In its second-largest acquisition, Amazon buys the company for $970 million.
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Although the virtual retailers may claim lower prices, Butler waves them aside. “We’re not in a price war,” he says, noting that the importance of price has been exaggerated. There’s a growing appreciation that time is money, which makes convenience a major drawing card for Web shoppers. Yet virtual retailers don’t pack the kind of fulfillment punch that Office Depot does with its 2,000 company-owned trucks, 2,500 drivers and more than 20 major warehouses around the country. “We own customer experience from to front to back,” says Butler.
Indeed, analysts give Office Depot kudos for strong integration and fulfillment. “They really bit the bullet on consolidation,” observes Ursula Moran, a retail analyst at Sanford C. Bernstein, a New York-based investment and research firm. After buying a group of contract stationery firms in the mid-’90s, Office Depot spent considerable energy and money to consolidate warehouses on a common platform. “Office Depot really did the hard work over the past years that is paying off for its online business,” observes Moran.
Though Butler may not be losing sleep over virtual retailers, traditional players are his larger concern-especially Staples, which launched its Web site last November. “Staples is biting at our heels,” says Butler, pointing out that Staples just put up a redesigned site this summer.
In the office supply market, Office Depot dominates with approximately $9 billion in annual sales, followed closely by Staples with $7.1 billion and Office Max with $4.3 billion. Yet online, the tables get turned a bit where one measure of success is how much traffic a Web site generates.
Media Metrix rates OfficeMax as the leader in terms of unique visitors. In May, OfficeMax.com attracted more than 1 million unique visitors while OfficeDepot.com had 784,000 and Staples.com had 693,000. But that’s not the number that counts, contends Butler, noting that visitors may browse, but don’t always buy. OfficeMax.com’s traffic might be higher because of its shotgun approach to marketing, speculates Butler.
“We’re laser beam-like in our focus,” says Butler proudly, referring to OfficeDepot’s target audience. In contrast, Staples aims at a broader audience-though not as broad as OfficeMax. Butler observes: “I see Staples advertising in places that aren’t bad, but not necessarily where I would go.”
Whereas OfficeMax.com tries to lure customers with frequent flier miles and Staples.com holds out dividend checks as a carrot to customers, Office Depot Online doesn’t play the incentives game. “That’s more of a consumer approach,” says Butler. His team strives to win loyalty by providing one-stop shopping, resources and services for the small business.
With that in mind, this summer Office Depot Online redesigned Office Solutions, an area of its Web site that extends a helping hand to small businesses. Here, entrepreneurs can bone up on everything from writing a business plan to hiring employees and paying taxes. Model business documents, sample letters and contracts can also be downloaded. And though OfficeMax.com offers a smattering of Web links, OfficeDepot.com has a full-blown online directory of Web resources, ranging from Bartlett’s Quotations to stocks quotes. “Office Solutions is a key differentiator for us,” says Butler. “It establishes our site as a single voice for not just office products, but services and information.”
Value-added services are another area of focus for OfficeDepot.com. The retailer recently teamed up with TelePost, an Internet-based telecommunications company, to offer Web-based teleconferencing and presentations. Another affiliation with ELetter, an Internet mailing service, enables customers to outsource direct mailings from their desktop, faster and cheaper than traditional stuffing and stamping. More partnerships are in the pipeline, Butler promises.
Although VanStory, Butler’s predecessor, was a strong general manager, “Keith is much stronger at marketing and sales-which fits in very well with the stage we’re at right now,” observes Paul Gaffney, senior vice president of systems development at Office Depot, whom Butler reports to.
“Keith has a unique ability to understand through experience what’s going on in the Internet world and then bridge that to the real world,” adds Gaffney. “He’s a voice of reason about some things that go on in the Internet world that aren’t worth applying for a large company.”
No surprise, then that Butler will be an integral part of Office Depot’s global expansion. The company already operates a Viking Web site in the United Kingdom, which was built after its merger with Viking Office Products Inc. in 1998. Yet Europe and Japan are being eyed for future expansion, and Butler will direct the worldwide business development and online marketing component of that effort. “The OfficeDepot.com site will serve as the lead site for features, enhancements and new technology development,” says Butler.
Although Butler may be drawing upon his marketing savvy right now, he has unusual breadth and Internet knowledge, observes Paul Nelson, senior vice president at PreviewTravel and a former colleague of Butler’s. “Most people come from one area and then migrate to the Internet,” says Nelson. Yet Butler “has touched every aspect of the business” from the engineering side to business development.
Butler also possesses insight into the needs of OfficeDepot.com customers. During his graduate school days, Butler got involved in two different start-ups-both builders of limited edition cars. Though he worked in purchasing, Butler got to touch all aspects of the business. In a start-up, employees have a greater span of control and involvement, he observes: “You feel more in control of your fate.”
After working for two other small companies, Butler decided it was time to garner experience in Corporate America and spent the next nine years at Pacific Bell.
In 1991, he joined Advanced Computer Communications Inc., a bridge and router manufacturer, then moved on to Redgate Communications, a new media marketing agency that was later acquired by America Online.