A Second Wind
Staples' renewed focus on home-office and business needs is proving a good fit
If you want to know how the U.S. economy is faring, Staples might be a good place to start. The archetypal office supply superstore is a good barometer of the hiring and expansion plans of business. The company had phenomenal growth in the 1990s during the stock market boom, when everyone seemed to be quitting day jobs to trade Internet stocks in newly outfitted home offices. Then 2000 came around, and "our business softened up dramatically," says CEO Ron Sargent.
But Staples survived and indeed prospers today like never before. Through October 30 of last year, earnings rose 64 percent to $457 million on an increase in sales of nearly 11 percent to $10.4 billion. The company reports full-year numbers in February. Also, last year Staples announced its first-ever dividend and said it would buy back up to $1 billion of its stock.
The revival has been no accident. The downturn prompted Staples, which had been living the typical cycle of a growth company with little time for management to reflect upon its success, to do a little soul-searching. Guided by customer research, managers undertook a pencils-to-printers review of the operation. One finding: Even though home- and small-office customers contributed two thirds of the revenues, they accounted for 90 percent of the profits. "We heard the product mix was a little too consumerish," Sargent says. "Also the marketing. We heard our service was average." What's more, customers thought the store format "was a little '80s, a little too warehouse club," he adds. "The other big complaint we got from our customers was 'I know it's here in the store, but I can't find it.' " Surprisingly, cost was not a major factor in the buying decisions of its customers, Sargent says, noting that it did not even make it into the top 10 reasons shoppers chose an office superstore.
So Staples did a makeover, with its newer stores sporting a "racetrack" format that features lower aisles (so you can see what is available in the next one), signs that tell you what's in each aisle, and grouped specialty departments like mobile computing, copy centers, and office furniture. It also trimmed some 800 items from its product list. Every store employee was put on an incentive program, by which store clerks can get an additional $1 to $3 an hour of pay if the store meets certain benchmarks. "Mystery shoppers" prowl the aisles of every store once a month on average.
A snap. Most recently, the retailer has penned a new advertising and marketing campaign around the word "easy" that features the different ways Staples serves its customers, from in-store buying to online shopping and delivery options. One example is rebates. Now a customer can buy a product in a store, receive an invoice with a rebate authorization number, punch it in at Staples.com, and get a check back within four weeks. "What we've done with rebates is just a home run," says Shira Goodman, executive vice president of marketing. "Rebates just got in the way of making buying office products easy."
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