April 1, 2005, 12:00 AM

New Realities

Monica Luechtefeld looks to the future of the Internet—and Office Depot

By Kurt Peters

Few retail chains have been as successful as Office Depot Inc. in driving sales online. And few have been so deliberate about harnessing the benefits that the Internet affords to retailers.

So it`s no surprise that Office Depot`s head of e-commerce has taken on additional responsibility in a strategic initiative that is looking for the trends that will drive shopping in the future and figuring out how Internet will not only respond to those changes but help shape them as well.

Looking in & out

Monica Luechtefeld, who had been Office Depot`s executive vice president of e-commerce, in early January became executive vice president of strategy and development, looking to the future but also retaining her electronic commerce responsibilities. Her new responsibilities will focus on strategic planning and corporate development, marketing and finance.

And it will require looking at external forces that will affect how shoppers interact with retailers as well as the internal resources that will be required to harness those forces. "We will be looking at short-term and long-term developments, both outside in the marketplace and within the organization, to determine how customers will shop in the future and how we respond," Luechtefeld says.

If Office Depot`s web experience is any guide, the company will be ready for change when it arrives. Office Depot launched on the web in 1998. And while other retailers may have gotten there first, few have had the success that Office Depot has had online. Today, it is the third largest online retailer in the U.S., according to Internet Retailer`s Top 300 Guide to Online Retailing. And its size isn`t keeping it from growing: Sales at 40 web sites in 16 countries and 14 languages were up 19% last year to $3.1 billion from $2.6 billion the year before. E-commerce now accounts for 23% of all Office Depot sales.70% of Office Depot`s business with mid-sized and large companies come via the Internet.

Office Depot`s web approach has been successful because of an insight it gained from looking into the market as the Internet was starting to come onto the scene: "The real saving is in the time to procure, much more so than in the price, especially on high-frequency, low-dollar transactions," Luechtefeld says.

The company is hoping to harness further such insights as it undertakes new initiatives. For instance, Luechtefeld`s team will address how to meet the needs of workers whose offices are no longer in a central location. "We`re moving to a market where the office is wherever the person is," Luechtefeld says. "A key question will be: How do we leverage our 900 stores to serve those whose office is in the home, or in a cafÈ or in their car?"

That new reality has broad implications for how Office Depot gets products to customers. "We may do less delivery to a physical location," she says. "We offer pick up at the store today, but a small number of customers take advantage of it and typically it is from a local store. We expect there would be more need for customers on the road to order product remotely and pick-up remotely from the most convenient location."

Luechtefeld has the background to lead Office Depot into new territory, analysts say. "Making Monica Luechtefeld head of strategy makes sense; she comes out of the e-commerce area and brings a multi-channel perspective to this role," says Colin McGranahan, research analyst with investment company Sanford C. Bernstein & Co.

And, he adds, be believes Office Depot is on the right track in aiming at mobile consumers. "People want to use different channels depending on where they are right now," he says. "The Internet plays well into that broader initiative."

A real time saver

Luechtefeld joined Office Depot when it acquired Eastman Office Products Corp., a Southern California retailer of office supplies, in 1993. She advanced through a series of positions before moving to Office Depot headquarters in Delray Beach, Fla., and becoming head of the Business Services Group. That group had targeted the development of corporate accounts and the ability to efficiently deliver office supplies at a low cost.

She became involved in a pilot between Office Depot and the Massachusetts Institute of Technology to determine how the Internet would affect businesses. Once the company embraced the Internet, it did so with enthusiasm, she says. "We had an executive team that got that the Internet would be a real time saver for our customers and would save corporate customers money," she says.

From the start, Office Depot strove to align the entire company to the Internet strategy, she says, including training at all levels, even down to stores, and making sure all employees knew the web was not competing with, but rather was complementing, other channels.

Office Depot is applying that approach to Luechtefeld`s new initiatives. "Having a great idea or a vision isn`t enough," she says. "You have to be an evangelist and a relentless champion of the idea."

The Internet will play a key role in implementing the new initiative, Luechtefeld says. Office Depot will especially explore the flexibility of the Internet in creating customized marketing--the much-anticipated of one-to-one marketing. One way the market-of-one approach will play out is to deliver information to individual access devices, no matter which device the customer uses. "Customers are wired with PDAs and cell phones and they`ll want knowledge delivered to their own device," Luechtefeld says. "We`ll have to be able to interact with whatever device the customer wants to use."

Early stages

Part of the new team`s role will be to determine what kind of information can go to those devices and how to get it there, Luechtefeld says. "We`re at the very early stages of figuring out how content can be delivered just in time to the customer so the customer can make a better and more informed decision," she says.

As with Office Depot`s approach to the Internet, the company will be looking to profitability as a guidepost that its journey is on the right path. "We`ll be passionate about what we`re doing, but we`ll also set reasonable goals and task ourselves with ROI," she says. "We`ll be looking for signs in the marketplace that tell us we`re not wasting our time."

kurt@verticalwebmedia.com

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