Robert Keane is the president and CEO of VistaPrint, the company he founded in Paris, France in 1995. VistaPrint began as a direct marketer of small business desktop publishing software and consumables, and from 1998 onward expanded into its well known success in Internet-based small business graphic design and printing. More recently, VistaPrint moved into additional markets that support small business brand building and marketing, such as promotional products, websites, signage, creative services and custom apparel. VistaPrint’s revenues exceeded $400M in the last fiscal year, with company operations in seven countries and customers served in 120 countries.
WTT: Your customers, mostly small businesses, need great pricing. How has VistaPrint continued to cut costs on the manufacturing side?
RK: For the small business customers who are VistaPrint’s sole focus - print, graphic design, branding and other marketing products and services are commodities. Price matters more than anything else by a very wide margin. So our biggest challenge is to make continuous strides to cut costs, improve efficiencies, and to drive to higher and higher volumes which in turn lead to additional cost advantages. This applies not just in printing, but in all aspects of delivering small business marketing services.
VistaPrint has a disruptive business model that is highly effective at delivering small business marketing solutions in ultra-low-cost, micro-sized quantities. Serving this market requires the automation of every aspect of the value chain or, even better, the total elimination of costs by deploying technology that enables customer self-service.
We look to other low-cost producers such Dell, Southwest Airlines, Toyota, Nucor and Wal-Mart as role models. Each of them revolutionized their respective industries by driving down their cost positions, year in and year out, over decades. At the same time, they constantly increased the quality and attractiveness of their product as measured by their target customers, not as measured by the traditional competitors in their markets.
As part of VistaPrint’s focus on our existing strategy we are continually raising the level and the intensity of the playing field, making it easier and cheaper than ever for our customers to brand and market their small businesses.
WTT: How much will VistaPrint spend in the coming fiscal year on equipment and marketing?
RK: We will invest over $60 million in capital expenditures, over $100 million in advertising, and over $50 million in technology and development, all focused on the objectives I just mentioned.
WTT: When you say “small business customer”, who falls into that category?
RK: VistaPrint’s customers are very, very small businesses, typically with just part-time, one, or three employees. Examples are eBay resellers, house painters, tennis coaches, or nail salons. Many of these “businesses” are in fact part-time jobs: for instance a teacher who also freelances as a tutor, or a carpenter who has a side business plowing driveways in the winter.
The first set of challenges with these customers is that that they have very small budgets, and they are very price sensitive. Our average revenue per order, including graphic design services and shipping, is just $33.
Furthermore, very small businesses rarely have an understanding of the technicalities of printing, graphic design, marketing or other skill sets that ad agencies, graphic designers and other intermediaries provide to larger businesses.
As discussed earlier, we work to meet those challenges by a constant focus on reducing costs, and on providing super-easy self-service tools for the customer to design, order and manage their transactions.
WTT: Are you optimistic or pessimistic about the economy in 2009?
RK: I am extremely pessimistic about the economy. The world has leveraged up enormously, we have lived beyond our means by indebting future generations. I would not be surprised if, in retrospect, the last decade is remembered just as the 1920’s were remembered by our grandparents: a decade of excess, followed by a decade of deep economic trauma and pain, and then, hopefully, several decades of economic advancement that comes from hard work and savings.
Businesses, even those who are profitable and growing, will find that banks will be very reluctant to lend, and if they lend at all it will be on much tougher terms. In this environment, cash is king, and debt will kill.
To survive, printers need to deeply understand their customers’ needs and focus exclusively on those needs. Strategies will vary from one company to another: VistaPrint’s harsh world of commodity printing is certainly not the only possible choice. Companies can chose strategies to be value added, they can be full service, they can be a communication partner, etc. But whether you are a printer or a supplier to the printing industry, know who your customers are and do everything you can to fulfill their needs, even if it means forgoing opportunities in your own business. You can’t have your cake and eat it too.
WTT: As a publicly traded company, have you experienced pressure to be more “green”?
RK: I believe that the push for printers, and for all businesses, to become more environmentally friendly is not only the right thing to do - but that it is no longer a choice. So VistaPrint takes our environmental responsibilities seriously.
We have initiatives both big and small that will help reduce our environmental footprint. 18 months ago we were featured in CIO Magazine due to our deployment of more energy-efficient servers and virtualization technology in our primary data center, steps that have reduced energy usage by 75% and carbon dioxide emissions by several hundred tons per year from this initiative alone. We are testing customer acceptance of recycled paper, and we actively recycle scrap and other waste products in our facilities. We are designing all of our new facilities and our facility expansions to reduce emissions and water waste. And we are paying the full costs of employee-led initiatives such as office recycling, the elimination of disposable water bottles, and shuttle buses from our offices to public transportation hubs.
None of these initiatives is a cure-all, but in aggregate they really start to add up. You will see many more of them from VistaPrint in the future.
WTT: Describe your workflow and equipment used for most of the work produced by VistaPrint.
RK: Our equipment choice is highly diverse, since we sell so many different types of products ranging from apparel to signage to promotional products. Our core printing equipment is 40-inch MAN Roland offset presses. We use these for very short run printing: run lengths as low as 50. We are able to do this because of our proprietary software and our volumes virtually eliminate set up and prepress labor. We have combined those with today’s fully digital computer to plate equipment to achieve totally automated and highly repetitive short run printing, without having to pay for expensive proprietary inks and click charges that are associated with digital printing.
WTT: What about the use of digital presses?
RK: Our view on digital has not changed over the past decade, but we recognize that our view point is very atypical. The theoretical advantage of digital is radical reductions in set up times, which in turn lowers the costs of short run printing. But for most short run lengths, VistaPrint has already achieved these reductions using offset presses and our aggregation technology, but with much lower consumable costs. So we only use digital for ultra-short runs: units of one, ten, 50 or sometimes 100.
Xerox, Kodak, Xeikon, HP and others all make good quality, productive digital presses, and all are highly competitive with one another. We have presses from each one of those suppliers: we chose one versus the other based on negotiations with suppliers, and sometimes on the specific needs for a given production line.