The Kinko's Threat

Quick printers have long competed with in-plants for business, but Kinko's, fueled by the FedEx acquisition, could be turning up the heat even more.

By Bob Neubauer

With the recent $2.4 billion acquisition of Kinko's by FedEx, its fair to ask what impact this sale might have on in-plants. After all, even before FedEx stepped in, Kinko's provided significant competition, especially to in-plants at universities, where quick copy shops seem to congregate.

That competition heated up last fall when Kinko's returned to the course pack printing business that it abandoned more than a decade ago after it was sued by publishers for copyright infringement.

Add to this the fact that Kinko's has an entire facilities management division, actively looking to take over corporate printing and copying, and suddenly the influx of cash from FedEx looks a whole lot more troubling.

"I think this will give Kinko's additional leverage to continue the path of in-plant take-overs," worries Jennifer Bowers, director of Printing and Mailing Services at Florida State University, in Tallahassee. "Since many universities are dealing with FedEx in the mail room, they could easily look at bundling services."

Kinko's recently announced that Northwestern University, in Evanston, Ill., would be outsourcing document production to Kinko's. And at the On Demand show in New York recently, Kinko's had a large exhibit where it was pushing its new variable-cost outsourcing model and trying to differentiate itself from other print outsourcing firms, mostly equipment manufacturers.

Though FedEx wouldn't comment on the importance of Kinko's FM services to its growth plans, the company is certainly pleased with the Kinko's business model.

"We like the way they run their business," affirms Liana Sucar, FedEx spokeswoman. "I don't think there's any intention to change that."

And it's true, Kinko's runs its business very well, expanding from a single shop in 1970 to 1,200 branches worldwide today. Its name is one of the most well known in the quick printing business.

Though other quick printing chains (Sir Speedy, Minuteman Press, etc.), also compete against in-plants for business, Kinko's is arguably the largest of these companies (though it keeps its sales figures to itself). Thus its marketing efforts and attempts to lure away in-plant customers are much stronger and more noticeable—and therefore more of a threat to anxious in-plant managers.

"Kinko's has contacted my supervisor each month to try and increase their market share," reveals Jean-Luc Devis, director of Oregon State University Printing & Mailing Services, in Corvallis. "In addition they contact various departments with price low-balling. Typically our prices are much better, but customers walk away with our estimates and present them to Kinko's to negotiate an even lower price."

Just Competing For Business?

On one hand, Kinko's branches are only trying to get more business. If an in-plant can't compete, it should either change what it's doing, or close its doors. Expecting print work to come simply because the shop is an internal department is not the way to run an in-plant.

But on the other hand, some Kinko's operations may be going too far. Reports have surfaced of Kinko's branches distributing misleading marketing material, trying to get exclusive contracts for work an in-plant is already handling, and betraying the trust of managers who do send them business.

"We tried outsourcing some jobs to them with the agreement they would not call on our customers," notes Walt Leonard, director of General Services at Sonoma State University, in Rohnert Park, Calif. "Well, they used that information to call on our customers direct, so we do not use them anymore."

Up at Michigan State University, Carmen Crist, General Manager of MSU Printing Services, says the local Kinko's pushed to become a preferred vendor with the university. The purchasing director initially sent the Kinko's representative to Printing Services, which was coincidentally putting out a Request For Proposal for its document management and production services. But when the Kinko's proposal came in late and was disqualified, the company returned to purchasing and asked again for preferred vendor status.

"They're really focusing a lot of time with these sales people and account managers trying to get this preferred vendor status," says Crist.

At the same time, he adds, Kinko's erroneously told one of his staff members doing an anonymous price check that Kinko's had a contract with MSU. It also mass mailed a brochure implying the same, he says. MSU's purchasing department has since talked with Kinko's, he adds.

Such mass marketing—not an option for most independent quick printers—keeps Kinko's name fresh in the minds of in-plant customers. As a result, they start to think of Kinko's first when they have jobs—even when there are policies in place directing them to use the in-plant.

In Virginia Beach, Kevin Field, administrator of Printing and Mail Services for the city and its schools, knows some of his customers use Kinko's and other quick printers for small jobs, despite city policy.

"It's an ongoing thing here," he laments. His e-mail reminders can hardly compete against Kinko's flashy sales collateral.

Even in-plants with full-blown marketing programs are having trouble.

"We market to our internal staff all the time," notes Joe Morin, manager of Production Printing at Colorado Springs School District No. 11. "But Kinko's is a marketing machine."

As FedEx takes over and pumps even more money into Kinko's, this marketing is sure to increase.

