Staples 2006 Annual Report Download - page 72

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PART I
Item 1. Business
Staples
Staples is the world’s leading office products company. We pioneered the office products superstore concept by
opening 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, expanding to include a variety of retailers,
dealers, and distributors, including other high-volume office supply chains.
Staples, Inc. and its subsidiaries (“we”, “Staples” or the “Company”) operate three business segments: North
American Retail, North American Delivery, and International Operations. 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 K 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
and related products, computers and related products, and office furniture. Although there are no clear demarcations
among customer segments, we target four principal groups: home offices (customers spending over $500 per year on
office products excluding computers and furniture; including home-based businesses and teachers); small businesses and
organizations with up to 20 office workers; medium-size businesses and organizations with between 20 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 three sales channels designed to be convenient to the needs of our customers: retail
stores, catalog, and Internet. Our ability to address all four major customer groups increases and diversifies our available
market opportunities; increases awareness of the Staples brand among customers in all four groups, who often shop
across multiple sales channels; and allows us to benefit from 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.
We strive to provide superior value to our customers through a combination of everyday low prices, a broad
selection of products, convenient store locations, easy to use web sites, and reliable and fast order delivery. Our strategy
is to maintain our leadership in the office products industry by differentiating ourselves from our competition, delivering
industry-best execution, and expanding our market share.
To achieve differentiation we strive to execute our brand promise, we make buying office products easy, in response to
extensive customer research revealing the significant value customers place on an easy shopping experience. Our
commitment to making it easy for our customers to shop is reflected both in terms of the shopping experience and
product offering. We have implemented initiatives in both retail and delivery to improve the customer experience,
infused the “Easy” brand personality in all of our marketing vehicles, web sites, and store signage, actively promoted our
advertising tagline, “that was easy”, and increased the quality and value of our Staples brand products. To respond to the
importance our customers place on courteous and helpful associates, we continue to emphasize our customer service
model in our retail business to ensure a positive shopping experience driven by higher customer engagement. We
continually upgrade our web sites to make it easier for customers to shop for products and services on-line. In addition,
we are growing our copy and print centers through enhanced service and technology, introducing innovative products
that customers can buy only at Staples, and helping customers run their offices by offering technology services such as
computer repair and installation of wireless networks performed by in-store and mobile technicians through our
“EasyTech” service.
We are committed to delivering industry-best execution with a focus on improved service and profitability. Our
recent initiatives have included a focus on our domestic supply chain program. We have improved our overall end-to-end
order to fulfillment execution, increasing in-stock levels, achieving higher inventory turns, and driving better customer
service in retail and delivery. In addition, over the past several years we have continued to focus on driving profitable
sales growth; improving profit margins; and increasing asset productivity. As a result, we have dramatically improved
return on net assets, the primary metric we use to measure shareholder value creation. During 2006 we reached our long-