Thomas G. Stemberg, founder and CEO of Staples Inc., discusses why you should make decisions based on customer preferences first and cost factors second.
Thomas G. Stemberg Founder, CEO, and chairman of the board of $11-billion Staples Inc.
Back in 1986 and '87 we decided that we should not enter the delivery business. We thought we should make you come to the store and buy. We did that largely because we had been great students of Sol Price, founder of the Price Club stores [now Costco]. The reasoning was that you should never add incremental costs to a certain segment of your business, because other parts of your business would be subsidizing it and you'd have to raise prices.
We opened our first store in May of '86. When Office Depot opened its first store in October '86, and Office Club opened its first in early '87, both began delivering right away. We saw the kind of huge volume that our competitors were doing with delivery.
We ran an experiment, delivering office supplies in West Springfield, Mass. Lo and behold, the business wasn't cannibalizing our stores. It was different customers, or to the extent it was the same customers, they were going to get this stuff delivered whether they bought it from us or from somebody else. Say you have a secretary who is small in stature. She would not want to be lifting 60-pound boxes of copy paper. She would be buying pens and diskettes from us and paper from someone who delivered.
About two years later than our competitors, we also began to deliver. Probably over time that mistake cost us $100 million in sales and $10 million in profits. Today our delivery business represents $2.5 billion.
That was one of the few times in our corporate history when we made a decision based on cost factors as opposed to customer preferences. It reminded me once again that whenever you plan your business, you're way better off starting first with the customer and moving next to cost rather than the other way around. --From an interview with Jill Hecht Maxwell
The Quotable Entrepreneur
"I sold my company on Friday. On Monday I checked my voice mail, and the guy who bought the company hadn't called. I assumed he would call me every day! All of a sudden I realized, 'I don't have a job.' " --Susan McCloskey, former CEO of Office Plan Inc., an office-furniture company in St. Paul, Minn.