We have concentrated on expanding our store base and increasing our sales in
markets with high concentrations of small- and medium-sized businesses across
the United States and in Canada. Our North American Retail Division sells a
wide selection of merchandise, including brand name and private label office
supplies, business machines and computers, computer software, office furniture
and other business-related products and services through our chain of high-volume
office supply stores. Most stores also contain a multipurpose copy and print
center offering printing, reproduction, mailing, shipping, and other services.
Our retail stores are based on a model designed to achieve cost efficiency
by minimizing rent and eliminating the need for a central warehouse. Each store
displays most of its inventory on the sales floor using pallets, bins and steel
shelving, permitting the bulk stacking of inventory and quick and efficient
restocking. Shelving is positioned to form aisles large enough to accommodate
customer traffic and merchandise movement. In recent years, we have further
enhanced the shopping experience with the installation of new lighting, signage,
and broadband Internet capabilities across our entire North American Retail
chain. Additionally, through our business relationships with recognized carriers,
such as United Parcel Services, we offer shipping services in many of our retail
stores. This has enabled us to offer our customers a full selection of packaging
and shipping supplies, as well as a complete portfolio of U.S. domestic and
international shipping services at regular customer counter rates.
Business Services Group ('BSG')
We have provided office supply products and services to businesses through
our catalog and contract sales operations for almost ten years. In 1998, we
expanded our catalog business through our merger with Viking Office Products
('Viking'), a company that sold from catalogs and used customer call centers
in the United States and several European countries. Today, BSG sells branded
and private label products and services by means of our dedicated sales force,
through catalogs and call centers, and electronically through our Internet sites.
Our contract business employs a dedicated sales force that services the office
supply needs of medium- and large-sized businesses. Depending on the size and
type of customer, our sales force tailors its service offerings to optimally
serve the customer's needs at the lowest possible cost. Sales representatives
increase contract revenues, we believe, by building relationships with customers
and providing information, business tools and problem-solving services to them.
In 1995 we introduced electronic ordering for our large business customers and
have endeavored to convert our larger customers to this method of ordering.
Our commercial business is tailored to serve small- and medium-sized businesses.
Customers of our commercial business order products using our Office Depot and
Viking brand catalogs and via the Internet at our Office Depot public web site
(www.officedepot.com) and Viking public web site (www.vikingop.com). We expanded
our offerings when we acquired 4Sure.com in 2001, adding web sites (www.computers4sure.com
and www.solutions4sure.com) aimed at more sophisticated technology purchasers.
We have integrated 4Sure.com into other Office Depot offerings and have added
a new web site (www.techdepot.com) for technology purchases. We believe our
Internet business will provide significant future growth opportunities for our
BSG segment and our business as a whole based on the growth rates we have experienced
over the last three years.
International Division
Our International Division sells office products and services in 21 countries
outside the United States and Canada through retail stores (in France, Japan
and Spain), direct mail catalogs, Internet sites, contract sales force, and
through international licensing and joint venture agreements. The growth in
our International Division in more recent years has come from startup operations,
primarily in Europe, but also from the acquisition of Guilbert S.A. ('Guilbert')
in June 2003. The acquisition of Guilbert has doubled the size of our business
in Europe and established Office Depot as the leading reseller of office products
in many of the principal countries of Europe.
Internationally, we have grown our retail business through the selective opening
of company-owned retail stores and through joint venture and licensing agreements.
In 2003, we expanded this business into Spain with the opening of six retail
stores.
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