With ambitious expansion goals, Office Depot had determined that a differentiated and lower-cost store model was needed to enhance the office supplies chain's presence in existing core markets and provide immediate access to other areas of the country. The new model would be crucial to increasing the number and speed of new store openings; remodeling older stores to accelerate comparative growth; and using the recently purchased Kids "R" Us sites to enter new markets.
A cross-functional task force was charged with creating a format that is less expensive to open, more efficient to operate, easier to shop, and more inviting.

Research indicated that customers wanted help in getting oriented, the ability to find everything on a shopping list, fast checkout, and for technology and furniture, assistance and support from knowledgeable staff and the ability to try out product options. The task force also noted the value perception created by pallets of merchandise as well as the minimization of employee “touches” for non-pallet items packaged in display-ready trays in wholesale clubs. While some Office Depot products were already shipped in display-ready trays, current fixtures often did not allow the company to leverage this potential savings.

The team determined fixturing needs in a secret location. As though it was a giant erector set, the team ordered excess shelving of many kinds to play with in an old furniture building with brown paper covering the windows. To form the new Millennium2 (M2) prototype format, they called in Miller Zell, an Atlanta-based turnkey store design firm whose client list includes Wal-Mart and Circuit City.

Brainstorming sessions determined that product categories critical to Office Depot's success had to be highlighted in the new format. The designers brought to life a vision of Rick Lepley, executive vice president of North American retail, of a store with "pods" for better visibility of key categories. They created better holding power for products with new efficient packaging and colorful signage to complement the pod format and bring the team's vision for the "look and feel" to fruition.

The result was a low-cost, efficient format that is intuitive, logical, and designed for the way people make purchase decisions. Core supplies at the outer perimeter of the store are signed for optimal visibility and easy purchase, while furniture and technology are at the center to better support consultative sales.

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Store Layout
- The pod structure assures easy navigation.
- The modularity adapts to different store sizes/shapes, yet provides a consistent customer experience.
- The open format allows employees to assist customers more efficiently.
- A 10% reduction in sales space did not significantly sacrifice SKU count.
- Combined check-out and copy areas with cross-trained staff creates a unified service offering.
- A redesigned copy area uses 50% less space while maintaining full functionality.

Fixtures
- Low-center fixtures offer clear sight lines.
- High steel at the outer walls and increased shelf depth maximizes holding power at the point of sale.
- The holding power reduces perceived out-of-stocks and number of employee product "touches."
- Planogramming tech assortment into designated top-stock locations reduces replenishment time/labor.

Bulks and Pegs
- High-velocity items are bulk-stacked to reduce labor and reinforce a value statement.
- The number of pallets on the sales floor increased fivefold.
- The number of pegs was reduced 50% to improve labor allocation.

Graphics and Color Palette
- The new color scheme is vibrant and cheerful, incorporating a contemporary color palette.
- A new way-finding system makes it easier to navigate the store and find products.

For Office Depot, M2 has demonstrated efficiencies of operation, such as:
- New store build-out costs decreased.
- Remodel costs dropped from $350,000 to $400,000 to $250,000 to $300,000 and their expected incremental sales hurdle declined.
- The modularity dramatically reduces the number of unique planograms and the complexity of store planning.
- M2 offers a broader roll-out opportunity for the portfolio of Office Depot stores.

Pleased with the outcome of M2's debut in June in Venice, Fla., Office Depot is well into expansion plans with more than 30 M2 stores now open nationwide, including several in the Northeast—a new territory for the office supplies retailer. A total of 80 new stores are planned for 2004 and another 100 in 2005 and 2006. Plans also call for a number of remodels, as existing stores average more than 8 years old.