hbr.

org

How I Did It… Kevin Peters is Office Depot’s

president for North America.

Office Depot’s President on

How “Mystery Shopping”
Helped Spark a Turnaround

The Idea
The office products retailer
was measuring customer
service using metrics—
such as the cleanliness of
bathrooms—that didn’t
drive sales. Its new presi-
dent is trying to fix that
by retraining the staff and
transforming the company.
Photography: (Clockwise FROM left) Getty Images; Courtesy of Office Depot

by Kevin Peters hen I became the leader of To understand these contradictory data
Office Depot’s retail stores in points, I decided to do some mystery shop-
the United States, in 2010, the ping myself. I didn’t wear a suit. I didn’t
first thing I tried to do was figure out the wear a blue Office Depot shirt like the ones
meaning of a puzzling set of facts. Our sales employees wear in all our U.S. stores. In-
had been declining, and although that’s stead I wore a faded pair of jeans, a T-shirt,
not unusual in a weak economy, they had and a baseball cap. I didn’t tell anyone I was
declined faster than the sales of our com- coming to visit, and in most cases I didn’t
petitors and of retailers in general. At the let anyone know afterward that I’d been in
same time, the customer service scores our the store. What I wanted was to experience
third-party mystery-shopper service was Office Depot in the same way our custom-
reporting were going through the roof. This ers do. Over the next several weeks I visited
didn’t make any sense. How could it be that 70 stores in 15 or more states.
PHOTOS Peters (center at we were delivering phenomenal service to At each location I followed the same
upper right; on the right
below) with Office Depot our customers, yet they weren’t buying routine. First I pulled into the parking lot
employees anything? and just watched customers go in and out

November 2011 Harvard Business Review 47

How I Did It

for a few minutes. When I went into the I went into the store and looked at the that customers don’t really care about any
store, I’d spend 20 to 30 minutes observing stanchion that stands at the front of every of that. Those factors don’t drive purchases,
what was going on. I’d talk to customers, location, displaying the name of the man- and that’s why our sales were declining. It
in the aisles and as they were leaving the ager and his or her picture. Guess who the would be easy to blame our associates for
store. Some of the most interesting conver- store manager was? Yes—the guy smoking ignoring shoppers, but under the system
sations took place when I followed people outside the store. So I went up to him and we’d built, they weren’t doing anything
out who weren’t carrying shopping bags introduced myself, and we had a good long wrong. They were doing exactly what we’d
and asked them why they hadn’t bought talk. He was ashamed of his behavior—and asked them to do—working to keep stores
anything. Some of them gave me an earful. he was sweating during the conversation. clean and well stocked instead of building
I could tell you a lot of stories about the He promised he’d do a better job of taking relationships with customers.
things I saw, but two scenes stand out in my care of customers, and I promised to keep My conversations with customers gave
mind. In one store I watched an employee in touch. Even today we exchange e‑mails me three insights into how we should
argue with a customer about whether or every month to discuss his performance. transform our business to become more
not we carried a calculator that her son competitive: One, we had to reduce the
needed for first grade. An employee argu- Get In, Get Out size of our stores. They were too large and
ing with a customer—it was unbelievable. During most of my visits, though, I man- too difficult to shop in. Two, we had to dra-
At another store, I parked and saw an aged to stay incognito, and I came away matically improve the in-store experience
associate leaning up against the brick having learned a big lesson: Our mystery- for our customers. That meant retrain-
facade smoking a cigarette. Meanwhile, shopping scores were correct. You know ing our associates to stop focusing on the
customers were walking out without any what was flawed? Our scoring system. We things our existing system had incentiv-
bags. This employee did nothing—he just were asking the wrong questions. We were ized them to do and focus on customers
watched them leave empty-handed. At asking, Are the floors clean? Are the shelves instead. Three, we had to look beyond of-
that point I had a tough decision to make: full of inventory? Are the store windows fice products to provide other services our
Should I blow my cover and alert the store clean? Have the bathrooms been cleaned customers wanted. They wanted copying,
manager, or should I stay silent? I sat in the recently? Think about that for a moment: printing, and shipping. They wanted help
car a few minutes, thinking it over. Finally How often do you go to the bathroom while installing software and fixing computers.
I decided, I just can’t let this go. shopping for office supplies? It turns out We needed to expand our offerings if we
were to remain relevant to our customers.
Talking directly with dozens of custom-
ers also reminded me of a cold, hard fact:
They have many choices. Office products
Our mystery-shopping scores were correct, are a $300 billion industry, and the top
three players—Staples, Office Depot, and
but our scoring system was not. We were OfficeMax—account for less than 10% of
asking the wrong questions. that. Approximately 65% of our custom-
ers are small and midsize businesses, and
buying office supplies doesn’t add value
to what they do. It’s a chore. They want to
get in and get out—they care about conve-
nience above all else.

