Photocopy Cats II

In response to the Jan. 1 entry about the FedEx/Kinko's merger, FC Now reader Don Johnson asks some key questions that could help determine the partnership's success:

  • Will FedEx retain top Kinkos managers and let them run the business or try to provide "consulting" and centralize certain functions? What's its track record on this score?
  • How much overlap is there betwen existing FedEx offices and Kinkos shops; how many redundancies will be eliminated?
  • Will FedEx counters really draw more printing customers to Kinkos?
  • Will the FedEx delivery service somehow be used to deliver to Kinkos' customers?
  • FedEx is borrowing all but $750 million of the $2.5 billion purchase price; will it have the cash flow, capital and borrowing power to expand Kinkos or its core businesses?
  • Will UPS expand its UPS stores to compete with Kinkos?
  • How can UPS counter the FedEx purchase of Kinkos, or does it need to?
  • Kinkos is a marginally profitable business; with the new overhead (depreciation, corporate, etc.), will FedEx be able to increase its profitability?
  • Will Kinkos' pricing power be helped or hurt? FedEx's?

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16 Comments

  • itwasme

    "Personally I would love to see FedEx restaff Kinkos with driven, energetic and hard working people who share a common vision of where FedEx wants to go with Kinkos. That's what Kinkos has been lacking.

    My vote: Good for Kinkos customers in the long term, bad for Kinkos employees, neutral for FedEx and probably bad for FedEx shareholders unless FedEx rings profits out of Kinkos."

    Your comment sucks, not all kinkos workers slack. Yes some of them do, (I had to work with a lot of them).....for a lousy 8 bucks an hour would you......
    BTW, they got rid of all the good fedex employess and replaced them with the staff from kinkos stores......what does that go to show....the reason....fedex employess were making up to $20 an hour (I would give great service and bust ass for that also).....now your local fedex counter has an overworked, underpaid KINKOS employee, with nothing but online training......BUY UPS STOCK NOW....you will not regret it....
    There is now way that these employees are going to be able to handle the Holiday rush of FedEx, not to mention all of the Christmas crap they sell (have to prepare and make while the customer waits, while the FedEx package customers wait also....?????) and package FedEx packages and do the crap that kinkos always has done at christmas.
    Christmas sucked at Kinkos before with the long lines and bitching customers, now with the fedex packages and packing the line will be twice as long and the customers will bitch twice as much...they still don't have enough people at the counters to help.....what up with that??

  • Jeffrey

    I am a Kinkos employee. We are losing employees left and right since the Fedex buy. In our area (SF, Monterey) we have lost two district managers (to Starbucks), store managers and assistant managers. In fact my branch has lost all it's managers. Our Teammembers are not happy and almost all are looking for new jobs. FedEx is coming in and starting to make our primary purpose Pack and Ship. We'll I've been in the printing business for more than 20 years and I'm not happy about packing boxes.

  • Swaine

    The UPS-Mailboxes Etc merger will prove to be more valuable than Fedex/kinkos. Why? Convergence and Convienence. Most people knowadays have home offices, color printers, scanners and everything necessary to start a home based-business. Computer peripheral costs are way down. But, how convienent is it to grab an item, take it to the UPS Store and say, box it, ship it and its there! Hell, you even get a tracking number to follow the package, which is wayy better than fedex.

    Bottom-Line: Home-based businesses and EBAY sales depend on companies like UPS Store for shipping back and forth.

  • bongo

    FedEx buying Kinko's means more openings for customers to drop off packages both Ground and Express. Ever see a Mail box etc at Xmas? They are jam packed. More outlets to expand services to the public

  • William Muzzy

    I have worke for kinkos for over seven years. I have to say the experience you received at the stores you folks went to was most likely reactionary. We try to help even those most dim-witted customers but sometimes the arrogance and attitude of the person dictates our response. My advice to everyone is if you need our help do yourself a favor and know what the heck your talking about before you come in. Oh, and as a side note, FedEx employees feel the same way.

