enabling
us to purchase in full truckloads and other economically
efficient quantities from suppliers. Our centralized purchasing
and distribution systems enable our store associates to spend
more time on customer service and store presentation. Since
our distribution centers maintain backup inventory, our in-
store inventory requirements are reduced, allowing us to more
efficiently operate our retail stores.
In Europe, we are in the process of reducing the complexity and
redundancy of our distribution network. We are standardizing
all of our supply chain processes and systems architecture,
and continuing to consolidate facilities. These efforts are
expected to improve customer service and quality, drive cost
savings and increase overall operating efficiency.