Less Stocking, More Selling

Photography: Courtesy of Office Depot

On the basis of that feedback, we began to

transform our business. It’s probably one
of the most challenging journeys I’ve taken
in my life. We started by designating two
test stores, one in Chicago and one in south
Florida.
Many of the changes we made were
done behind the scenes, in parts of the
business that customers don’t see. We al-

48 Harvard Business Review November 2011

 HBR.ORG

What We Say Matters…

Office Depot wanted to dramatically
improve its customers’ in-store experi-
ence. That included making the questions
employees asked more open-ended. MEET THE
INSTEAD
OF ASKING PLEASE ASK…

Hi, how What brings you

CHALLENGE.
are you? to Office Depot
today? EMBRACE THE
Are you finding
everything okay?
What can I help
you find today?
OPPORTUNITY.
Is this all you What else are you
need today? looking for today? To thrive in today’s marketplace, senior executives
require inspiration, intellectual stimulation, and
Are you What other items
doing okay? are on your list fresh perspectives that will allow them to see the
today?
world and their business in a new context. Stanford
Thank you for
shopping at Office Executive Education programs can help inspire
Thanks…
Depot today. their next breakthrough. Learn more today.

tered the way our supply chain operates so

that we could accept deliveries from ven-
dors even when no one was in the store to
2012 GENERAL MANAGEMENT
sign in the merchandise. We began separat-
ing stock onto U-boats (the narrow stocking
EXECUTIVE EDUCATION PROGRAMS
carts we use in aisles) assigned to different Executive Leadership Development:
parts of the store and delivering the U-
boats to an optimal spot—marked with an
Analysis to Action
X on the floor—to minimize the labor re- January 15 – 27, 2012 and April 15 – 20, 2012
quired by associates to stock shelves. We (two-module program)
also divided the store into zones and began
having the same associates stock the same
Stanford Executive Program
sections repeatedly. Becoming expert in June 24 – August 4, 2012
one area of the store allowed them to re-
stock faster, reducing labor.
Executive Program for Growing Companies
Many people think that in order to im- July 15 – 26, 2012
prove service, you need to hire more front-
Executive Program in Strategy and Organization
line workers. But in fact, by finding ways to
reduce the time employees spend on func-
July 15 – 27, 2012
tions such as stocking shelves, we’ve been
able to repurpose their time for selling to
customers. Each of our stores employs 18 For Ongoing
people on average; by finding ways to work Executive Education Programs Visit
smarter, we’ve been able to save 80 hours
stanfordexecutive.com
a week—the equivalent of hiring two full-
time salespeople but at no added cost.
Once our associates had more time to
serve customers, we needed to ensure Change lives. Change organizations. Change the world.

1377 Nov11 HOW Peters.indd 49 9/27/11 2:15 PM

How I Did It hbr.org

A New Approach
To Sales and Service
Office Depot simplified its sales process
from five steps to three. It’s now called
ARC, for “Ask, recommend, and close.”

