A steady hand
Dirk Collin has been running Office Depot’s all-important EMEA division since 2005, joining the company just a few months after former CEO Steve Odland. While Odland was in the spotlight a lot of this time – mostly for the wrong reasons – Collin has been quietly but confidently steering his division through some challenging years and the worst of the recession
With an operating profit margin of 3.4 percent of sales in 2009, Office Depot’s International division was the company’s most profitable division. Within International, the EMEA region – where Depot has a presence in 37 markets – accounts for the bulk of sales and profit, making it a vital component of the overall business.
A key to its success over the last five years has been the steady hand of EMEA President Dirk Collin who has implemented a customer-centric – as opposed to channel-centric – approach. Not afraid to make changes where necessary, Collin has had a keen eye on driving operational efficiencies, but has not sacrificed this at the expense of developing Depot’s human capital, a key to his long-term vision for the company.
OPI travelled to Venlo in the Netherlands to meet the unassuming 55-year-old Belgian.
OPI: Let’s start with a quick recap of your own career before joining Office Depot.
Dirk Collin: My professional career began with Xerox as a salesperson, straight out of university, and I ended up staying there for over 25 years. The beauty of that company is that it really gives you the opportunity to take on a new challenge, so I had a wide variety of roles in different countries. That’s why I stayed so long.
After Xerox I led the EMEA sales team of data storage firm StorageTek for a couple of years until the company was acquired by Sun Microsystems in 2005.
OPI: And then came the opportunity with Office Depot. What did you know about the company and the office supplies industry at the time?
DC: To be honest, I was not aware that Office Depot was such a big company. I knew about it, of course, because in my days with Xerox we were supplying paper to Office Depot. I joined Depot because of its talented, dynamic and enthusiastic people. But the office supplies industry is quite a closed business; you don’t know the details until the moment you start looking in more depth. The more you look at it, the more you get excited about it.
OPI: Could you give us an overview of Office Depot’s EMEA business?
DC: As you know we have in our region Europe and the Middle East and we are not yet present in Africa. We have over 10,000 employees in 37 markets, either through our own organisations or via partnerships.
From our European and Middle East headquarters here in Venlo we manage our four main regions: UK and Ireland; Southern Europe; what we call DACH and Benelux, which comprises Germany, Austria, Switzerland and Benelux; and finally Central and Eastern Europe.
We also have businesses in the Nordics. We have 100 percent ownership of a company in Sweden called AGE that on 1 January 2011 will change its name to Office Depot. The Norway, Denmark and Finland markets are covered by partnerships. Then we have our Middle East business, which is our strong presence in Israel and our franchise partnership with Alshaya in the Gulf countries.
OPI: You’ve got around a quarter of Office Depot’s global workforce, so I would assume your turnover is in the region of $3 billion. Is that close?
DC: I think that’s a good assumption. Unfortunately I’m not in a position to give detailed numbers from the Europe and Middle East organisation as we report by divisions and we are rolled up into the International division.
OPI: Can you give an indication of the relative size of your main markets?
DC: The strong markets for us are in Western Europe, let’s say the UK and Ireland, the Southern region and the Germany/Benelux region. They are approximately the same size and account for a substantial amount of our business.
OPI: I’d like to have a look at these individual markets. Perhaps we could start with the UK and Ireland.
DC: The UK and Ireland is a good market for us. The UK has gone through major challenges, politically and economically. Ireland is at this moment on a deep dive.
However, we started to look at business process improvements in this region in 2007, and John Moore and his team have done a fantastic job in reorganising the business and despite the government spending restrictions, we are able to maintain our profitability.
OPI: How important is the public sector business in the UK and Ireland?
DC: The public sector in Europe is about a quarter of our contract business, but I don’t want to give any specifics.
OPI: With the much-publicised spending cuts being made in the UK public sector, what growth strategies have you put in place for that market? Are you going after a bigger share of what’s left after the cuts or are you looking for other avenues of growth?
DC: It’s a combination of both of those options, but one of the key drivers – and this isn’t only for the UK, it’s across Europe – is the strength of the SMB sector. That’s one of my key priorities: how we can obtain more access into that market.
From 2002 to 2009, eight million jobs were created in those countries we are active in. Of those, six and a half million were in the SMB sector. We estimate that from 2002-2009, the market grew by about N5.6 billion, and N4.5 billion came from the SMB market.
The potential is enormous and if you look at that market, you see a very diverse and fragmented competitive landscape. There’s a limited number of big pure players and a lot of smaller ‘local heroes’ who we believe account for more than 50 percent of the market.
But we have our Viking brand for SMBs. We already have a very significant market share and that is what I believe the nucleus of our future growth strategy will be in this SMB market.
OPI: There was talk some time ago of the Viking brand being put to bed as in the US. Now it seems central to your growth strategy.
