Upwardly Mobile Stationery

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"CUTE LITTLE BINDER CLIPS"

At the board's prompting, Staples revamped in-house labels. Sargent insisted that Eagle first overhaul the basic Staples-brand products before adding a premium line. Eagle studied retailers such as Marks & Spencer, Target (TGT), and Tesco (TESO). The company even banned the term "private label," with its connotations of black-and-white cans of Brand X veggies. Soon, cheap wares and cut-rate prices were out. In their place came a new line of higher-quality offerings, marketed with a Staples logo. The new Staples-branded supplies caught on, amounting to 22% of the company's sales last year, from just 8% in 2003. Since then, gross margins have risen from 24% to 28%.

Now, with Sargent's backing, Eagle, a former McKinsey & Co. consultant to fashion retailers, has taken the next step upmarket with the M line. At first, managers of Staples' 1,700 North American stores resisted the plan. They worried that shoppers would balk at expensive versions of high-volume, everyday items such as paper clips. But Eagle stuck by his research, which suggested customers wanted office supplies that were more professional and more personal.

In focus groups, potential shoppers commented on how notebook paper and bookmark ribbons felt to the touch. "Look at the cute little binder clips," one tester gushed, according to a Staples executive. "This is the kind of stuff I give in to very easily."

Analysts say it's too early to make judgments about the new M brand. But in product tests last year, Staples says, arranging the premium goods on a table drew more attention, particularly from high-income women, than when they were shelved next to regular merchandise. "Customers didn't notice when it's just those little soldiers in a row," says Michelle Ormes, director of merchandising for the brand. Despite the tough economy, Eagle has lofty aspirations: "This brand should be so good you could envision a stand-alone store."