  • none

    I am not a DOPE!!!!!!!!!
    I LOVE, and I mean LOVE almost all of my customers, both retail and Commercial. I have a high respect for my manager, and I LOVE MY JOB!!!!
    If you have had a bad experience, then I am very sorry. I have worked for this company for four years, and treating customers the RIGHT way IS what we are about. I hate that you feel the way you do, but the treatment that you received is not the norm.

  • mark

    have you last few people ever been to Kinko's? They have a horrible reputation for accuracy and professionalism. In theory, it's great to email a file to kinko's and ask them to ship it to its destination. In reality, however, you can't trust Kinko's employees to make sure there's toner in the printer.

    Not sure about the merger yet. A lot of improvement has to be made at Kinko's. FedEx choosing to keep the Kinko's name is a good idea -- that way, FedEx can keep its distance if (and likely, when) Kinko's fails.

  • Michael

    The name of the game in the 21st century is convergence. Print, copy, ship. This is a logical extension and offers great potential for outsourcing for small, medium and even large companies. This is also an excelent oppertunity for Kinkos to raise its corporate profile by tapping into the equity of the Fed Ex Brand and for Fed Ex to significantly increase the reach of its network. The UPS-Mailboxes etc. merger proved that the model can work. And Kinkos, I think, has more to offer. Throw in the right marketing mix, and were off to the races. At the end of the day, may the best economies of scale win.

    Michael
    Advertising student
    Ontario, Canada.

  • Howard Pierpont

    Win for FedEx, smaller win for Kinko's.

    I can now ship my files to a Kinko's site and have them printed directly. Allows for better quality than a copy.

    I can get Kinko's to deliver my material in their van, but timing is a little iffy. [Need to increase customer service and reduce turn around time.]

    Introduce FedEx. Allow me to send my file to the closest Kinko's to my final destination. Kinko's prints files and prepares based on my schedule. Existing FedEx truck moves the product across town to the destination. This takes the weight out of the transfer of information, reduces the trucking need by at least one at every location, delivers the product on time and for fewer total $$.

    This could significantly change the print on demand market.

    Some larger corporations have Kinko's drop stations inside their lobbies for the high volume print work that used to be done in house. At some point you could combine the Kinko's drop station with Corp FedEx and personal FedEx and see added savings.

  • Tom

    this must be the Don Johnson from Miami Vice. No wonder Melanie left you... fedex and all their stupid moves over the last 30 years has netted me 7 figures...i'll buy.

  • Don Johnson

    Thanks for posting my questions and for all the great comments. Just did a stock check on FDX. It's a dog.
    Morningstar.com gives the stock a 2-star rating, meaning it's fairly valued at $65. The stock closed today at $67.60, down .052% on an 81% jump in volume. Institutions are getting out. This is confirmed by Investor's Business Daily accumulation rating of D-. The stock is down from about $72 a month ago and 13% below its 52-week high of $78.05 vs. a low of $47.76. IBD's overall rating for the stock is a dismal 38=D.

    The stock is trading at an expensive P/E of 31.74 (PEG=4+), but a low 88% of sales and 10.13 times cash flow. That's a mixed valuation message.

    Why the mostly low valuation? Morningstar says FDX has a narrow moat---few barriers to competition. IBD says its EPS and sales have both grown only 7% annually over the last three years. The EPS rating is an ok 71 but the stock's relative strength is a low 25.

    IBD rates the industry a D.

    I guess I'll pass on this one.

  • Jon Strande

    Interesting discussion. One thing that keeps going through my mind is how many times people have pointed to FedEx when commenting on a successful business.

    In the great "22 immutable laws" books, the authors identify FedEx numerous times.

    Here are a few from The 22 Immutable Laws of Branding, by Al Ries and Laura Ries:

    The law of expansion - The power of the brand is inversely proportional to its scope. Expanding your brand will diminish your power and weaken your image.

    The law of contraction - A brand becomes stronger when you narrow its focus.

