Print Solutions Magazine

Print Solutions December 2006

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COMPETITIVE LANDSCAPE

This series focuses on thriving or up-and-coming companies in the print industry. Many of the companies featured won ’t fit the traditional distributor or manufacturer model. Some are investor darlings, others have created industry buzz with technological innovations or with a new approach to selling print. If you have suggestions for companies that should be profiled in this series, email them to abrown@PSDA.org.

Next Month: InnerWorkings Inc.

“Price” Isn’t a Dirty Word

VistaPrint’s winning formula is selling print at the cheapest price to the smallest customers.

By LaShell Stratton

VistaPrint
Founded: 1995
Headquarters: Hamilton, Bermuda
Principal: Robert Keane, president, CEO and company founder
What makes this company an emerging competitor? The online print provider keeps prices low for its 7 million customers, most of whom are small business owners with tight budgets. An automated ordering and mailing process helped VistaPrint ’s revenue to consistently grow by more than 50 percent in the past few years.

If a printer wants to stay competitive for the long haul, the worst thing you can do is vie with competitors on price, say some print industry veterans. Traveling that road leads to commoditization and maybe even closure with nothing that distinguishes you from the thousands of other printers other than an advertised discount. Not so, says VistaPrint President and CEO Robert Keane, who insists that the automated, online print provider ’s biggest selling point isn’t the convenience offered by its web-to-print sites or even three-day print job turnaround, but price—a concept on which the company was founded.

“Printing is a commodity, so price matters,” Keane says. “Web-to-print enables VistaPrint to radically reduce costs and to slash prices for our customers. Unlike many printers, we welcome harsh price-focused competition because VistaPrint has such enormous efficiencies in the total automation of our process that VistaPrint is very good at winning in commoditized, highly competitive situations.”

But Keane says the key to excelling in price-focused competition is snagging sales from the right market: very small businesses. “Most of our customers have just one, two or three employees,” Keane says. “They include local businesses like dog-walkers, caterers, independent consultants, florists and plumbers.” This SOHO (Small Office/Home Office) “is a huge market. There are 38 million businesses with fewer than 10 employees per firm between the U.S. and Europe,” he says. “These micro-businesses can’t afford traditionally-priced, professional quality graphics and printing. Their budgets are just too small and too constrained. VistaPrint’s average order is about $30. So prior to VistaPrint, they used low-end desktop publishing software like Broderbund Printshop, and printed from desktop printers or photocopiers.”

It may seem counterintuitive—focusing on price and the little guy (make that micro-guy) in order to succeed in the printing industry. But those are the two pistons that keep the VistaPrint engine running with more than 15,000 orders daily, according to fiscal year 2005 stats. These orders are generated seven days a week from the 17 localized web sites that that serve more than 120 countries worldwide.

Focusing on price and micro-businesses may also be why VistaPrint has consistently posted more than 50 percent revenue growth rates in the past few years. In fiscal year 2006 alone, the company ’s total revenue was $152.1 million, an increase of 67 percent over the total revenue of $90.9 million for FY2005. According to The Motley Fool, an investment publication, such revenue growth rates are an “anomaly in an industry that expands by 2 percent to 3 percent a year. And like other e-commerce companies that dominate their markets, including Amazon.com and eBay, VistaPrint is aggressively reinvesting its profits because it expects the strong growth to continue for quite a while, even despite a recent sell-off in its shares.”

VistaPrint produces 80 percent of its orders on offset presses at its manufacturing plants in Venlo, The Netherlands and Windsor, Ontario. The multinational print provider does not outsource its work.

Catering to the Little Guy

VistaPrint’s story begins in Paris, where Keane founded the company in January 1995. Prior to becoming VistaPrint ’s CEO, Keane was a consultant to Microsoft with the Microsoft Publisher desktop publishing product team. He provided research and advice on the graphic design and printing needs of small businesses in Europe. That research would come in handy.

“VistaPrint was founded because we identified a lack of printing solutions for the small business owner looking to order printed materials in smaller quantities and at rock-bottom prices. We saw a void in that market and offered those individuals a solution,” Keane says.

The vision for VistaPrint was to bring high-quality, low-cost printed graphic design and printing to small businesses and consumers. And so far, the idea seems to have caught on. In April 2000, VistaPrint had fewer than 500 customers, but by June 2006, that number had exploded to 7 million. (The company went public in September 2005.)