Ask
that they knew how. We simplified our dramatic improvement at the store where
sales process from five steps to three—it’s I caught the manager smoking outside:
now called ARC, for “Ask, recommend, 3 questions Today it is one of the top performers in the
and close”—and trained them to imple- company.) We hope that by the end of 2011,
• S tart with an open-ended
ment it. We taught them to ask customers 325 of our stores will be utilizing the new
welcome question.
open-ended questions. Our research indi- system.
What brings you in today?
cated that in certain departments—such as We’ve also made progress in shrinking
furniture—sales go up by more than 100% • F ollow with at least 2 qualifying the size of our stores. Today they average
when associates with really good product questions. 24,000 square feet. We’ve already had suc-
knowledge are assigned to those zones. So How are you planning to use cess with new stores of 15,000 to 17,000
in addition to sales training, we invested in the product? square feet. We are introducing a small-
product training. What has worked for you format store that’s about 5,000 square feet.
When a retailer delivers poor service, in the past? It carries only 5,000 SKUs—compared with
many people are quick to blame the em- 8,500 SKUs in our traditional stores—but
ployees. In my experience, it’s more com-
plicated than that. We have 22,500 associ-
Recommend
3 products
because they’re our most popular prod-
ucts, they represent 93% of what we sell in
ates in our retail organization; one of the a traditional store. This format will allow
things we did as part of our change program •U
 se your product knowledge to us to be in downtown markets like New
was to have every one of them take a test suggest 3 items that match the cus- York City or in remote markets where we
built on the Myers-Briggs Type Indicator tomer’s needs. wouldn’t consider putting a large-format
These 3 are the best for you. Let store.
We found that we had me tell you about the differences As we work to make these changes, I still

been hiring people who between them. try to visit our stores as frequently as pos-

Close
sible. It’s really the only way you can know
were most comfortable how your business is doing. You have to
with their backs, rather and cross-sell in 3 steps see how customers are being treated, and
you can’t rely on reports or scores or hear-
than their bellies, to •M
 ake a closing statement. say—you have to experience it yourself.
the aisle. It sounds like this one is your top
choice. Should I bring it up front?
If you think your company is doing well
with customer service, ask yourself, Am I
• Answer the objection. really sure? Do I know what the customer
to help us understand their skills, behav- Ink is really not expensive when experiences?
iors, and attributes as they relate to serving you factor in the cost per page. What I pay attention to most of all is
customers. An interesting thing we found how many people are leaving the store
was that we’d been hiring people who were •C
 ross-sell at least 2 items without a shopping bag. I’d be glad if peo-
most comfortable with their backs, rather or attachments. ple came to our stores to browse, but this is
than their bellies, to the aisle. Roughly We have great deals on ink and not a browsing industry—people are shop-
one in five associates preferred perform- paper today. Would you like me to ping with a very specific purpose in mind.
ing tasks on merchandise over interact- share them with you? If they don’t make a purchase, something
ing with customers. A challenge we faced has gone wrong. If we can reduce this “balk
in rolling out these initiatives was how to rate” by just 10%, it will have a meaningful
help those workers become comfortable customers to establish expectations and impact on both our top-line revenue and
with the ARC culture—or, frankly, to help behaviors. These changes won’t be com- our margins.
them find other meaningful jobs within the pleted in the next month or the next quar- You also have to make sure you’re mea-
company if they couldn’t acquire the right ter—maybe not even in the next year. In suring things that really matter to custom-
selling skills. addition to the two “lab” stores in Chicago ers. I can tell you from firsthand experi-
and Florida, we’ve rolled out 30 pilot stores, ence what happens when you measure the
Smaller Is Better and we’re seeing encouraging evidence of wrong things. I always try to remember
You can’t drive changes like this overnight. an improvement in sales. We’re also hear- that we need our customers more than
Our business has been around since 1986, ing positive anecdotal feedback from cus- they need us—and we’d better act like it. 
and that’s a long time for employees and tomers and associates. (There has been a HBR Reprint R1111A

50 Harvard Business Review November 2011

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