Wednesday, November 12, 2008
On February 12, 2004, the Memphis, Tennessee–based express shipping giant FedEx Corp. (founded in 1973 as Federal Express) expanded in a new direction when it purchased the Dallas, Texas–based Kinko’s photocopy center chain, which was founded in 1970 in Santa Barbara, California. The purchase was not a complete surprise to industry analysts—FedEx had already been using many Kinko’s copy centers as drop-off points for customers, and the purchase consolidated these services, among other things. After rebranding the company as FedEx Kinko’s Office and Print Services and the outlets themselves as FedEx Kinko’s Office and Print Centers, FedEx began to implement an ad campaign designed to attract small business owners as well as a more mobile customer, one who would find FedEx Kinko’s services convenient as an ‘‘office on the road.’’ The ad campaign was tagged ‘‘Our Office Is Your Office.’’ The campaign was created by BBDO New York, FedEx’s lead agency and creators of the award-winning 2003 campaign ‘‘Relax, It’s FedEx.’’ Using the offbeat humor that had become a hallmark of FedEx advertising, the $25 million rebranding campaign broke with four 30-second television spots. Other spots were added later. In addition to television the campaign used radio, the Internet, print, and direct mail. The campaign had the important task of reintroducing a known entity to the public with ads titled ‘‘First,’’ ‘‘Luggage,’’ ‘‘Welcome Aboard,’’ ‘‘Cloud Nine,’’ and ‘‘Plastic.’’ ‘‘Our Office Is Your Office’’ intended to cement FedEx Kinko’s new identity into customers’ psyches. Several of the spots earned accolades from the advertising industry. Sales at FedEx Kinko’s failed to soar as much as management had hoped, but for fiscal year 2005 the company still managed to report revenues of $2.1 billion, an increase over the previous year.
At a glance the combination of FedEx and Kinko’s would seem an unlikely merger. The former was an established shipping company that practically reinvented the package delivery industry by concentrating on express delivery via jets. Kinko’s, on the other hand, was one of the leaders in the print and photocopy field. At the time of the buyout, Kinko’s was operating approximately 1,200 stores worldwide, serving 215 countries. The company estimated its annual revenue for calendar year 2003, which was just prior to the buyout, at nearly $2 billion. However, the relationship between FedEx and the privately owned Kinko’s, which stretched back to the 1980s, had been growing more intertwined over the years. In 1988 FedEx became Kinko’s exclusive shipper, and by the end of 2003 FedEx was conducting full-service retail business in 134 Kinko’s stores.
Kinko’s profitability aside, a further incentive for the buyout was a shift in corporate thinking at FedEx. Since its inception the company had been the leader in express delivery services, pioneering domestic and international air shipment. The financial downturn of the first years of the twenty-first century, however, was a major factor in the flattening out (and in some fiscal quarters a slight decline) in the company’s express shipment sector. During this same time FedEx Ground experienced seven consecutive quarters of double-digit growth. Clearly customers were choosing a lower price over the convenience of fast delivery. With the corporate shift toward focusing more effort on its ground delivery service and the already solid relationship between FedEx and Kinko’s, plus the high profitability of mobile customers who used the FedEx drop-off points in Kinko’s stores, the decision to expand into the print and copy industry seemed an almost foregone conclusion in the information age. The announcement of the buyout came in December 2003. At that time, as reported in Brandweek, FedEx chairman, president, and CEO Frederick Smith declared, ‘‘The FedEx and Kinko’s combination will substantially increase our retail presence worldwide and will enable both companies to take advantage of growth opportunities in the fast-moving digital economy. Our two companies share a similar background, culture and customer focus, and that common ground is extremely important as we prepare for future growth and success.’’ In February 2004 FedEx paid approximately $2.4 billion in cash to acquire the global operations of Kinko’s.
Aimed at small business owners and casual and regular customers in need of the office and shipping services the new FedEx Kinko’s could provide, the ‘‘Our Office Is Your Office’’ campaign relied on offbeat humor—practically a FedEx trademark. The spots made several points, primarily that the busy mobile customer and small business owner, who might not be able to afford or have the inclination for permanent office space, let alone myriad office equipment, could find satisfaction at FedEx Kinko’s. The ad campaign targeted casual, more mobile customers because they, and to a lesser degree small business owners, were more likely to pay higher shipping rates in addition to making use of the full range of printing, copying, shipping, and electronic services—the latter dealing with electronic transfer and delivery of scanned and documents and PDF files. FedEx Kinko’s also intended to lure customers away from the UPS Store, the leading provider of shipping, postal, and business services in the world. The UPS Store not only offered identical services as FedEx Kinko’s, but it also provided mailbox rentals. To attract these UPS Store customers, ‘‘Our Office Is Your Office’’ focused on FedEx Kinko’s lower shipping rates.
