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By Cary Sherburne, Senior WTT Editor
February 21, 2007 -- Our interview with FedEx Kinko’s COO Brian Philips late last year ranked in the top ten articles for the year at WhatTheyThink in terms of number of reader accesses. With recent FedEx Kinko’s announcements and other press coverage, it appeared to be a good time to do a follow-up discussion with Philips to see how the company is progressing relative to its restructuring and expansion efforts and to learn more about what is new. Our readers who are interested in following FedEx Kinko’s may also wish to read the interview with FedEx Kinko’s CEO Ken May that recently appeared in Fortune Magazine. One important aspect of the FedEx Kinko’s business strategy covered in that interview that is not discussed here is increased focus on the trade show and convention business.
WTT: Brian, thanks for speaking with us. We wanted to offer an update on FedEx Kinko’s to our readers and appreciate your taking the time. Based on what I have been reading in the press, it seems like you are continuing to refine and expand the physical and digital network you spoke about the last time we talked.
BP: It is all fitting together nicely. Since you have recently been able to take a look at Print Online ( see related Special Report Extra), I would like to explain how that fits with the strategy we talked about the last time we spoke. We said our key competitive advantage is our network, and that our network is not only the physical brick and mortar, but the FedEx infrastructure and the digital backbone that networks it all together. When we talk about being the back office for small business and the branch office for large and medium-sized business, Print Online is one of the tools that allows customers to print from anywhere to anywhere. In terms of enabling the customer experience and creating efficiency and effectiveness in the network environment, we have that experience because of the monumental change that FedEx.com introduced into the shipping experience at the beginning of the Internet that made it easier to transact with us online than in any other form. We believe the same convenience exists in Print Online and the rest of the offerings that make up our service bundle. There are a number of other components that we are going to lay on over the next several years to continue to build on that print from anywhere to anywhere strategy. This extends even to making it simpler to pay for services and to track those expenditures. As I indicated before, you can use your FedEx account number today online to pay for shipping from FedEx Kinko’s, and we eventually will move to a single account number across all FedEx operating companies. It is a complex process and we are laying the groundwork for that today.
WTT: Can you give us a hint about what some of those additional components might be?
BP: Direct mail is one, and of course, there is an online component to direct mail. We believe you don’t have to physically come in to one of our locations to take advantage of our significant printing capabilities. With all of our product lines, including signs and graphics, direct mail, and photo, there will be a digital component that will augment or enhance our customer experience. In the old days, you had to come in to drop work off, be there to preview or proof it and come back to pick it up. We are making that whole process much simpler now with online access and our range of pick-up and delivery options. You can transact business with us now without ever setting foot in the physical store.
WTT: In the Print Online demo, Linda Price mentioned eCourier as a delivery option. Can you explain what that is?
BP: We give our customers a wide variety of options for delivery. FedEx is known for overnight delivery but not necessarily for same day expedited delivery. At the same time, we have a courier force within FedEx Kinko’s that allows us to pick up and deliver shipments at various times of the day. For Print to a FedEx Kinko’s and Print Online orders specifically, we brought on eCourier as a partner to handle delivery within a 20 mile radius of any of our Office and Print Center locations.
WTT: FedEx Kinko’s recently announced a direct mail offering. Tell us a little more about that.
BP: Direct mail is a good example of how we are beginning to play out our strategy. We are beginning to bundle things we can offer through our network that are part of a broader small business value proposition. There was an article in the Wall Street Journal not too long ago that talked about the needs of the SOHO market, which included shipping, copying, printing, technology services, etc. We also have had partnerships for years with organizations like the U.S. Chamber of Commerce, the National Federation of Small Businesses and American Express. With them, we look at key concerns and barriers that small businesses have. You always see the usual suspects on that list—health care plans for employees, retirement plans for employees—but near the top of that list are mechanisms like advertising and marketing to help grow revenues. In general, small businesses don’t have access to the types of services that direct mail agencies have to offer. Those agencies tend to deal in larger lots. A large percentage of the business that comes in our door for copy and print ends up in the mail stream. Just by asking the simple question at the counter, “Do you plan to mail this,” we have been able to capture a significant amount of additional revenue. We have been pleased with the results so far and it adds incremental value and revenue to our print and copy business.
WTT: How does FedEx Kinko's target direct mail marketers?
BP: We can help with basic design and layout; we can produce the piece; we can then fold it, stuff it, address it and insert it in the mail stream, and do it in a way that allows customers to take advantage of postal discounts such as bulk (or standard) rates. We have a partnership with Pitney Bowes for lists, which can only be purchased when using the online tool. However, customers can use lists bought from other providers or use their own lists when placing direct mail orders at a local center. Through Pitney Bowes, we clean lists and prepare them for mailing, and we can do it in small lots because we have such a flexible production network. We just started advertising nationally at the beginning of January during the Bowl series, and our sales force is behind this initiative. We are also doing a lot to leverage the FedEx customer base as well; there are some great synergies there. We are very pleased with the adoption rate so far. We just started filling out the equipment in the fall, with training in November and December and advertising in January.
WTT: Who is responsible for the program internally?
BP: On the people side of our strategy, one of the things that helps us compete is the strength of our leadership, the entrepreneurial spirit our people embody, and the tenacity with which they attack business problems. Mayda Gonzalez is the product manager for Direct Mail, and she understands the business from ground up, including partnering, training, developing and launching a product from scratch. We believe we have succeeded over the years because of people like Mayda.
WTT: How is it going with the launch of new store layouts?
BP: We just opened our 100th store in the new smaller format with a big celebration in Miami. We have ramped up slowly but are well ahead of the curve and are very pleased with the results. As I mentioned the last time we spoke, one-third of the shipping volume in those locations is net new, and we are also seeing a lot of new revenue in the copy and print side of the business, as well as with Print Online and Direct Mail. These new locations create an even broader network for our customers and give us a broader network with which to capture direct mail coming into the system.
WTT: What about the conversions you talked about last time, where you were changing the layout of some of the existing larger outlets?
BP: We have been doing more of the conversions, most recently in Texas and Memphis. The Memphis location was a new center though, and as long as you are going to start from scratch, you might as well model it in the new image. As for the conversions, we are doing these market by market. Orlando and St. Louis are going well, and the next two markets are Boston and Minneapolis by the end of our fiscal year in May. If you or your readers are planning to be at the On Demand show in May, be sure to stop by and visit one of the new locations in Boston.
As we attack each of these markets, we will have a mixture of new stores and restructuring of existing stores, upgrading our convenience office supply category and the look and feel of the stores, and enhancing the customer experience. We are on track to roll out 200 new locations this fiscal year in the smaller format, what has sometimes been referred to as the “compact car,” 300 next fiscal year, and 400 the year after that to reach our goal of 2,000. At the same time, we are connecting customers to the network with Print Online and offering new products and services like direct mail.
WTT: Do you see yourselves as a threat to the small commercial and quick print market?
BP: We are looking at serving small business customers, enabling people to reach global markets through FedEx, and to market to prospects and customers through our small footprint locations and direct mail offering. We are looking to bundle our customer experience and give them a good solution. That helps us compete against DHL and UPS as well as other players in the industry, large and small. But printers of all shapes and sizes still fit into the marketplace. Mom and pop printers and franchise offerings will always play a role.
WTT: Brian, thanks so much for your time. Is there anything else you would like to add before we close?
BP: Just that we are very pleased with where we are. Our strategy continues to evolve, and we are very much on course to execute that strategy. We feel good about our prospects and we appreciate your interest in our business.