DC: If you want an authentic and unique go-to-market strategy you need to leverage the strength of your brands. I did say at the OPI European conference in 2006 that we were considering integrating the Viking brand into the Office Depot brand. Maybe I shouldn’t have said that, especially with the reaction that we were going to "kill" the Viking brand, but I was trying to be honest and share the things we were thinking of.
However, it quickly became clear that the Viking brand awareness was so strong in Europe that we immediately gave up on our consideration.
So now we are working to reinforce this brand. In the spring of 2011, we should be in a position to announce some major initiatives. We want to be more relevant to all SMB customers.
OPI: I’d like to look at the French market, where you have the strongest multi-channel approach in Europe with your 53-store retail presence.
DC: I am extremely pleased with Michel Milcent’s French team. They are doing a great job, and having three channels there is an advantage. But again, also in France, we look at all the different touch-points. And the fact that we’re moving away from these distinct channels, in France as well, gives us some opportunities. We look at our product portfolio, our number of SKUs, and we are able to harmonise them across those channels.
OPI: You’ve been developing the retail side recently. I guess it probably didn’t move too much for a number of years and now it seems that you’re investing again in the city store concept in Paris.
OPI: How’s that going?
DC: It’s going extremely well and you’re right, I believe up until three or four years ago the idea of retail was these big superstores. We did some tests in Paris, and it works very well with the smaller stores, closer to where the customers are. We recently opened some more and will continue to open more.
OPI: Is this just in Paris or are you looking at other major cities?
DC: We’ll be looking at other cities in the future, but at the end of the day, a city store in combination with a superstore is working extremely well. One is not taking customers away from the other. Our customer base is growing every year with numbers, I would say, into the high single-digits, so that helps. But we also see a positive influx into our superstores, so it’s a good combination.
OPI: Ideally, would you like to have that French model in your other markets?
DC: Well, first of all you have to look at how the customer base is developing. Secondly, if you want to invest in bricks and mortar you need to have some returns.
When I observe the market, especially in Western Europe, I don’t see a lot of money made in bricks and mortar investments. There are exceptions.
OPI: When you joined Office Depot, the company was a couple of years into the Guilbert integration. Much has been said about the ‘fact’ that it was a failed integration or failed acquisition. What is your view?
DC: I certainly wouldn’t call it a failed acquisition – it was very good. We looked at ways of getting more efficiencies out of the acquisition and changed the name Guilbert into Office Depot in early 2007. And I must say it has been a fantastic success in France.
Of all the customers we had we got one negative reaction to the change, and that was a customer complaining because he had a different sales rep. At the end of the day, this was one of our most successful integrations. It was a bit later than planned, admittedly, but we achieved it in the end.
OPI: You still have Guilbert’s Niceday brand. What’s the plan for that?
DC: We have a private brand strategy of good, better, best and Niceday fits in there. Now the Niceday brand definitely has some brand awareness. People know the brand and there is the connotation with the little puppy.
At this moment Niceday has its benefits, let’s put it that way.
OPI: You’re suggesting that you could phase the brand out?
DC: I don’t think you can say any brand will be here forever. There is an ongoing judgement that has to be made. I cannot comment on whether the brand will still exist in the next five years or not.
For me the most important thing is that, if you have a strategy on your private brands and you have good, better, best, let’s make sure we have in all these three areas the best solution for our customers. And if the Niceday brand fits into that, ok, then we continue with it. It’s as simple as that.
OPI: Back to France – it’s recently been incorporated into the Southern region, is that correct?
DC: This is a new change that came into effect at the beginning of November 2010. Until then France was one region and Southern Europe – Italy, Spain and Portugal – was another. We looked at it and found there would be some benefits in combining them.
OPI: Is this a result of the economic troubles in Southern Europe?
DC: No, it’s because we continuously want to improve our organisation. However, Spain has suffered. The economy went south and unemployment is up to 20 percent.
But I believe that this market has gone through the worst and, albeit not comparable to three years ago, I’m seeing some positive signs. Over time we have adapted to the economic pressures. And when the economy improves again, we are ready to capture the growth and with it a very positive input to the bottom line.
OPI: A quick look at Central and Eastern Europe. The region has also suffered economically recently. Is that what you’re seeing with your businesses there?
DC: We believe that Eastern Europe, maybe contrary to what some of our colleagues in the market might say, is a growth market. We’ve invested a lot in terms of people on the street and I’m very happy with what we see coming in.
So that, for me, is a growth market. I would say the further you go east, the more opportunities there are, but the question is how to grab them.
OPI: What about the Russian market? There’s been a bit of change with your competitors and their local partners in the last few months…
DC: If you look at the map, there are of course some white spots for us and I know that. If I was 20 years younger I would try to capture them all at once.
I am more experienced now and I don’t want to do it at once. I find it’s important to have a flag in a country, but it’s more important to have sustainable good service. I’m not going to just look at anybody that moves and put my flag there. I want to do it more thoroughly.
I see Russia as an opportunity, definitely, and I am convinced one day we will be there, but when we’re ready.
OPI: And when you have the right partner.