From the outset the main competition for FedEx Kinko’s was the UPS Store. Shipping rival United Parcel Service (UPS) had actually led the way in diversification with its 2001 purchase (for $191 million) of Mail Boxes Etc., which was rebranded the UPS Store in 2003. In 2004 UPS opened 525 additional outlets, which raised the total number of UPS Stores to 3,771. This was approximately three times the number of FedEx Kinko’s outlets. Regarding their retail pack-and-ship outlets, UPS had a strategy that differed from that of FedEx in three important ways. First, the UPS Stores were franchised as opposed to being a subsidiary company. The second difference was location. FedEx Kinko’s were concentrated in urban areas, while UPS Stores were located in suburban and rural areas, though by early 2005 UPS Stores were expanding into urban neighborhoods as well as college campuses, military bases, and convention centers. Third, while both were after the growing retail shipping market, FedEx Kinko’s offered more print and copy services than the UPS Store.
Dave Hirschman, writing in the Atlanta Journal-Constitution soon after the ‘‘Our Office Is Your Office’’ ad campaign broke, noted that while FedEx Kinko’s lagged behind the UPS Store in terms of physical numbers, its urban stores took in ‘‘far more revenue on average than suburban UPS Stores.’’ Nevertheless, and despite its expansion elsewhere, UPS Stores remained wedded to the suburbs. On this subject Mark Davis, a senior analyst at FTN Midwest in Cleveland, as quoted by Sandra O’Loughlin in Brandweek, observed, ‘‘UPS is very focused on the next battleground, which they believe is out in the suburbs and rural areas. That’s where they feel the next opportunity exists for them to enhance their relationships with customers and provide an additional point of contact for them in their competition with both FedEx and DHL, but also the U.S. Postal Service.’’ In time as FedEx Kinko’s services evolved, the ‘‘Our Office Is Your Office’’ ad campaign would seem to foreshadow a whole new dimension. By 2005 FedEx Kinko’s was in competition not only with the UPS Store (as an extension of UPS itself) and DHL but with office suppliers Staples and Office Depot as well.
The ‘‘Our Office Is Your Office’’ campaign was the first for FedEx Kinko’s. The campaign debuted during the first week of July 2004 with nine television spots along with radio, print, direct-mail, and Web elements. The campaign’s goal was to immediately position FedEx Kinko’s as a less expensive, more convenient alternative to the UPS Store. The ‘‘Welcome Aboard’’ spot did this by specifically mentioning savings of up to 35 percent. As quoted in Business Wire at the time of the launch, Gary Kusin, president of FedEx Kinko’s, declared, ‘‘These ads reflect the value that FedEx Kinko’s offers to our customers. In addition to the industry’s broadest range of services—copying and printing, computer rental, Wi-Fi Internet access, videoconferencing, and FedEx shipping—we plan to launch a complete packand-ship capability before the peak holiday season.’’ And FedEx executive vice president T. Michael Glenn (quoted in the same article) noted, ‘‘FedEx Kinko’s powerfully redefines the future of the business services marketplace by offering customers a fully functional office on the road.’’ Many business journalists picked up on and advanced that theme.
From the outset the campaign strategy was to take on the UPS Store directly. When FedEx purchased Kinko’s it went full steam into waters it had previously only been testing. While the number of domestic UPS Stores was far greater than the number of FedEx Kinko’s, the latter relied on location—urban versus suburban—and its wider range of services to attract new customers. The spots ‘‘First’’ and ‘‘Welcome Aboard’’ both touted FedEx Kinko’s over its main rival, the UPS Store. ‘‘First’’ used sight and sound gags to show the availability of FedEx Kinko’s as opposed to the UPS Store and empathized with customer frustrations over not finding a UPS Store open. The spot depicted a man pointing out different company artifacts (the first dollar, which was framed, and the first letter from a satisfied customer) to a woman. The third artifact was a chair embedded in a wall, which signified the first tantrum. The man in the commercial, as quoted by Barry Janoff in Brandweek, went on to explain, ‘‘because we had to ship a package and the UPS Store was closed.’’ In ‘‘Welcome Aboard’’ a boss and an employee argued over whether the employee had been fired or quit. The spot ended with the worker being rehired after mentioning that by using FedEx Kinko’s instead of the UPS Store he had saved up to 35 percent. Thus the humor had a very competitive edge to it. In another spot, ‘‘Luggage,’’ the convenience of utilizing FedEx Kinko’s services was highlighted. Two would-be entrepreneurs struggled as they tried to unload office equipment from an airline carousel. One finally suggested that perhaps they ought to have gone to FedEx Kinko’s.
Despite the decline in revenue for ‘‘traditional’’ office services at FedEx Kinko’s Office and Print Centers, corporate officials felt that the ‘‘Our Office Is Your Office’’ ad campaign had successfully implanted the notion of integrated services in customers’ minds. The ad industry seemed to agree, as ‘‘Cloud Nine’’ was designated as one of Adweek magazine’s Best Spots of 2004, and ‘‘Plastic’’ won an international bronze Andy award in 2005.
By the end of the first quarter of fiscal 2006, FedEx Kinko’s claimed more than 1,450 employees with service in more than 11 countries. One year after the launch of the campaign, FedEx Kinko’s was making plans to triple its number of domestic stores. In August 2005 the parent company took the office notion one step further when it began selling office supplies and furniture online.