Office Depot’s E-Diva

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DQI Bureau
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Since the early 1990s, Bank of America executives have been
letting employees order supplies from their desktop computers, but they were
using an old-fashioned system that was expensive and difficult to operate. The
bankers knew there had to be a better way, but they couldn’t figure it out on
their own.

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That’s when Monica Luechtefeld came calling. Office Depot’s
chief of e-commerce explained how the office-supply retailer could easily plug
its on-line store into Bank of America’s internal network. And Luechtefeld
offered rebates for on-line purchases. It was a winning pitch. Today, Bank of
America orders 85% of its office supplies on-line through Office Depot and is
saving millions of dollars a year.

In the past two years, Luechtefeld has opened eyes at big
companies worldwide. Today, 40% of Office Depot’s major customers are using
the on-line network to buy everything from cherry conference room tables to
paperclips. Office Depot’s on-line unit booked $982 million in sales last year–nearly
double that of its biggest competitor, Staples. That makes it the biggest
on-line retailer after Amazon.com. Better yet: Unlike Amazon, Office Depot says
its on-line unit is profitable–and has been since it was launched in 1998.
Last year, the company’s Internet sales grew 143%, compared with a 12%
increase in overall revenue. This year, the company expects its on-line sales to
rise 30%, to $1.5 billion, and contribute 14% of overall sales.

Luechtefeld’s success contrasts sharply with the fate of
many dot-com entrepreneurs. EToys.com’s Toby Lenk and Webvan Group’s Louis
Borders vowed in the late 1990s that they would wield the Internet as an axe to
hack off a big chunk of business from the giant retail chains. Now both of these
companies are out of business, and Luechtefeld’s ‘clicks and bricks’
strategy is paying off.

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While other office-supply retailers set up Web operations
independent from their stores, Luechtefeld insisted the Net operations be woven
into Office Depot’s existing businesses. The company uses one seamless network
to track inventory and sales, whether on-line, in a store, or from a catalog.
That allows it to manage inventories and market to customers efficiently. It is
setting up Net kiosks in its stores so customers who don’t find what they need
on the shelves can quickly order it via the Web. The company’s regular
salesforce pitches on-line ordering, too.

But is Luechtefeld’s on-line unit producing for Office
Depot as a whole? There’s no question the company’s core retail operation is
struggling, closing 70 stores and taking a $300 million charge in the fourth
quarter of last year. And catalog sales are down slightly. Executives blame a
sluggish economy and poor locations. They say shifting more sales on-line will
reduce the company’s overhead. And internal company studies show catalog
customers who start shopping on-line find it so convenient that they spend up to
a third more a year. "Our share of their wallet only increases," says
Luechtefeld.

Science to sales

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She aims to push half of Office Depot’s customers on-line this year. To
reach that goal, she’s cranking out services ranging from accounting to
payroll for small and midsize businesses. And she just launched a new wireless
service, called Office Depot Anywhere, that lets customers use handheld devices
to order merchandise or check availability at any store.

Raised to be ambitious, Luechtefeld was the oldest of three children. She was
inspired in part by a grandmother who ran her own plant nursery and took an
African safari while in her eighties. "She was strong and very independent,
and I liked that," says Luechtefeld.

Her first job out of college honed her people skills. She recruited students
for her college. She loved talking up the school, taking parents and kids out to
dinner and showing off her college campus.

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Newly-married and pregnant in 1979, Luechtefeld cast about for a less
demanding job. She joined Maloney’s, a local stationery chain. It wasn’t
quite what Luechtefeld had bargained for. She had to fight for every account.
And when she took maternity leave, many of her customers jumped to other sales
reps. "Since then, I’ve never taken customer loyalty for granted,"
she says.

Luechtefeld’s career really took off after she joined Office Depot in 1993.
She had been president of Eastman, a small office-furniture supplier that had
bought Maloney’s and was subsequently purchased by Office Depot. Once there,
she broadened her skills by first running its massive operations in Southern
California and then moving to headquarters to handle marketing. The idea of
creating an on-line store fell into her lap in 1996, when MIT asked if Office
Depot would like to bid on setting up a Web purchasing site for the university.
Office Depot won the job, and Luechtefeld was sold on the power of the Internet.
The success of the MIT site led to her promotion as senior vice-president for
e-commerce.

Building Office Depot’s on-line offering was the hardest thing she has ever
done. She went against the grain–persuading senior management not to spin off
the on-line effort as a separate "silo" but rather to incorporate it
as the backbone of the company’s supply chain. That terrified some of the
salespeople, who feared the Web would take away their jobs. To win their
support, she offered reps bonuses for steering corporate customers to do even
some of their buying on-line.

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Co-workers weren’t the only skeptics. Luechtefeld signed up only 500
customers during the on-line venture’s first two years. To melt resistance she
began a grassroots educational campaign with purchasing managers, many of whom
she knew personally from her 20 years in the office-products business. Her pitch
was simple: On-line shopping would reduce costs, increase control over who
bought what, and eliminate tedious work.

Be nice to novices

Now Luechtefeld spends hours every day plowing through overnight
customer-satisfaction surveys and e-mails about problems on Office Depot’s
website. "I learn the most from the ones that challenge me," says
Luechtefeld. A recurring lesson: Customers care more about ease of use than
about hot new technologies. That’s why she pushed Office Depot’s engineers
to design an on-line network even tech novices could master.

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Monica
Luechtefeld
  • Born: January 23, 1949, in Los Angeles

  • Education: Earned a Bachelor of Science degree in 1971 from
    Mount St Mary’s College, a Catholic school in Los Angeles.

  • U-turns: Although trained as a scientist, her first job was
    in the recruiting office of Mount St Mary’s College. While in
    college doing research on mosquitoes, she decided that science didn’t
    give her enough human contact.

  • Career highlights: Left her job as a recruiter in 1979 to
    become a sales rep at Maloney’s, a family-owned office-supply chain
    in Los Angeles. Joined Office Depot in 1993. Soon rose to run the
    sales, warehouse, and distribution operations in Southern California.
    In 1996, promoted to vice-president of contract marketing and sales
    administration. That’s when she recognized the rising importance of
    the Internet and helped get Office Depot wired. In 2000, she was named
    senior vice-president of e-commerce.

  • How she challenges herself: She keeps two items on her
    bookshelf to keep her focused: One is the book E-Volve-or-Die.com,
    which prods her to keep an eye on the next trend; the other is a
    little toy shopping cart, a reminder that her core business is retail
    sales.

  • Leaves work at work: She clocks long days, usually from 7:15
    am to 8 pm. But come weekends and she leaves her briefcase at the
    office. She’s a big believer in downtime to recharge her battery.
    Calling her while she’s vacationing is a definite no-no.

  • Family: Divorced 10 years ago, with one son, Chris, 22.

Today, Luechtefeld is expanding beyond selling supplies to selling services.
With her partners, she provides Office Depot’s 13 million small-business
customers with services. Home Depot gets fees for the transactions it steers to
partners. Her biggest coup: persuading Microsoft to link OfficeDepot.com to its
Microsoft Central suite of business services, including work-group collaboration
and salesforce automation. She envisions a cattle rancher in Montana keeping his
books on-line at Office Depot’s site, and then using the site’s tax
preparation service at the end of the year.

If Office Depot rounds up those millions of small businesses, it will set a
new standard for how established retailers can harness the Web to make
themselves more efficient and generate new revenues. And watch out, Amazon.com:
Monica Luechtefeld is on your tail.

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Charles Haddad–BusinessWeek