Stemberg, Thomas

(1949-)
Staples, Inc.

Overview

A retail pioneer and innovator, Thomas G. Stemberg founded the office supply superstore Staples, Inc. He developed and launched the first line of generic food sold in the United States and revolutionized the office supply business by eliminating wholesalers and selling directly to customers in his warehouse-like superstores. With a clear but simple message, Stemberg always emphasized that his "priority is saving people money." Stemberg's simple formula has spawned imitators who collectively have helped transform modern retailing.

Personal Life

Thomas G. Stemberg was born in Orange, New Jersey, on January 18, 1949. His father was an Austrian restaurateur. When Stemberg was 13, his father died and he moved with his mother to Vienna. He was a student at the American International School from 1962 to 1967. He returned to the United States to attend Harvard College, graduating in 1971. In 1973, Stemberg graduated from the Harvard Business School as a George F. Baker Scholar. He was married for nearly ten years to Maureen Sullivan, with whom he had one son. Stemberg married Dola Davis Hamilton in 1988, and they have four children. Stemberg is an active alumnus of his alma mater and serves as the president of Friends of Harvard Basketball.

Career Details

Before founding Staples, Stemberg applied his marketing and efficiency skills learned at Harvard Business School to the competitive world of supermarkets. After receiving his M.B.A. he went to work with the Jewel Companies, owner of Massachusetts' Star Market, where he rose to become vice president of sales and merchandising in 1982. Stemberg developed and launched for the store a line of generic foods because he sensed that customers would choose savings over brand names. He also introduced warehouse specials on selected items. His innovations revolutionized retailing and raised Star Market's sales from fourth to a tie for first place in the competitive Boston market. In 1982, Stemberg moved to Connecticut-based First National Supermarkets to become president of its Edwards Finast division. There he applied the lessons he had learned at Star Market, opening the Edwards Food Warehouse megastores, which emphasized savings through volume buying and reducing operating costs. In 1984, however, Stemberg was fired due to a dispute with management. It was while Stemberg was out of work interviewing for a position as a chairman of a wholesale club that he came up with the idea that lead to Staples.

Over a Fourth of July weekend, Stemberg needed a printer ribbon for his computer. The computer store did not carry ribbons and all the office supply stores were closed. As Stemberg recalls, "I was saying to myself this is crazy. There's no place to buy this stuff from Thursday morning to Monday. There's got to be a better way." The office supply business was ready for Stemberg's brand of efficiency management. He conducted an analysis of the office products market and wrote the business plan which would redefine the industry. His conception was Staples—"the office superstore." It would be a chain of discount office supply stores that served smaller and home businesses with discounts averaging 50 percent of list prices and convenient store hours. Stemberg's partner in launching Staples turned out to be Leo Kahn, the founder of Purity Supreme, Stemberg's chief competitor when he was with Star Market. Kahn had sold Purity and was looking for a good investment. During a conversation at a Harvard basketball game, the two former rivals joined forces to launch Staples, Inc. in 1986.

The first Staples store opened in Brighton, Massachusetts. Stemberg set about transforming office supply retailing in the same way that Toys 'R' Us had done in toys and Home Depot had done in building supplies. Stemberg cut out wholesalers, buying directly from manufacturers and passing the savings on to consumers.

Despite the eventual growth and success of Staples, Stemberg faced a number of challenges. The first was to get customers into the stores. Staples sent merchandise coupons to area office managers, but it took months for the first one to visit the store. Accustomed to traditional purchasing methods, office managers required several months and personalized direct marketing before becoming loyal customers. There were also difficulties in getting manufacturers to accept dealing directly with Staples instead of traditional wholesalers. Once products reached the stores, customers were tearing apart identical packaging to see what they were purchasing. Staples campaigned to convince suppliers to change their packaging. If they refused, Staples went to another supplier.

Stemberg attributes his success to maintaining focus on his primary goal: "Devote your career to developing and implementing bold new ways for customers to save money." He takes credit for coming up with the "pretty simple idea" of slashing the costs and hassles of running an office and with having the foresight to hire the most talented managers. As Stemberg observed, "I'd advise anyone wanting to build an organization to bring in the best people you can and then give them the latitude to make decisions. Let them take prudent risks—people should not be penalized by their mistakes." Critics have given Stemberg high marks for his management style in showing, according to Gary Balter of Donaldson, Lufkin & Jenrette, "the right combination of applying the pressure in the right places and allowing the people to grow on their own to take as much responsibility as they can manage. He's obviously emerged as the top player in the office-supply business, and it's all been because of his leadership and making sure he's surrounded himself with the right people."

Chronology: Thomas Stemberg

1949: Born.

1971: Graduated from Harvard College.

1973: Received M.B.A. from Harvard.

1973: Hired by the Jewel Companies.

1982: Promoted to vice president of sales and merchandising, Star Market.

1982: Hired as senior vice president of sales and merchandising, First National Supermarkets.

1986: Opened first Staples store.

1988: Became chairman of Staples, Inc.

1996: Proposed merger with Office Depot.

1997: Merger blocked on antitrust grounds.

The company at first concentrated its growth into the Northeast in the Boston to Washington corridor, which has the highest concentration of office workers in the country. By 1989, when Staples went public, sales had climbed to about $120 million and nearly $300 million by 1991. Staples first topped the $1 billion mark in 1993, increasing its number of stores to 360, with plans to open 30 to 35 new stores each year. The 1996 bid to merge with Staples' principle competitor Office Depot would have created a 1,100 store giant with annual sales projected at $7.5 billion. However, the Federal Trade Commission overruled the merger claiming that Staples would achieve a monopoly in the office supply business, which would have an adverse effect on future prices, a contention that Stemberg denies. Rather than wanting to buy its competitor to raise prices, Stemberg argued that the move was to gain efficiency that would save $5 billion in the next five years. Staples has expanded into Canada and Europe and its growth has been remarkable. As Stemberg remarked in 1995, "If someone had told me back when we started that we'd be opening stores in Portland, Maine, or West Lebanon, New Hampshire, or Ithaca, New York, I'd have told you to get your head examined."

Social and Economic Impact

Stemberg is a pioneering retailer who has revolutionized the way businesses and individuals shop. With Staples, Stemberg reached the large market of small businesses, including the rapidly growing home business segment, which had often been ignored by retailers previously. Stemberg introduced his multibillion-dollar office superstore chain by applying techniques he learned from the supermarket business. Stemberg recognized that desire for discount pricing in the office supply market could transform the way many conducted their businesses. He centralized deliveries and inventory and bought directly from manufacturers in order to pass savings along to his customers. The formula was irresistible, and Staples, along with its competitors, reached cities throughout the country as it continued to grow worldwide.

Sources of Information

Contact at: Staples, Inc.
One Research Dr.
Westborough, MA 01581
Business Phone: (508)370-8500
URL: http://www.staples.com

Bibliography

Barrier, Michael. "Tom Stemberg Calls the Office." Nation's Business, July 1990.

Caminiti, Susan. "Seeking Big Money in Paper and Pens."Fortune, 31 July 1989.

Hyatt, Josh. "Staples, Gutsy & Growing." Boston Globe, 9 June 1992.

Hyten, Todd. "Notepad Nirvana: Staples Finds Success."Boston Business Journal, 12 May 1995.

Jones, Sarah P. "Staples Supplies the Right Stuff."Boston Herald, 30 January 1997.

Stemberg, Thomas G. Staples for Success: from Business Plan to Billion-Dollar Business in Just a Decade. Santa Monica, Calif.: Knowledge Exchange, 1996.