Office Depot 2003 Annual Report Download - page 11

business order products using our Office Depot and Viking
brand catalogs and via the Internet at our Office Depot
public web site (www.officedepot.com) and Viking public
web site (www.vikingop.com). We expanded our offerings
when we acquired 4Sure.com in 2001, adding web sites
(www.computers4sure.com and www.solutions4sure.com)
aimed at more sophisticated technology purchasers. We have
integrated 4Sure.com into other Office Depot offerings and
have added a new web site (www.techdepot.com) for technol-
ogy purchases. We believe our Internet business will provide
significant future growth opportunities for our BSG segment
and our business as a whole based on the growth rates we
have experienced over the last three years.
BSG orders are filled through our Customer Service
Centers (“ CSCs”), which provide warehouse and delivery
functions for our catalog, contract and Internet customers. Some
CSCs also house sales offices, call centers and administrative
offices. At the end of 2003, we operated 22 CSCs in
the United States, consisting of 12 Office Depot facilities, two
Viking facilities and eight combined facilities. During 2003, we
closed two Viking facilities and consolidated their operations
into existing Office Depot facilities. Over the past three years,
we have implemented advanced technologies to assist with
reordering, stocking, the pick-and-pack process, and delivery
operations. As a result, warehouse costs have been declining in
recent years. In 2004 we plan to implement additional strategies
that we believe will make our warehouses even more efficient.
International Division
Our International Division sells office products and serv-
ices in 21 countries outside the United States and Canada
through retail stores (in France, Japan and Spain), direct mail
catalogs, Internet sites, contract sales force, and through inter-
national licensing and joint venture agreements. The growth
in our International Division in more recent years has come
from startup operations, primarily in Europe, but also from the
acquisition of Guilbert S.A. (“ Guilbert”) in June 2003. The
acquisition of Guilbert has doubled the size of our business in
Europe and established Office Depot as the leading reseller of
office products in many of the principal countries of Europe.
At the beginning of 2003, we sold our operations in Australia
to focus on locations where we could be a market leader.
Internationally, we have grown our retail business through
the selective opening of company-owned retail stores and
through joint venture and licensing agreements. In 2003, we
expanded this business into Spain with the opening of six
retail stores. At the end of 2003, our International Division
served customers through 64 company-owned office supply
retail stores, and participated in 135 more through licensing
and joint venture agreements. In 2004, we plan to expand our
International Division’s retail presence by opening 5 to 10
company-owned stores in existing retail markets.
The international catalog business was launched in 1990
under the Viking Direct威brand with the start-up of operations
in the United Kingdom. With the expansion into three addi-
tional countries during 2002, we now have catalog offerings
in 12 countries outside of North America.
In March 1999, we introduced our first international
public web site (www.viking-direct.co.uk) for consumers and
businesses in the United Kingdom. Today we operate 31 sep-
arate international web sites. Our international e-commerce
business increased 204% during 2003 and additional growth
is expected in future years.
We launched our Office Depot contract business in the
United Kingdom in 2000 and have since expanded into Ireland,
the Netherlands, France, Japan and Italy. In early 2003 we
began contract operations in Germany. This channel targets
medium- to large-sized businesses and offers personalized serv-
ice through a dedicated sales force, individualized pricing and
overnight fulfillment, using our existing logistics infrastructure.
In June 2003, we further expanded our contract business
with the acquisition of Guilbert, a leading contract stationer in
Europe. Guilbert sells to small, medium and large companies
in France, the UK, Germany, Italy, Ireland, the Netherlands,
Spain, Belgium and Portugal through a direct sales force and
through e-commerce and other Internet solutions, under the
Guilbert威and NiceDay™ brand names. Our acquisition of
Guilbert has accelerated our growth in the large-sized busi-
ness customer channel in Europe, contributing sales of $808.8
million since acquisition. The acquisition of Guilbert has also
added management depth, market experience, purchasing
power and scale to the International Division. We are in the
process of integrating Guilbert into our existing country sys-
tems and processes, and expect to generate significant cost
reductions as a result.
International Division company-owned store and CSC
operations for the last three years are detailed below.
Office Supply Stores
Open at Beginning Open at End
of Period Opened Closed of Period
2001 . . . 35 6 2 39
2002 . . . 39 13 2 50
2003 . . . 50 16 2 64
Customer Service Centers (1)
Open at Open at
Beginning End
of Period Opened Closed Guilbert (2) of Period
2001. . . . 12 3 1 — 14
2002. . . . 14 3 2 — 15
2003. . . . 15 — — 10 25
(1) The number of Customer Service Centers has been reduced to
reflect Australia as a discontinued operation.
(2) Post-integration warehouses obtained as a result of June 2003
acquisition of Guilbert.
Additionally, as of December 27, 2003, we participated in
operations of 135 office supply stores and 5 CSCs under our
licensing and joint venture agreements. In 2002 and 2001, we
participated in operations of 121 office supply stores and 5
CSCs and 104 office supply stores and 6 CSCs, respectively.
9Office Depot 2003 / Form 10-K