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STAPLES: The Office Superstore

Company Overview
Staples launched the office supplies superstore industry with the opening of its first store in Brighton (Boston), Massachusetts, in May 1986. Its goal: to provide small-business owners with the same low prices on office supplies previously enjoyed only by large corporations. Within the short span of a decade, Staples' annual sales approached $4 billion. Today, the company serves a broad range of customers, from students and home offices to the Fortune 100 corporations, offering substantial savings on thousands of office products and a host of business services. Staples' foreign markets now include Canada, Germany, and the United Kingdom. The Company maintains three distinct operating divisions that enable it to focus attention on specific target market segments.

North American Superstores
This retail division comprises Staples The Office Superstore, Staples Express, Business Depot, and Bureau En Gros. Typically located in suburban malls, strip centers, and high-traffic urban sites, these stores offer everyday low prices on more than 7,500 items (5,000 in Staples Express stores). Staples Express is a compact superstore, specifically adapted to dense urban business districts. Business Depot in Canada, wholly owned by Staples, Inc., also operates as Bureau En Gros and Staples The Office Superstore.

Staples Contract and Commercial
This division provides delivered office products and equipment to business customers of all sizes, from fledgling entrepreneurs to the nation's largest multi-site conglomerates. The division's three subgroups address differing customer needs based on company size and requirements.

Staples National Advantage
Designed to serve the needs of major, multi-site corporations, Staples National Advantage provides delivery of office supply products and equipment on a customized and uniform contract basis nationwide.

Staples Business Advantage
Seven wholly-owned regional stationers comprise Staples Business Advantage. Together, they fulfill the office supplies demand of thousands of mid-size and large regional companies throughout North America.

Staples Direct
Created in 1989 to serve customers who prefer the convenience of catalog shopping with next-day delivery, Staples Direct offers low superstore pricing on more that 5,000 office supply items. Its toll-free ordering and free delivery (on orders of $50 or more) appeal strongly to many small-business customers.

Staples International
Two European business units comprise Staples International. Staples UK, wholly-owned by the Company, operates more than 40 superstores throughout the United Kingdom. Staples Germany, more than 95 percent owned by the Company, operates 18 Staples superstores. Recognizing offshore market potential similar to that in North America, Staples ventured overseas in 1991. Today, with some 60 stores throughout Germany and the United Kingdom, Staples International provides a platform for continued worldwide growth.

The Office Supplies Industry

History: Prior to 1986, the office supplies industry was highly fragmented. A variety of local, regional, and national firms served the needs of those able to purchase office supplies in large quantities. Others were forced to rely on local stationers whose small size and limited product assortment necessitated premium pricing. In May 1986, Staples introduced everyday low pricing to customers large and small with the opening of the industry's first office supplies superstore.

Imitators were quick to follow, the first opening its doors just five months later. In fact, that store so closely duplicated the Staples concept that their literature even reproduced a typographical error. By 1988 competitors already included Office Depot, Office Max, Office Club, BizMart, and more than a dozen other clones.

Today, three retail chains compete in the U.S. office supplies superstore industry: Staples, Office Depot, and Office Max. In the mail order segment, Quill Corporation and Viking Office Products are major players together with Staples and Office Depot.

Market Size and Growth: The U.S. market for office products is currently estimated at $110 billion. Adding computers and peripherals brings the total close to $200 billion. Industry analysts estimate that the market will grow seven to ten percent annually. Despite the market's vast and growing size, a 1996 survey by the Business Products Industry Association reported that office product superstores still accounted for only 20 percent of the sales of U.S. office products manufacturers. Continued rapid growth of vital retail customer segments, including home and mobile offices and small businesses, supports anticipated industry growth.

Product Assortment: Four major product categories define the industry. They comprise: office product consumables; office machines, including computer and communications equipment; furniture; and business services. The expanding business services category includes: copying, printing, binding, desktop publishing, and telephone account sales, as well as technology-products consulting, installation, and upgrading.

Competition: Office Depot and Office Max are Staples' chief competitors in the office superstore industry. In the mail order arena, Staples competes with catalog sales firms such as Quill Corporation and Viking Office Products, as well as with Office Depot. Competitors in contract and commercial sales include Office Depot and numerous office products distributors. Office Depot, Office Max, and Viking Office Products are publicly traded companies. In April 1998, Staples entered an agreement to acquire Quill Corporation pending regulatory approval.

Market Outlook: The U.S. office supplies market is expected to continue growing in step with domestic economic expansion. Ongoing growth of service industries, small businesses, plus home and mobile offices will further increase demand in the retail and non-contract delivery segments. Most overseas markets remain highly fragmented and therefore present significant opportunities for further growth.