FedEx Office - What's the Strategy Now?

Richard Palarea is the COO of PA & Associates, Inc., among the fastest growing privately held companies according to the Baltimore Business Journal. PA & Associates has been saving companies money by negotiating strategic small package carrier agreements for seventeen years. Mr. Palarea can be reached at 866-200-SAVE (7283) x 201, rich@paaa.com or www.paaa.com

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During the late 90's, UPS made moves into ancillary, synergistic businesses that leveraged their distribution network. The more notable and public of these moves included their on site depot repair services for Toshiba. UPS staffed key distribution centers with Toshiba-certified laptop repair folks and used the UPS network to move ailing laptops into UPS facilities for depot repair services and turnaround back to its customers. The idea was to dramatically reduce the number of days required to receive back a repaired unit. Seemed like a good fit. After all, it wasn't about technology expertise (the UPS employees were Toshiba certified). It was about logistics.

UPS's subsequent deal with Mailboxes, Etc. to create UPS Stores was also directly about feeding the big brown beast.   

The FedEx move to acquire Kinko's (a copy center located in a number of US metro and suburban markets) also seemed like a fit.  After all, how many business professionals have rushed to prepare a presentation at a print/copy center only to haul a box of paper with them to the airport for their presentation?  Just "FedEx" it from Kinko's.

The reality is that times have changed:

1. Technology has allowed for desktop publishing and e-mail of urgent documents "when it absolutely, positively has to be there overnight". 
2. Networking and Internet printing are now common in many disconnected office environments. While connected to the WAN or internet, an author can print materials to a document production machine located in another state or country. 
3. Document management workstations are now commonplace in most office environments. These machines, far more than printers, allow for the production of materials in color, collated, bound, book-printed, slide production and more. The business-user market that Kinko's initially served well and FedEx wished to capture has been shrinking for some time. 
4. There is still a viable market for some print management services around university campuses, however, smaller independents and franchisees have come into the market and compete on price. 
5. The digital printing revolution has brought about the print-on-demand scenario where users (everyone from the office knowledge worker to the designer) can submit a print campaign or document online and have one piece digitally printed and fulfilled along with all of the tracking and metrics required for ROI (I.e.: direct mail campaign with a limited run not possible prior to digital printing).  This is less of a factor for FedEx Kinko's, although the market is surely one they were keeping their eye on. 
6. The print-on-demand and brokerage houses are becoming more savvy with regard to providing logistics services; many using it as a profit center. Some of these organizations are offering the full-service experience, including fulfillment services to a specified end point.

The division has never turned a profit since its acquisition in May, 2004. 300 locations were added in 2007; only 70 are planned for fiscal 2009.  The original copy shop - to ship model is shrinking because of technical competition created by digital media and the internet.

FedEx needs to get beyond the copy and print shop business.

My Firm has used FedEx Kinko’s and UPS Stores as strategic pickup and drop off points for low-volume, residential delivery-intensive customers where we were challenged to leverage the limited volume to reduce residential surcharges. Delivery to these commercial addresses eliminated the residential surcharge. Use of the carrier’s basic web notification tools provided the recipients with notification that their package is being held for pickup. This model has worked well for our clients that maintain a home-based workforce of brokers, financial planners and sales representatives. Both FedEx and UPS could leverage these offerings; thereby increasing store traffic (what retail establishment doesn’t want more in-store visitors?).

So what about the present incarnation of FedEx Kinko’s and the move to re-brand to FedEx Office? I’m afraid that what we're seeing is a creative attempt to leverage infrastructure, however far it is from your core-capability.  Time and technology have changed the copy shop business when strictly considering print services and back office activity.

Where there could be an opportunity with FedEx Office is in the Service Parts Logistics business. FedEx Kinkos storefronts are located throughout metropolitan areas.  They could be used as pick up and drop off points for SPL deals for MRO goods like high end machine parts, etc.  That strategy could serve niches in big business, not just the SMB market.

Whatever the meaning, the strategy for FedEx Office remains murky.   FedEx still seems to be trying to figure out what to do with an ailing asset base, and in the meantime still use it to feed their parcel network.

Rich

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