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Office Depot's E-Diva


Since the early 1990s, Bank of America (ODP) 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. "We weren't ready for the Net," says Laurie Venzon, the Charlotte (N.C.) bank's senior vice-president for strategic sourcing.

That's when Monica Luechtefeld came calling. Office Depot's (ODP) chief of e-commerce explained how the office-supply retailer could easily plug its online store into Bank of America's internal network. Venzon would be able to set it up to recognize who had clearance to buy an executive chair or a box of pencils. And Luechtefeld offered rebates for online purchases. It was a winning pitch. Today, Bank of America orders 85% of its office supplies online through Office Depot Inc. and is saving millions of dollars a year. "She made the complex seem simple," says Venzon. "Without her, it would have been the blind leading the blind around here."

In the past two years, Luechtefeld has opened eyes at big companies worldwide. Today, 40% of Office Depot's major customers are using the online network to buy everything from cherry conference- room tables to paper clips. Office Depot's online unit booked $982 million in sales last year--nearly double that of its biggest competitor, Staples Inc. That makes it the biggest online retailer after Amazon.com Inc. (AMZN) Better yet: Unlike Amazon, Office Depot says its online 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 online 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 Inc.'s Toby Lenk and Webvan Group Inc.'s Louis Borders vowed in the late 1990s that they would wield the Internet as an ax 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. "Office Depot gets it," says Chuck Martin, chairman of e-commerce think tank Net Future Institute. "It used the Net to build deeper relationships with customers."

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 online, 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 online ordering, too.

But is Luechtefeld's online 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 online will reduce the company's overhead. And internal company studies show catalog customers who start shopping online 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 online 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.

Luechtefeld was raised to be ambitious. Born in Los Angeles, she was the oldest of three children and was expected to babysit her siblings while also acing her science exams. 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. She became the first in her family to attend college, Mount St. Mary in Los Angeles. Her father, John Spillane, a lumber salesman, struggled to pay the tuition. In college, Luechtefeld dreamed of becoming a scientist. She won a coveted internship as a senior to study mosquitoes. But working alone day after day, with only the buzzing of insects to keep her company, convinced Luechtefeld that pure science wasn't for her. "I missed human contact," she says.

Her first job out of college honed her people skills. She recruited students for Mount St. Mary. She loved talking up the school, taking parents and kids out to dinner, showing off her college campus. "She was our best selling tool," says Sister Cecelia Louise Moore, Mount St. Mary's longtime president. "There was nothing phony about her, and people sensed it."

Newly married and pregnant in 1979, Luechtefeld cast about for a less demanding job. She became the first woman sales rep at Maloney's, a local stationery chain owned by the family of her best friend. 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 Inc., 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 online store fell into her lap in 1996, when the Massachusetts Institute of Technology 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 online offering was the hardest thing she has ever done. She went against the grain--persuading senior management not to spin off the online 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 online. At the same time, every sales applicant has to pass a test about the Net and create a video of themselves pitching Office Depot's online sales system to a potential customer.

Co-workers weren't the only skeptics. Luechtefeld signed up only 500 customers during the online 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: Online shopping would reduce costs, increase control over who bought what, and eliminate tedious work. Bank of America's Venzon says Luechtefeld is a big reason her bank stays with Office Depot. "She always answers my e-mail--even if I haven't spoken with her in months," says Venzon.

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 Web site. "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 online network even tech novices could master. She keeps her chief technology officer, Jeff Chang, next door, popping into his office frequently with questions.

Young staffers admire Luechtefeld for her ability to stay cool under fire. Kathleen Kelly Stockhman, director of online advertising, remembers a staff meeting when a senior executive launched into a critique of the online operation. Luechtefeld calmly refuted every criticism. "People snap to attention when Monica walks into a room," says Stockhman.

Luechtefeld drives herself hard, but at the end of her typical 12-hour days, she leaves her briefcase at the office. The 52-year-old loves to ski, snorkel, and read potboiler novels such as those by Tom Clancy. Divorced for more than a decade, she's close to her 22-year-old son, Chris. When Luechtefeld was promoted to Office Depot's headquarters in Delray Beach, Fla., in 1996, she kept her home in Valencia, Calif., so her son wouldn't have to change high schools. Chris lived with his father during the week, but Luechtefeld flew back to California every Friday to spend the weekend with him. "It meant the world to me," says Chris.

Today, Luechtefeld is expanding beyond selling supplies to selling services. Through partners such as Intuit, Stamps.com, and Schedule Online, 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 Corp. to link OfficeDepot.com to its Microsoft bCentral suite of business services, including work-group collaboration and salesforce automation. She envisions a cattle rancher in Montana keeping his books online 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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