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Commentary & Analysis

FedEx--Kinko's on demand

By Frank J.

By WhatTheyThink Staff
Published: April 12, 2004

By Frank J. Romano April 12, 2004 -- FedEx acquired Kinko's for $2.4 billion in cash. By now this is old news. FedEx expects synergistic economies of scale by leveraging FedEx's purchasing power to decrease Kinko's costs, and capitalizing on Kinko's copying and printing services to decrease FedEx costs for those services. But there is much more to this story. Since 1989, FedEx has been the sole shipping option at Kinko's stores. FedEx staff are on site at 134 of Kinko's 1,200 stores where they accept FedEx shipments, while unstaffed sites only accept Express drop-offs. FedEx counter staffing will be added to all U.S. and Canadian Kinko's stores. FedEx Express delivers about 3 million packages-per-day throughout the U.S. and to 210 countries worldwide. UPS, which competes with FedEx in package delivery, acquired Mailboxes, Etc. a while back and is re-branding the chain as “The UPS Store," which still focuses on shipping and delivery services, although some UPS stores offer copying. Kinko's, by comparison, offers copying and printing (including posters and signs), videoconferencing services, computer and online access, and shipping services via FedEx, along with some basic office supplies. Key Markets Three key markets are in FedEx sights: small and medium businesses, corporate services, and mobile professionals. Kinko's already has 370 corporate customers among the Fortune 500 firms that use Kinko's “pay as you go” document outsourcing model rather than the traditional fixed-price model of most facilities management firms. There are about 50 closed-door facilities and about 400 superstore hubs, with six Xeikon machines that are migrating to Xerox 2060s and 6060s. There are a number of Xerox DocuTechs in the closed-door sites plus 125 IBM InfoPrint 2000s. 625 corporate sales reps call on businesses. Kinko's does $2 billion-per-year and has about 20,000 employees worldwide. That makes it one of the 20 largest U.S. printers. Because it does mostly copying and digital printing, we tend to ignore them in most industry lists. They think that the North American market has capacity to profitably double the number of Kinko's locations. There are no plans to offer locations on a franchise basis, and all stores will be company owned. This acquisition diversifies FedEx's business into the $30 billion document solutions marketplace where they are already a key player. Transportation of documents via the FedEx network has declined due to the growth of the Internet and the increasing use of the Web for transferring information. Kinko's receives 25% of its work via the Internet, up 5% from less than two years ago, and the next step is to allow customers to send documents from their computer for printing and have them shipped directly from Kinko's. The corporate solutions space is a $12 billion market. FedEx failed miserably in fax service in the early 1980s. Fax became so pervasive so quickly that they missed the market. But this Kinko's expansion will have a profound effect on the printing industry—Kinko's is an on-demand digital printing service that will compete nationally and internationally.

 

 

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