Facilities Management Business

That name recognition is what Kinko's is counting on as it tries to expand its Facilities Management Services arm. After all, it's competing with long-timers like Xerox Business Services and IKON.

So what makes Kinko's better suited to facilities management than these others? Unfortunately Kinko's wouldn't say. Despite initial interest in being interviewed, the firm's communications department eventually "decided to decline most media requests during our time of transition to FedEx."

Though Kinko's isn't the only quick printer trying to score corporate business, (Sir Speedy touts its "business documents services"; Alphagraphics offers "strategic sourcing"), Kinko's has a formal FM program in place to take over an organization's printing. It lists three ways it can manage a business's documents:

• A Kinko's production center can be operated on your site.

• An on-site representative can manage the order process, while most production takes place at a nearby Kinko's.

• All your production can take place at Kinko's.

The company's Web site paints the usual rosy picture of outsourcing:

"Dramatically reduce or eliminate your copier lease obligations and pay only for the actual work your company produces. Never worry about obsolete technology again. And your human resources expenses related to maintaining a copy center are a thing of the past."

FM Not Kinko's Strong Point

As ominous as all this may sound to in-plant ears, though, some ex-Kinko's insiders aren't concerned.

"I don't believe facilities management is their strong point," says Penni Istre, a former Kinko's employee who now manages Tiger Copy & Graphics at the University of Memphis. She contends Kinko's has been unsuccessful running its FMs due to mismanagement. It was this very mismanagement, she adds, that prompted her to leave the company. The push to boost business through aggressive pricing was so strong, she adds, that it was counter-productive.

Lisa Lee, another former Kinko's manager, agrees.

"Part of my reason for leaving was they seemed to lose their focus on their customers as well as their employees," says Lee, now manager of copy services at Wake Forest University, in Winston Salem, N.C. "They were definitely focusing on the money."

The way they did this, she says, was to offer very low prices for copying, and then raise the prices next time.

"Get them hooked. Get them in the door," Lee explains. This led to erratic pricing, though, she notes. "You get one price one day. It could be something else the next day."

Many in-plant managers have noticed the same tactic in their regions: Kinko's offers prices for copying that are so low the in-plant cannot compete. The company makes it up, managers say, by charging more for other services, like binding.

(Case in point: A recent visit to a New York City Kinko's turned up a price of $4.50 to velo bind a single book. At a Philadelphia location, the price was about $3.00. An independent quick printer nearby quoted a price of $1.50.)

"Kinko's is virtually unbeatable with their per copy costs," testifies Sonoma State's Leonard. "But anything outside of that is much higher than anyone else in the marketplace."

So what's an in-plant to do to compete with these super-cheap copies? Slash its own prices? It's tempting. But inevitably it's a losing tactic.

"I would suggest resisting the pressure to get into a price war with them," remarks Crist, of Michigan State University. "Winning on price may cause some short-term impact on business, but we are finding customers are not willing to give up the quality and service they get from their university printing operation to save a few bucks. This was validated in recent focus group sessions we conducted with current customers and prospective customers. They expect and value quality and service. A good price, in most instances, won't offset poor quality and service very long."

'Kinko's Sells Service'

While this may be true, few have accused Kinko's of poor quality. And as for service, some would say Kinko's has mastered this art.

"Kinko's doesn't sell copies. Kinko's sells service," maintains Ray Chambers, vice president and chief information officer at Juniata College, in Huntingdon, Pa. "They add value. How? By creating an environment where the customer can get most everything they need to finish a project. And, a lot of it is free. You can walk into Kinkos with an idea and walk out with a professional looking document. How many of us offer that level of service?"

A look at Kinko's Web site reveals a host of services that can attract a customer who may have started out wanting only a photocopy. Kinko's handles business cards, stationery, signs, banners, brochures, manuals and even passport photos. Its scanning service converts documents into digital files for archiving and cataloging.

Customers can print online by sending jobs from their computers. Or, through the Kinko's DocStore feature, they can create an online, customizable catalog of their organization's frequently printed documents, then select and order jobs online, which Kinko's prints and delivers.

Then there are the non-duplicating services like computer rental, videoconferencing and wireless Internet access.

Clearly, Kinko's is a formidable competitor. But it's also a good example for an in-plant to follow.

"So if your business strategy is that the folks at your school should be using your service because you're one of them, you may have a problem," notes Chambers. "You've got to compete on service and value, as well. I suspect that's really Kinko's strategy: Bring them in with low cost and hook them with value."