Staples 2003 Annual Report Download - page 39

We have approximately 8,000 SKUs stocked in each of our typical North American retail stores and approximately
15,000 SKUs stocked in our North American delivery business. We also offer over 130,000 additional SKUs to our
customers through the internet, including internet access points in our U.S. retail stores. In order to minimize unit costs
and selling prices, we sell most products in multi-unit packages. The pack sizes are designed to be large enough to be cost
effective without being burdensome to our small business customers.
Our product offering includes approximately 1,000 Staples private label items which are primarily in consumables
categories. In fiscal 2002, we expanded our 10-year old private label program to focus on the Staples brand rather than
controlled brands with greatly improved packaging. Staples branded products generally offer better gross margins than
national brands and provide high quality and, we believe, better value to our customers. We also offer an array of
services, including high-speed, color and self-service copying, other printing services, faxing, pack and ship services,
payroll services and product warranty contracts.
Our strategy is to tailor our product mix to meet the needs of customers by regularly evaluating sales and profit
performance for each of our SKUs. In connection with our Back to Brighton strategy, we reevaluated our retail product
assortment to refocus on the more profitable small business customers and power users. This began with a SKU
rationalization process aimed at maximizing our assortment value and eliminating many of our low margin or slow
moving consumer oriented SKUs. We added approximately 450 SKUs aimed at meeting the needs of our small business
and power user customers while eliminating more than 700 consumer-oriented SKUs. This process included eliminating
some of the entry-level, consumer only, low-end business machines in favor of more heavy duty, higher-end products with
business features and functions that better fit our core customers’ needs. We have also reevaluated our computer
selection and now stock only one PC SKU in approximately 400 of our retail stores. We continue to stock an assortment
of PCs in the rest of our stores and have increased our focus on build-to-order computers in all of our retail locations.
The following table shows our sales by each major product line as a percentage of total sales for the periods
indicated:
Fiscal Year Ended
February 1, 2003 February 2, 2002 February 3, 2001
Office supplies and services ................. 41.7% 40.8% 39.6%
Business machines and related products ........ 30.5% 29.8% 28.7%
Computers and related products ............. 20.9% 22.3% 23.9%
Office furniture .......................... 6.9% 7.1% 7.8%
100.0% 100.0% 100.0%
We select our vendors based upon quality, price, delivery reliability and, where appropriate, customer brand
recognition for all of our sales channels. As a result of the volumes in which we purchase our products and our
centralized distribution facilities, we are able to obtain favorable pricing from our vendors. In fiscal 2002, we began to
use reverse on-line auctions, an internet-based bidding process, to achieve savings through lower costs from our vendors
on many of the items we use to operate our business and on some of the products we sell. We purchase products from
several hundred vendors worldwide, and we believe that competitive sources of supply are available to us for substantially
all of the products we carry.
Supply Chain
We operate centrally located distribution centers across the United States to service the majority of our replenish-
ment and delivery requirements for our U.S. retail and North American delivery operations. Most products are shipped
from our suppliers to the distribution centers for reshipment to our stores and delivery to our customers through our
delivery hubs. As of February 1, 2003, four distribution centers, located in California, Connecticut, Indiana and
Maryland, supported our U.S. retail operations, and 31 distribution centers throughout the United States and Canada
supported our North American delivery operations. Of our 31 North American delivery distribution centers, seven
locations service multiple delivery businesses, with our distribution center in London, Ohio, which we opened in 2002,
supporting all of our delivery businesses. We plan to continue to expand our multi-business capabilities into three
additional locations in 2003.
5