Vistaprint has, for many years, been an example of the success that focus and automation can bring to a printing business. Its parent company, Cimpress, is taking that success to new levels with two major strategic pushes to spur continued growth into the future. His strategies and views are quite interesting.

WTT: Robert, I thought your recent acquisition of WIRmachenDRUCK was quite interesting. There are certainly many web-to-print service provider options out there. Why this one?

RK: We’ve actually done several acquisitions in the last 18 months, but the two largest were WIRmachenDRUCK in Germany and Exaprint in France. Between the two, they have well over $100 million in revenues, virtually all outsourced to a network of more than 150 production partners. We like that because these two teams have competed and won in the extremely competitive European web-to-print market by building a networked model that aligns with our own vision for the future. As we announced 18 months ago, we are building a software platform that will support an ecosystem linking back-end supply chain operations at many production providers together with many different, resellers and other customer-facing partners. Some of the back end and front end will be owned by Cimpress, but a large percentage won’t be.

WTT: This is an interesting strategy considering the investments you have made in the Vistaprint production capabilities. Are you looking to bring some of that new work into your traditional facilities?

RK: Actually, the reverse. Cimpress’ fastest growth is occurring outside the printing of standardized rectangles like flyers, postcards and business cards that have already migrated to web-to-print over the past 15 years. Although those applications are still important to our business, we believe by applying the principals of mass customization to other products that the Upload-and-Print market enables, there are even greater growth opportunities.

WTT: Explain, please.

RK: The first products that moved to mass customization were those that have a very popular standard format, especially where templates allow the end customer to lay out the product by themselves. Mass-customization hasn’t yet taken off yet when things become more complex; for instance, adding a leaf-fold to a standard 16-page 8.5x11” magazine, or a customer who needs items in an oval shape. Each of those complexities keeps the job out of standardized web-to-print and therefore out of mass customization. But we believe that we can change that if we build a large enough ecosystem of both production partners and customer-facing resellers.

WTT: In your recent earnings presentation, you defined mass customization as “producing, with the reliability, quality and affordability of mass production, small individual orders where each and every one embodies the personal relevance inherent in customized physical products.” Can you expand on that?

RK: In a traditional customized market, each individual job is conceived of, put out to bid or quote, machines are set up to produce it, and transportation required to deliver it is contracted. Every step of the value chain in a traditional manufacturing environment is done in a custom way. High setup costs don’t matter if you are making large volumes of something, like toothpaste or cell phones or auto parts, because those setup costs are small in the overall scheme of things. But with custom products sold in smaller volumes, those setup costs have to be amortized across a smaller base. That’s why, as everyone knows, you can buy 10,000 offset printed brochures for not much more than 5,000 would cost; you’ve just got a little more press time added to the mix. Mass customization solves the question of how do you customize something for an affordable cost without having to produce those large orders, but rather in tiny individual orders??

WTT: So give us some examples.

RK: Products like mugs, business cards, flyers and photo books could be mass customized early on because they are standard formats used by millions of customers, for which automated systems could be built to produce huge order quantities. Last year in the Vistaprint business, we processed 18 million orders, and each order had an average of more than two products. That’s roughly 50 million setups for products. For those types of ultra-high-volume applications, vertical integration and total automation is hard to beat. But looking to the future, we think mass customization could also move into the long tail. An example might be a beer mat for a restaurant in an oval shape that is tied to the shape of their logo. That would be a traditionally customized product. But in the future, by linking production lines owned by others across the Internet with a massive set of customer channels, the world of mass customization can be brought to these types of long tail needs, not just rectangular products and standardized mugs.

WTT: You describe your market-facing activities in terms of customer segments such as the Vistaprint target of micro businesses and now, Upload and Print. . Can you explain the difference more specifically?

RK: The typical Vistaprint customer doesn’t know much about any technical graphic terms, even those as simple as CMYK or cut marks. So the Vistaprint user experience is geared toward someone who has no graphic experience. In contrast, the Upload-and-Print business is geared toward graphic arts professionals – designers, trade printers, etc., who understand the technical details behind job specification and desktop publishing. Both types of customers can be the front-end of mass customization. Brands like Vistaprint or Shutterfly that are template-driven were the first instance where mass customization took hold because standardized design processes allowed automation of repetitive production operations. But trained graphic professionals are needed for moving into non-standard formats. When you open mass customization up to people that have great graphic design skills, you don’t have to make it ‘do-it-yourself’ easy like you do for someone who has no clue about desktop publishing, and that enables the professionals to exploit their creative abilities. Combine those creative skills with enormous order volumes across a single software network, plus a computer integrated manufacturing capability on the back end through workflow software, plus the digitization of prepress, press and post-press, and you open up mass customization to tens of thousands of different product formats. With high enough volume and sophisticated enough software, you can automatically direct homogeneous streams of orders to specialized suppliers. If you do so with structured data flows then, thanks to the digitization of the manufacturing process, setup costs become basically nothing. So the Upload-and-Print go-to-market model allows us to address the long tail that template-based models never did.

