Office Depot’s E-Diva

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.

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.

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

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.

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.

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.

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.

Charles Haddad–BusinessWeek