    The law of the word - A brand should strive to own a word in the mind of the consumer. Federal express became successful by being the first air cargo carrier to narrow its focus to overnight delivery, thereby owning the word "overnight" in the mind of the air cargo user. FedEx has become synonymous with overnight delivery

    Here are a few from The 22 Immutable Laws of Marketing, by Al Ries and Jack Trout:

    The Law of Focus - The most powerful concept in marketing is owning a word in the prospects mind. A company can become incredibly successful if it can find a way to own a word in the mind of the prospect. Not a complicated word. Not an invented one. The simple words are best, words taken right out of the dictionary. Federal Express was able to put the word "overnight" into the minds of its prospects because it sacrificed its product line and focused on overnight package delivery only.

    The Law of Line Extension - There's an irresistible pressure to extend the equity of a brand. One day a company is tightly focused on a single product that is highly profitable. The next day the same company is spread thin over many products and is losing money.

    The Law of Sacrifice - You have to give something up in order to get something. Look at Emery Air Freight. Emery was in the airfreight business. Anything you wanted to ship, you could ship via Emery. From a marketing point a view, what did FedEx do? It concentrated on one service: small packages overnight. Today, FedEx is much bigger company than Emery.

    I wonder if any of this was on the minds of the executives when they decided to buy Kinkos?

    Jon

  • David Wachtendonk

    Currently Fed Ex has drop boxes and counters for their express services. If they can expand this into accepting ground packages this would be a draw on the small business owners they are trying to attract.

    I agree with John in saying that the average kinko's employee is a dope. Whereas my Fed Ex guy is a trooper going through hell and high water to make sure my package gets delivered.

    In my opinion I think Kinkos should be greatful to fall under umbrella of Fed Ex. I see this as a plus for a Kinkos and a possible bad deal for Fed Ex?

  • John andrews

    Analysts and investors have been badgering FedEx for some time regarding growth. There is simply no real growth in the document delivery business going forward. The real growth in FedEx has been overseas expansion, which will face the same glass ceiling as technology replaces overnight document delivery worldwide (it has not yet).

    UPS is in package delivery - lots of growth there, especially with e-commerce. This past holiday season, UPS local delivery trucks used the MBE stores as depots, to great efficiency (and it pissed off some franchisees as well, who received nothing in exchange for all the added headaches).

    FedEx tried electronic document delivery and failed miserably. They needed to answer to the question - "what are you doing about the information age".

    Kinkos has a network connecting all stores. It is supposed to be e-ready. It looks like a promising partnership to the corporate types, because it provides functional tech-equipped customer service stations nationwide, many open 24x7.

    In my view Kinkos is a dog and FedEx will not gain from this except depot access and customer service counters. Overpriced services, high maintenance and aging facilities, and high fluff-factor staffing with holier-than-thou atitude (this being a small busines owner and Kinko's customer's perspective).

    Then again if Kinkos is a dog, is it ripe for the imposition of some FedEx efficiency and corporate restructuring? You tell me, who has more get-up-and-go: your average FedEx courier employee or your average Kinkos counter rep?

    If Kinkos is marginally profitable FedEx should be able to make it profitable. I see a alot of waste in the local Kinkos operations.

    Personally I would love to see FedEx restaff Kinkos with driven, energetic and hard working people who share a common vision of where FedEx wants to go with Kinkos. That's what Kinkos has been lacking.

    My vote: Good for Kinkos customers in the long term, bad for Kinkos employees, neutral for FedEx and probably bad for FedEx shareholders unless FedEx rings profits out of Kinkos.

    69uoclc02@sneakemail.com
    johnandrews.typepad.com

  • Joe Kowal

    Every time I go to my local Kinkos there are hardly any customers there. Everyone now has a laser printer, scanner, digital camera, etc. in their house and no longer requires the services that Kinkos offers.

    Even if you don't have that equipment, you surely know someone that does and will let you use it - either for free or for a couple of beers.

    The purchase by FedEx makes no sense to me...

  • Eric Farkas

    The FedEx move was actually a move to counter the earlier UPS purchase of MailBoxes Etc. To me, UPS' move was smarter.
    Unless FedEx makes a move to overtake Xerox's document processing, I don't see how this purchase can help FedEx. One-Ups-manship is one thing, but at the expense of the whole company? FedEx was doing fine as is. Maybe we've missed something that it has up its collective sleeve(s).
    Here's a CNBC comparative stock chart.
    Be Well, Eric