Office Depot, ELetter Work to Keep Online Customers Coming Back

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ELetter Inc. has started selling its Internet-based business mail services through Office Depot Inc.'s virtual store, and the company hopes to hit small business customers where they stock up on supplies by striking deals with more digital commerce sites.


"Office Depot's target market is the same as ours," said ELetter CEO Manish Mehta.


Half the customers at www.officedepot.com are companies with 10 employees or fewer, and 80 percent of its buyers have been in business five years or longer. That pool of small but stable businesses is exactly what attracted ELetter. Office Depot's Web site gets "several million visits a month," according to Keith Butler, vice president of Office Depot Online.


Mehta casts his company's services as an ideal way for large commerce sites to hang onto their traffic and get repeat visits from business buyers. Looking ahead, he expects ELetter, San Jose, CA, to benefit from more business-to-business retailers adding service components to their sites.


"We think that this is just the start of a trend in general," he said. "The way to attract small businesses is not through content, which is what has been tried before and has failed spectacularly. We think services is the way to do it."


ELetter is an online postal outsourcer, meaning businesses can go to www.eletter.com, load content for letters, postcards or booklets and enter a set of addresses. ELetter then produces the mailing and sends it out. The average cost for a four-color postcard is about 17 cents, and an eight-page booklet is less than 80 cents.


Now, ELetter wants to see small businesses taking care of their mail campaigns while they're picking up their staplers, printers and paper-clip holders. Office Depot is ELetter's "premier" partner, Mehta said, noting that he expects similar agreements in the future. ELetter and Office Depot have a revenue-sharing arrangement, but executives from both companies would not elaborate on the deal.


For Office Depot, the increased "stickiness" is more important than the money that changes hands. Butler agreed with Mehta's belief that a valuable service keeps buyers returning to Web sites. Office Depot tried holding its small business traffic by taking the community approach, installing chat forums and similar features.


"That didn't fly at all," Butler said.


Office Depot's revised strategy is that services or "soft goods" will keep shoppers returning to the store to buy its "hard goods." In the end, it's hoped, customers will spend more time at Office Depot and less time at, say, online rival Value America Inc.


ELetter eventually hopes to offer its Net-based product at Office Depot's brick-and-mortar locations as well. Mehta was careful to say ELetter does not yet have a deal with Office Depot, but he said he would be eager to move into the company's conventional channels. ELetter can do business anywhere a browser can be put in a booth or kiosk, and Mehta envisions something similar to the fax or copy services some retailers now offer in their stores.


"Our market strategy is to be in front of small businesses wherever they go to do business today, which means not just online. It means targeting all the places offline that they go to," he said. ELetter is in talks with other companies about moving computers into their stores.


Mehta said he doesn't consider ELetter a threat to conventional letter shops. The firm usually handles mailings of between 5,000 and 10,000 pieces, which is too few for some large print shops to do efficiently or profitably. In fact, printers have asked ELetter to handle jobs they considered too small. The company does not turn to outside sources for its print work. ELetter has its own printing facilities that it runs with proprietary software.


About $50.35 million of Office Depot's $2.6 billion in first-quarter sales came through the Net. The company was an early player among business supply companies hawking their wares digitally, setting up its electronic store in January 1998.
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