Staples 2002 Annual Report Download - page 36

PART I
Item 1. Business
Staples
Staples, Inc. and subsidiaries (‘‘We’’, ‘‘Staples’’ or ‘‘the Company’’) pioneered the office products superstore concept
and is a leading office products distributor. We opened the first office products superstore in Brighton, Massachusetts in
1986 to serve the needs of small businesses. The office products industry has experienced significant growth since 1986 as
the industry has expanded to include a variety of retailers, dealers and distributors, including other high-volume office
supply chains.
We operate three business segments: North American Retail, North American Delivery and European Operations.
Our North American Retail segment consists of U.S. and Canadian business units that, at the end of fiscal 2002, sold
office products and services through 1,300 retail stores. Our North American Delivery segment consists of U.S. and
Canadian catalog and internet business units, along with the U.S. contract stationer business unit, that sell and deliver
office products and services directly to customers. Our European Operations segment consists of our business units that,
at the end of fiscal 2002, sold office products and services through 188 retail stores in the United Kingdom, Germany, the
Netherlands and Portugal and sell and deliver office products and services directly to businesses throughout the United
Kingdom, Germany, France, Belgium, Spain and Italy. Additional information regarding our operating segments is
presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this
Annual Report on Form 10-K, and financial information regarding these segments is provided in Note M in the Notes to
Consolidated Financial Statements contained in this Annual Report on Form 10-K.
Business Strategy
We view the office products market as a large, diversified market for office supplies and services, business machines,
computers and related products, and office furniture. Although there are no clear demarcations among customer groups,
we target four principal end-user groups: power users (customers spending over $500 per year in office products
excluding computers and furniture; primarily home-based businesses, home offices and teachers); small businesses and
organizations with up to 50 office workers; medium-size businesses and organizations with between 50 and 500 office
workers; and large businesses and organizations with more than 500 office workers. We effectively reach each sector of
the office products market through different distribution channels designed to be convenient to the needs of our
customers. Our stores seek to address the retail needs of customers, while our catalog and internet operations focus on
customers who desire delivery of their office products and other specialized services. Our contract businesses are
specifically organized to service the needs of medium and large businesses. Our ability to address all four major end-user
groups increases and diversifies our available market opportunities; increases awareness of the Staples name among
customers in all four end-user groups, who often shop across multiple sales channels; and allows us to enjoy a number of
important economies of scale such as increased buying power, enhanced efficiencies in distribution and advertising, and
improved capacity to leverage general and administrative functions.
In 2001, we announced our Back to Brighton strategy. The three main elements of Back to Brighton are driving
profitable sales growth, improving profit margins and increasing asset productivity. Back to Brighton brings a renewed
focus to the business customer through changes in merchandise mix, marketing and customer service. To improve our
merchandise mix, we eliminated more than 700 products that were consumer-oriented and low margin or slow turning
and replaced these goods with 450 stock keeping units, or SKUs, directed at power users and small business customers.
We have realigned our marketing efforts to focus on power users and small businesses with an increased focus on our
sales force, direct mail, and customer loyalty programs and lesser emphasis on circulars. To improve our customer
service, we have expanded our training of sales associates, added labor hours to certain store departments and changed
our associate bonus plan.
North American Retail
Our North American Retail segment, consisting of 1,300 stores throughout the United States and Canada at the end
of fiscal 2002, generated a majority of our sales and profits during fiscal 2002. Our North American retail stores are
located in 45 states, the District of Columbia and 10 Canadian provinces in both major metropolitan markets and smaller
markets. Our retail operations focus on serving the needs of power users and small businesses.
Our strategy for our North American superstores focuses on several key objectives: provide superior value to our
customers through a combination of every day low prices, a broad selection of products, convenient store locations and
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