Keane says the process that a customer undergoes to purchase print off the VistaPrint web site is simple. “The customer logs onto our web site and chooses the product or products they want to create and customize according to their style and the message they want to convey,” he says. “The customer has the option to approve a PDF of the design before the order is finalized. The fact that it ’s easy to order from VistaPrint is what makes us attractive to people who really don ’t have the time or money to endure the traditional graphic design and production process.”

VistaPrint also has a large team of graphic designers and software engineers “who are constantly creating new graphics content to meet the ever-evolving needs of our small business and consumer customers,” he says. “Our team is experienced and very creative and that skill shows in the variety of products we offer on our site.” In addition to business cards, stationery, postcards, calendars and marketing collateral, VistaPrint now offers self-inking stamps, notepads and logo-creation software.

After orders are entered online, they go to VistaPrint’s two state-of-the-art facilities: a 54,000-square foot plant in Venlo, The Netherlands and a 68,000-square foot plant in Windsor, Ontario, Canada. (Keane says that VistaPrint doesn ’t outsource any of its jobs.) About 80 percent of the pieces are done on offset presses, though the company does have digital printing equipment. “We regularly have offset print runs as low as 100, sometimes as low as 50,” Keane says. “We use digital presses only for quantities from one to 99. We realize that this approach is contrarian, that the printing industry considers sub-1,000 quantity orders as the province of digital presses. But it works very well for VistaPrint, thanks to our technology and our unprecedented order volumes.”

Is Technology Really the Key to VistaPrint’s Success?

VistaPrint’s ordering and mailing process is standardized, automated and integrated from design conceptualization to product shipment. It all happens without human scheduling or human prepress operators. “This enables the aggregation, or grouping, of orders,” Keane says. “Aggregation and printing is very much on demand, in real time, and automatically managed by our proprietary software. The time it takes from ‘RIP to ship’ is about two hours, including the RIP process, plating, setup, printing, cutting and other postpress, packaging and addressing.”

VistaPrint has a strong investment in its technology, which according to some industry observers it is what gives the company much of its competitive edge. But according to The
Street.com, an online publication that provides business and investor advice, as more and more companies realize the potential of print-aggregation technology and invest in it, VistaPrint could see more competition. “VistaPrint's technology isn't as proprietary as it appears,” wrote Marc Lichtenfield, in a May 2006 column for TheStreet.com. “The list of competitors is not especially large now, but the barriers to entry are not as formidable as the company would have investors believe.”

Adding More Muscle to Ward Off the Competition

Though micro-businesses are VistaPrint’s primary focus, the company isn’t against opportunities with larger businesses. “VistaPrint has various partnerships in place with companies like Monster, Checks Unlimited and Advanta, where we have a link on their web sites and do their printing for them,” Keane explains. “We are always looking for partnership opportunities that make sense for the company, but at our core, we are a direct-to-customer business, and we like that model. It helps keep our costs low, just like Dell.”

In addition to seeking new opportunities, the company also heavily reinvests its profits. “In almost every area of the business, we are reinvesting profits in an effort to continue the growth of the company, to create innovative, new products for our customers, and to make this market unattractive for copycat competitors,” Keane says. “For the quarter ending September 2006, we have guided Wall Street to expect about $15 million in capital expenditures, another $15 million or so in marketing, and approximately $5 million in technology development. That is $35 million in just three months, and it doesn ’t include additional investments in recruiting and financial infrastructure, international offices, and several confidential projects. We are growing those investment rates at well over 50 percent per year,” he says.

Keane admits that VistaPrint wants to be a formidable foe to would-be copycats. “We want to make it painful for any competitor who tries to copy our business model, by raising required investment levels to literally hundreds of millions of dollars, and by constantly raising the level of the competitive playing field while keeping prices extremely low.”

With those investments comes expansion—on a global scale. In August, the company launched its 17th web site in Norway, and in September, VistaPrint announced that it would open new European marketing office in Barcelona, Spain. “The only way to amortize the fixed costs of this business model is via massive scale, and geographic expansion is one part of our strategy to achieve higher volumes,” he says. “Norway is our 17th geographic market, and while we don’t comment on specific future plans, you can assume that it is not our last.”

LaShell Stratton is assistant editor at Print Solutions magazine. Email comments to lstratton@PSDA.org.