Staples 2012 Annual Report Download - page 82

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Our expanded offering of proprietary branded products may not improve our financial performance and may expose
us to intellectual property liability, product liability, import/export liability, government investigations and claims, and other
risks associated with global sourcing.
Our product offering includes Staples, Quill and other proprietary branded products and services, which represented
approximately 28% of our sales in fiscal 2012 and which typically provide for higher margins. Our proprietary branded products
compete with other manufacturers' branded items that we offer. An increase in our proprietary branded products and services also
exposes us to added risks that could increase the cost of doing business, such as third party intellectual property infringement,
false advertising, and product liability claims against us with respect to such products and services; and import and export
compliance issues. Furthermore, although we have implemented policies and procedures designed to facilitate compliance with
laws and regulations relating to importing merchandise from abroad, there can be no assurance that contractors, agents, vendors,
manufacturers or other third parties with whom we do business will not violate such laws and regulations or our policies, which
could subject us to liability and could adversely affect our operations or operating results. We also have greater exposure and
responsibility to the consumer for replacements as a result of product defects. If any of our customers are harmed by our proprietary
branded products or services, they may bring product liability and other claims against us or we may have to issue voluntary or
mandatory recalls.
The more proprietary branded products and services we offer, the more these risks increase. A loss of consumer acceptance
of these products could also adversely affect our sales and gross margin rates. Any of these circumstances could damage our
reputation and have an adverse effect on our business and financial performance.
Problems in our information systems and technologies may disrupt our operations.
We rely heavily on various information systems and technology to sell and deliver our products and services and operate
our business, including systems to track inventory, to process and record transactions, to generate financial reports and to
communicate with our associates, vendors and customers. Our ability to attract and retain customers, compete and operate
effectively depends in part on a consistent, secure and easy to use technology infrastructure with reliable back-up systems. Any
disruption to the Internet or our technology infrastructure, including a disruption affecting our web sites and information systems,
may cause a decline in our customer satisfaction, jeopardize accurate financial reporting, impact our sales volumes or result in
increased costs. We may also outsource our information technology to third parties. Although we continue to invest in our
technology, if we are unable to continually add software and hardware, effectively manage or upgrade our systems and network
infrastructure, and develop effective system availability, disaster recovery plans and protection solutions, our business could be
disrupted thus subjecting us to liability and potentially harming our reputation.
In addition, we will periodically make modifications and upgrades to our information systems and technology. Some of
these modifications and upgrades will be outsourced to third parties. Modifications involve replacing legacy systems with successor
systems, making changes to legacy systems or acquiring new systems with new functionality. Although we make a diligent effort
to ensure that all providers of outsourced services observe proper internal control practices and procedures, we cannot assure that
failures will not occur. We are aware of inherent risks associated with replacing our systems, including accurately capturing data,
system disruptions and outsourcing to third parties. Information technology system disruptions, if not anticipated and appropriately
mitigated, could have a material adverse effect on our operations.
Compromises of our information systems or unauthorized access to confidential information or our customers' or
associates' personal information may materially harm our business or damage our reputation.
Through our sales and marketing activities and our business operations, we collect and store confidential information
and certain personal information from our customers and associates. For example, we handle, collect and store personal information
in connection with our customers purchasing products or services, enrolling in our promotional or rewards programs, registering
on our web site or otherwise communicating or interacting with us. We also process payment card information and check
information. In addition, in the normal course of business, we gather and retain personal information about our associates and
generate and have access to confidential business information. We may share confidential and personal information with vendors
or other third parties in connection with processing of transactions, operating certain aspects of our business or for marketing
purposes. Although we have taken steps designed to safeguard such information, there can be no assurance that such information
will be protected against unauthorized access, use or disclosure. Computer hackers may attempt to penetrate our or our vendors'
network security and, if successful, misappropriate such information. A Staples associate, contractor or other third-party with
whom we do business may also misuse confidential or personal information to which they have access; attempt to circumvent our
security measures in order to obtain such information; or inadvertently cause a breach involving such information. We could be
subject to liability for failure to comply with privacy and information security laws, for failing to protect personal information, or
for misusing personal information, such as use of such information for an unauthorized marketing purpose. Loss, unauthorized