Marketing pace revs up at Office Depot

DSN Retailing Today, Jan 24, 2005 by Mike Troy

DELRAY BEACH FLA. -- Office Depot may not have ended 2004 where it had expected when the year began, but the company is rolling into 2005 with new priorities and initiatives that could help generate some much needed momentum.

The most significant development is an extensive marketing agreement with the National Association of Stock Car Auto Racing and sponsorship of a NASCAR race team during the 2005 season, set to begin next month in Daytona.

"After a thorough analysis of a variety of sponsorship opportunities, it was clear to us that NASCAR was the optimal fit for our new strategic direction," said Chuck Rubin, evp and chief merchandising/marketing officer at Office Depot. "NASCAR's increasing popularity and passionate, loyal following give us an opportunity to target not only the small-business community that makes up much of the fan base, but also NASCAR's powerful team of marketing sponsors, some of whom we already do business with, and others who are prospective customers and partners.

The multi-year NASCAR deal designates Office Depot as the sport's first "official office products partner" and will include a variety of NASCAR-themed advertising during race telecasts in addition to in-store NASCAR-themed promotions.

The NASCAR sponsorship is actually a component of a broader initiative built around the theme of "taking care of business." Those familiar with Office Depot's marketing efforts in the late 1980s will recognize "Taking Care of Business" as the tune by the 1970s group Bachman Turner Overdrive that Office Depot used quite effectively to build brand aware ness during its formative years.

"By using this tagline, we leverage the equity we have previously built, while at the same time communicating a clear and meaningful message to our customers," Rubin said. "Further, it shows our desire to take on the competition and win."

A series of ads featuring the tagline will run on network and national cable television in prime time, during sporting events and late night programming. Radio spots will also run in the nation's top 35 markets.

The new initiatives follow a tumultuous 2004 that ended far differently than was envisioned at the beginning of the year. Former chairman and ceo Bruce Nelson began the year vowing that same-store sales at the company's North American retail division would turn positive in the first quarter and then accelerate throughout the year. The company delivered a 3% gain during the first quarter, but failed to accelerate in the second quarter when it produced another 3% increase. The momentum fizzled in the third quarter, and 11 days before the end of the three-month period on Sept. 25, 2004, Office Depot announced that sales were weak in each of its three business segments and that it would fall short of analysts' expectations for third- and fourth-quarter profits.

By early October, Office Depot announced that Nelson had left the company and that long time board member Neil Austrian would serve as interim ceo until a replacement was found. One of Austrian's first actions was to suspend activity relating to a new 600,000-square-foot corporate headquarters on 20 acres in Boca Raton, Fla. Nelson had authorized the project in 2003, and an architect and construction company had already been selected.

"Compared to other more pressing needs in our business units, we felt that the construction of a new facility could be deferred while we devote our time and attention to other initiatives," Austrian said.

By the end of December the project was killed altogether, and Office Depot said the land would be sold to the construction company it had hired to build the facility.

To further reduce expenses, Austrian announced sweeping job cuts in stores and at headquarters. Approximately 550 full-time store-level positions were eliminated, and 100 jobs at headquarters were cut.

Despite all the changes during the latter part of 2004, Office Depot moved forward with stepped-up expansion of a new prototype unveiled during the summer. A total of 24 new stores opened during the third quarter, compared with only four units during the first half of the year. An additional 50 new stores were slated to open during the fourth quarter, followed by another 100 stores this year.