DC: Exactly. The time will come and we will have the right solution for our customers. So I’m just observing at this moment.
OPI: At its investor conference in October, Staples outlined its international strategy, basically saying: "OK, we’ve identified six or seven key markets that are going to be our focus and if there are some white spots on the map, that’s fine." Is this similar to your idea?
DC: Exactly, I fully agree. As I said, you can’t do everything at once. It’s like this partnership we have for the Gulf states where our main competitors are absent, but for us it was so strategic.
But you have to develop that partnership, work on it, support it. You can’t start three or four greenfields or partnerships at once. So we are doing it in the right sequence and Russia will follow.
OPI: You mentioned the Gulf region. How did that region open up for you?
DC: We recognised the potential. I visited the region and I didn’t see any real organised approach in terms of office supplies. I saw some book stores and one competitor has one or two franchises.
OPI: I assume you’re referring to Office 1?
DC: Yes, I visited two stores and I felt that it was not organised; it was more opportunistic. So then we said: "OK, let’s understand how people buy their office supplies because a lot of companies are there and there is a lot of public sector administration." It became clear that the market is very strong in retail. If you go to any city, you’ll see there are lots of malls.
The question was, if it’s a retail culture, how can we find the right partner with whom to open up in that market? We looked at several opportunities and MH Alshaya was the most professional. Although based in Kuwait, it covers all of the Gulf region, so after some talks there was immediate interest on both sides.
OPI: And now you’ve got two stores in Kuwait?
DC: Yes, and one in Dubai. We are also planning our entry into Saudi Arabia. We are aware that retail is not the only touch-point we need to use in that market so, while we looked at the retail plan, we also developed a B2B plan.
Who you know is especially important there and Alshaya has very good relationships. Developing a sales organisation that is built on those relationships is a winner. So, again, I believe it’s absolutely the right thing to do.
OPI: And now you’ve opted for a similar partner strategy in Israel, one of Office Depot’s first markets outside the US?
DC: We already had a relationship with NHL through its credit card business. NHL approached us with its ambitious plans to grow the Office Depot brand in Israel. To be honest, I couldn’t see how we could achieve those targets, so now I really believe it’s a win-win for both parties.
For the local associates, they will still work for Office Depot and the name Office Depot will be developed further. The only major difference is that the business is integrated into part of a licensee agreement.
OPI: What’s your relationship like with the Boca Raton head office? Are you somehow a bit cut off in Europe?
DC: Not at all. I think first of all that I have an extremely good relationship with our American colleagues; there is a lot of mutual respect. For example, our board meeting in July took place in Europe.
They were extremely excited about the quality of our people and what we are doing. It was a big eye-opener for the board and the fact they came over here was already a big signal that they appreciate what we’re doing.
The people in Boca know exactly what we’re achieving, our challenges and the results we deliver. Charlie Brown [President, International] is here regularly, not to check what I’m doing, but to support us.
I’m very happy with that collaboration. We’re not regarded as a remote area; we have quite an important stake in the central organisation in Boca and I believe the relationship works very well.
OPI: These ongoing issues in the US with the BSD and the contract pricing allegations… What impact has that had on you in Europe?
DC: In a word, none. Everything that has been going on in the US has had absolutely no impact whatsoever on our business. We have a different go-to-market approach anyway and don’t have these types of contacts.
I must add, incidentally, that the way it has all been sensationalised in the press makes it seem much worse than it really is. Of course, we have some challenges but it has been blown out of proportion.
OPI: What will you be looking for from the new CEO whenever he or she is appointed? A different style of leadership?
DC: Every person has their own style of leadership, so if you have a new CEO, it will undoubtedly be a new style.
But the core strategy of this company will not change. It’s not led by one individual. A plan was presented to our board of directors and it was set and approved.
OPI: What do you think Steve Odland’s legacy will be?
DC: Let me say that I have a lot of respect for Steve. As I just said, everyone has their own style, either you like it or you don’t, but at the end of the day he has been trying to do the best for this company. And I believe, as Neil [Austrian] was saying, now that we are coming out of this economic crisis, maybe it’s the right time to have a new leadership to focus on other things.
OPI: Is the company better placed now to take advantage of an economic recovery than it would have been five years ago?
DC: Yes, absolutely. And I think that’s where credit should be given to Steve. I am convinced he brought this company to a much better state although maybe the value of the company at the moment doesn’t reflect that.
A lot of change has happened and I feel he was the right person at the right time. But there’s a time for everything.
OPI: You joined Office Depot a few months after Steve Odland. Will your tenure be longer than his?
DC: Well, I hope so. I don’t see any signs nor do I have any plans to move on. I’m 55 years old and I’ve another ten years to go before I reach retirement, and I definitely want to do it at Office Depot.
There’s so much going on at the moment, and I see a lot of future challenges. I enjoy what I do, I have a great team, I enjoy this industry and I want to stay here for a while. What drives me most in this job is developing talent and Office Depot is the right place to fulfil this ambition.