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By Julia Hanna
Items such as paper clips, ballpoint pens, and manila folders have never been considered high-profile goods. Such staples don't attract much attention until they're gone. As self-described "maverick" Tom Stemberg (HBS MBA '73) discovered on a summer afternoon in 1985, however, buying these workaday supplies wasn't as easy as running to the corner store for a loaf of bread. In search of a printer ribbon for his computer, he found his local stationery store closed and a nearby wholesale club out of stock. This minor inconvenience resulted in a revolutionary insight: the need for "superstores" dedicated to selling office supplies to small businesses at a discount. Fifteen years later, Staples, Inc., has fifty thousand employees at over one thousand locations in this country and abroad, sales of $9 billion, and a growing presence on the Internet.
Born to Austrian parents in Newark, New Jersey, Stemberg moved to Vienna with his mother at age eleven after the death of his lawyer-turned-restaurateur father. He returned to the United States to attend Harvard College, receiving a degree in physical science in 1971. But the courses he took in economics, as well as his managerial roles at Harvard Student Agencies, a hands-on organization of campus businesses, and the Harvard Independent, a newly established student newspaper, convinced Stemberg that he might be "cut out to run things."
The best route to that objective was just across the river at Soldiers Field, where he graduated as a Baker Scholar in 1973. Stemberg then joined the Jewel Companies and after a year of training was assigned to its Star Market division in Boston. An intense student of the details required to run a successful retail operation, Stemberg also demonstrated his talent for innovation when he developed and launched the first line of "generic" foods sold in this country. The low-cost store brand became a hit with customers and propelled Star from fourth place in Boston-area sales to a tie for first in 1982.
In twelve years in the grocery store industry, including a stint at First National Supermarkets, Stemberg mastered distribution techniques and learned the fine art of customer service. He also developed a number of long-lasting relationships with colleagues who would form the core of Staples' start-up team, including Myra Hart (MBA '81, DBA '95), who is now an HBS professor. Leo Kahn, an archrival before selling the chain of warehouse food stores he had founded, also signed on, providing significant guidance and capital throughout the long year of fifteen-hour days that led to the opening of the first Staples store in Brighton, Massachusetts, in May 1986.
Before launching Staples, Stemberg had done some market research of his own by talking with a variety of small-business owners. He discovered that most of them had no idea what they spent on office supplies—nor did their office managers seem to care. One friend, for example, underestimated the expenditures at his law office by a factor of five. Clearly, there was a place for a store that would offer discounted products in what Stemberg then believed to be a $40 billion market (it was, in fact, over $100 billion and growing rapidly). The challenge would be to make Staples the solution to a problem that, in the minds of many, did not exist.
"I realized early on that Staples' success would be contingent largely on how well we could change customers' perceptions and behavior," Stemberg asserts. To accomplish that, local businesses received certificates worth $20 to convince them to give Staples a try. Customers were then asked to provide information about their companies to receive even greater savings with a computer-linked "Staples Card." Next came an information technology system that enabled the new operation to print receipts showing the list price of an item alongside the discounted Staples price—or the even lower price enjoyed by Staples "members." Stemberg's innovative tactics (many of which are now common in retail marketing) brought people through the door.
Like most good ideas, Staples was quickly copied, but Stemberg was ready for the competition. He concentrated on rapid growth and large distribution centers. In 1989, the company bolstered its finances with an IPO and between 1989 and 1995 opened a new store every eight days. Staples extended its reach with the launch of catalog division Staples Direct in 1989 and pumped up its direct-mail strength with the acquisition of Quill Corp. in 1998, the year Staples.com debuted in the frenetic world of e-commerce. Whatever the means of reaching customers, Stemberg's mission remains relatively simple: "We want to be the place where business does business," he states.
As Staples pushes toward its goal of $10 billion in sales by 2001, its energetic founder is anything but complacent. Doing business today, for instance, demands strong brand identity. Accordingly, three years ago Staples bought the rights to have its name on the new Los Angeles sports arena. And these days Staples sells much more than paper clips. Staples.com offers an online Business Solutions Center where the small business customer can access affordable services like Internet URL registration and requests for proposals for complex systems.
When the federal government ruled against Staples' acquisition of Office Depot in 1997, some analysts dwelled on the possible aftereffects. As usual, however, Stemberg wasted no time brooding over what might have been. "My philosophy is that you position yourself to be in a win-win situation," he proclaims. "If the defining characteristic of an entrepreneur is to see the future, my defining bias is to see opportunity in every situation."
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