Staples 2007 Annual Report Download - page 79

services, such as the capability to print signs and banners and ‘‘Business Cards in Minutes’’, a service that delivers
professional quality business cards to customers while they wait. Investments in marketing and pricing drive greater
customer awareness of our capabilities, increasing sales and average order size. Our copy and print business is highly
profitable, and growth in this area contributes meaningfully to gross margin expansion. Following the success of our retail
copy and print business, we began to leverage our sales force and delivery network to offer copy services to our Contract
customers. We operate seven dedicated copy facilities to service the copy and print needs of corporate accounts, and we
plan to open more Contract copy facilities going forward to meet the growing demand in this category.
Another important service opportunity is in the technology services arena, a fragmented market largely served by
local independents. We provide a full range of installation, upgrade, and repair services, as well as data protection,
privacy, and security services through our ‘‘EasyTech’’ program. Currently, all of our stores are staffed with at least one
Staples EasyTech associate, and we continue to invest in our technology services infrastructure to further develop our
range of capabilities.
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 2, 2008 February 3, 2007 January 28, 2006
Office supplies and services ................. 41.8% 40.7% 40.1%
Business machines and related products ........ 30.5% 30.2% 30.3%
Computers and related products ............. 20.5% 21.6% 21.9%
Office furniture ......................... 7.2% 7.5% 7.7%
100.0% 100.0% 100.0%
Supply Chain
We operate two distinct networks to service the majority of the replenishment and delivery requirements for North
America: a network of 4 retail distribution centers in California, Connecticut, Indiana and Maryland to support our US
retail operations, and a separate network of 32 delivery fulfillment centers to support our North American Delivery
operations. Most products are shipped from our suppliers to the distribution and fulfillment centers for reshipment to
our stores and delivery to our customers through our delivery hubs. Of our 32 North American Delivery fulfillment
centers, 14 locations service more than one of our delivery businesses and 6 of the 14 locations support all three of our
delivery businesses. We continue to invest in new facilities to support rapid growth and maintain excellent service in our
North American Delivery business. We opened new fulfillment centers in Denver and Nova Scotia during 2007.
We believe our 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. We also believe that the reduction in the number of purchase orders and invoices processed
results in significant administrative cost savings. Our centralized purchasing and distribution systems also permit 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, and we operate smaller gross square footage stores
than would otherwise be required. A smaller store size reduces our rental costs and provides us with greater opportunity
to locate stores closer to our target customers.
Beginning in 2006, we increased our focus on improving our North American Delivery supply chain to support our
rapid growth and ensure excellent customer service. We are implementing a series of projects as part of a multi-year
program to reduce inventory while maintaining strong performance in our perfect order metric. Our goals are to drive
inventory turn improvement; reduce the number of trips per order; leverage logistics expense; increase product margins
by stocking more inventory in our own facilities and driving down shrink and damages in our network; drive greater
efficiency and throughput in our fulfillment centers; and give our customers more control over how Staples services
them.
More recently, we have begun to address supply chain improvement opportunities in our European operations. In
2007, in the United Kingdom, we opened a state of the art distribution center, improving service levels, lowering costs by
developing our central distribution capabilities, and replacing less efficient practices of vendors delivering directly to
retail stores. We continue to evaluate opportunities for process improvement in our supply chain practices throughout
our International operations.
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