WTT: You mentioned earlier that the fastest growth has been on the Upload-and-Print side. I noticed from your 1Q2016 results that the Vistaprint business unit saw about an 8% growth, while Upload and Print saw a 31% growth. That’s quite a difference.

RK: Some of the high growth in Upload-and-Print is due to M&A that happened in the past 12 months, so it is not a pure organic comparison. But you are right that even without M&A, we are growing much faster in this newer part of our business. For the quarter, overall Cimpress revenue grew 13% year over year to $376 million. It would have been 21% excluding the impact of currency exchange rate fluctuations. The Vistaprint business unit still represents 71% of total revenue, with Upload and Print representing 20% and the remainder in other businesses. That balance will shift over time with the higher growth rates we are achieving in our Upload-and-Print business.

WTT: What does your production platform look like these days? I understand you have made significant investments in digital printing.

RK: Keep in mind that the software and production capabilities we originally built for Vistaprint also serves many other applications as well. It could be FedEx Office or Staples, or Amazon or any one of tens of thousands of small resellers. We are integrating our organically developed production with the production and outsourcing capabilities of recent acquisitions, and today we have a range of offset presses from Komori, manroland and Heidelberg, and a large park of digital equipment. We are a large customer of HP and Xerox, and we have all kinds of other equipment in wide format from HP, Durst and others, as well as embroidery and textile printing. It’s quite a United Nations of printing equipment. And in line with our network strategy, Cimpress is also pursuing many subcontracting partnerships so we can explode the number of products we offer customers. When we don’t have a particular type of equipment, and someone else has made that investment, we can use them as a subcontractor across the mass customization platform. No one company can own all of the equipment, and there is such a wonderful amount of innovation taking place that it is hard to keep up. The network strategy takes some of the stress out of that aspect of the business.

WTT: I understand you are kind of winding down the Staples relationship, but at the same time, you are doing some interesting things with Amazon. Tell us more about that.

RK: We like and respect Staples and have had a great partnership with them for multiple years, as well as with FedEx Office, but we see the Amazon opportunity as potentially very significant. We are still in the testing stages, but Amazon was looking for a partner they felt could go to – excuse the pun – Amazonian scale with a global platform. Staples is no longer exclusive, and Amazon is not exclusive, either. In an ideal world, we would partner with both. Amazon moves quickly. They are designing the user experience themselves and the back-end operations go to the Cimpress mass customization platform. This reinforces our drive for scale: we want to pump as many tens of millions of orders through our network as possible because only with that quantity of orders does our mass customization platform vision make sense.

WTT: What about 3D printing? That would seem to be a natural area of expansion for you.

RK: We’re keeping our eye on it, but we have no plans to do anything now. We have so much on our plate that we have closer-in areas we need to focus on. The 3D printing market is in early days and is fascinating, but I think it will be a couple years before we put our toe in the water.

WTT: Anything else you would like to add?

RK: If you look at the evolution of industries, when the first generation happens, it is often vertically integrated. Think IBM circa 1965 to 1985, or DEC. They made everything themselves. Starting around 1990, the world of IT went mainstream. I don’t think it could have done so if it hadn’t broken up into an incalculable number of players competing and cooperating and creating networks where they buy from and sell to each other and, in doing so, deliver much greater value to the customers. We think the same will happen with web-to-print and with mass customization. The Vistaprint model of front end to back end vertical integration, all owned by us, was wonderful in its day. From a brand perspective, Vistaprint has huge growth potential for micro-business customers who want template solutions. However the Cimpress-wide future lies in a platform model that engenders an open ecosystem that processes unprecedented volumes of orders but which we don’t own exclusively. If we don’t break ourselves up into an enabler of a network of many different suppliers and resellers, we won’t be a leader in the future. That network-based ecosystem view is what our mass customization platform strategy, and Cimpress overall, is all about.