Vistaprint: Completely Changing the Printing Industry

Robert Keane had one year to plot out his business. He went to INSEAD business school in France with the idea of an opportunity. Over the course of his one-year MBA program, during a class on new ventures, he had a chance to lay out how he would seize it.

His business plan grew into Vistaprint, the world’s leading provider of printing services to small businesses around the globe. What started a "job" without pay when Robert graduated from INSEAD in 1994, now, as of 2009, generates over $500 million in revenue, produces 60% gross margins, and is transforming how small businesses around the world market themselves.

Whether Vistaprint will continue disrupting its competition and fulfill its goal of "building one of the truly revolutionary and sustainable business institutions that emerge each decade, but of which there are only a handful," is still uncertain. However, it is trying to be to printing what Ikea is to furniture or Southwest is to airline travel.  But to understand how this company has so swiftly carved out a space for itself in an old industry dominated by behemoths gives us valuable insights in how outthinkers disrupt their competition.

On Thursday, November 12, 2009, at 11am EST (9am PST), I will be holding a free webinar dissecting the success of Vistaprint. This international printing company has matured from 30 employees to more than 1,700 within nine years, and it continues to post incredible profit margins. Click here to register for the webinar, and by attending, learn the fundamental strategies that the Vistaprint management employed to grow so quickly and profitably.

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  • Brad Faulkner

    Kaihan, unfortunately I was unable to attend the webinar so I didnt get to see the unique strategies Vistaprint employs. If you have a transcript of the event I would really like to read it over, I think seeing as many sides to a situation as possible helps to make the best decision (particularly from an investment standpoint!).

    I think Vistaprint has a good product. I ordered business cards from them a couple years ago and they looked great. Additionally, to grow a business from 6mm in revenues to over 500mm in just 8 years is very impressive.

    They have a good product and great top line growth--two things any founder, ceo, employee, or investor would love to see. And if this were really the truth of the matter then the question still remains, why exploit your customers?

    Additionally, why would the CEO Robert Keane sell off nearly 90% of his stake in the company over the past 12 months, with the two largest disposals of stock coming within 1 week of the Commerce Committee letters to Vertue and Vistaprint?

    As for the company's location, it's not really that big a deal and quite frankly it's understandable that they would seek to minimize their tax liabilities. They're headquartered in the Netherlands which does not tax profits made abroad. France does not share the same philosophy on corporate taxation.

    I haven't studied their tactics to increasing revenue, but at first glance it seems the majority of their success is a result of considerable resources allocated to SEO/SEM. Google "business cards" and you'll see what I mean. The top sponsored link is not cheap, and that's reflected in their "marketing and selling expense" line item in the income statement.

    That being said I agree completely in that there is always something to learn. Again I would really like to read a transcript or hear a recording of the webinar as I am perpetually interested in tactics that create a durable competitive advantage.

  • Brad Faulkner

    Kaihan: Although it seems we've done different research I think you're missing the point of my comment. If this company were successful in outthinking its competitors why would it need to exploit its customers and base itself overseas to boost its bottom line?

  • Brad Faulkner

    I didn’t want to post this publically, but you didn’t leave an email address and I can’t seem to send you a message on the fast company community network.

    Before you exalt the ‘incredible profit margins’ at Vistaprint you may want to consider where its bottom line actually comes from.

    First, and not too pressing or severe an issue, is the fact that their tax rate is roughly 8%. The tax rate for corporations in the United States is 35%. They're based in Netherlands but do the majority (~60%) of their business in the US. If the Obama administration proposes any material crackdown on corporate tax evasion it seems these guys would facing a much higher tax rate.

    The second, and much more concerning element of their earnings comes from 'referral fees.' When you order from after you fill out your credit card info there is a display button that says, "save $10." If you click on it your CC info is automatically sent to a third party, Vertue Inc. and they charge you $14.95 every month without notice or receipt.

    This actually happened to me when I was ordering business cards a couple years ago. I found out about this about a year later after noticing an unfamiliar line item of the exact same amount on several bank statements. I traced it back to Vistaprint, who then directed me to a third party who then told me to talk to another company called...wait for it...Vistaprint. I filled a complaint with the better business bureau and my money was eventually refunded.

    They address this on their latest 10-Q saying they derive a portion of their revenue from third party referrals to the amount of $5.1 and $7m in Q3 of 2009 and 2008, respectively. They follow it by saying that in the future these may decrease to zero due to legislation blah, blah, blah.

    The trickery begins when they downplay its effect by comparing these to their revenue, not their net income. In the latest quarter this amounts to 3.5% of revenue and they predict that it will account for between 2-4% of revenue going forward (assuming there's no legislation banning these dubious practices). All-in-all not a big deal.

    However, there is no cost associated with these referral fees and they flow down to the bottom line unaltered. So in the latest quarter, on their net income of $12.9m about $5m of that comes from these referral fees. The insubstantial 3.5% of revenue is a whopping 40% of net income....and that's just in this quarter. For the same quarter last year referrals represented $7m out of $8.2 in stated net earnings…a massive 85%.

    There have been thousands of claims against Vistaprint and the company doing the referral business, Vertue Inc. Jay Rockerfeller, Chairman of the Senate Commerce Committee, is putting the heat on the latter company to come clean about its shady practices . It would appear that Vertue's days are numbered.

    Additionally, as of November 6, 2009, Senator Rockefeller requested the same information from Vistaprint itself. The committee is set to have a hearing on November 17th on the issue.

    The first “sample letter” link after the press release is directed specifically to Vistaprint, I recommend reading it.

    So….If you eliminate these referral fees, which are at best poor business practices and at worst, illegal, and apply a reasonable tax rate given that 60% of their business is done in the U.S. their legitimate earnings are at least 50% less than what they state: Impressively, unimpressive.

    Two offers of advice: Leave your email address when you write articles, and dissect the SEC filings of the companies you admire before you dissect their success.