VISTAPRINT — SMALL ORDERS MEAN BIG BUSINESS

WHEN IS a commercial printing firm not a commercial printing firm?

VistaPrint, of Lexington, MA, is neither fish nor fowl. Only 33 percent of its revenues are actually spent on print production. More than 34 percent is earmarked toward direct marketing. Another 11 percent is ticketed toward technology advancement.

You call this a printer? Where’s the sales staff? VistaPrint doesn’t have one. Heck, it doesn’t even deal with print buyers. Yet, the company posted sales of $152 million for its latest fiscal year, a 67 percent increase over the $90 million it did the previous year.

How can this be a printer? Where’s the customer support staff? A call center in Montego Bay, Jamaica? What if something goes wrong with the document files? You’ve got to be pulling my leg.

Cutting Out Hassles

OK, you get the picture. There is little to no prepress or pressroom hassle. There aren’t any contract proofs or press checks. No vertical markets to target. VistaPrint doesn’t churn out a single product in the United States, either; its two manufacturing facilities are based in Canada and The Netherlands.

What is appalling to anyone who hangs his/her shingle as a commercial printer. . .VistaPrint really has no competition. But it does have a fleet of eight MAN Roland 700 series sheetfed offset presses—all located with CTP units next to them—and 15 HP Indigo digital machines. So, if it’s not a printer, VistaPrint certainly has found a third dimension to its liking.

“Our model doesn’t work for the majority of the printing industry,” notes Robert Keane, chairman, president and CEO of VistaPrint. “We’ve been able to take traditional printing equipment and use it in a very different way. We’ve taken the idea of focused specialization to an extreme.”

Truth be known, VistaPrint is not a commercial printer. It is not a business-to-business operation per se, either. But it’s found a gold mine of a niche.

Founded by Keane in Paris back in 1995, VistaPrint is now built around a template-based Web ordering tool for small businesses and consumers. Keane’s foresight was a masterstroke: serving very small and owner-run operations requiring business cards, brochures, letterhead, envelopes, presentation folders, data sheets, note cards, rubber stamps and even holiday greeting cards.

While previously working as an independent consultant for Microsoft’s Publisher desktop publishing group, he quickly saw the value in a template-driven model.

“What makes this a highly specialized niche is that commercial printers, for the most part, simply cannot be attentive to our client base for obvious reasons. Our typical order value is only $30. Considering many commercial printers don’t want to bother with $500 digital printing orders, the VistaPrint price point wouldn’t register a ripple,” Keane points out.

So how does a company nail $150 million in annual print sales 30 bucks at a time? VistaPrint receives more than 15,000 orders a day; with multiple line items, that figure becomes 25,000.

How is this done? Let’s say a stay-at-home mom runs a pet grooming service on the side and wants to obtain 500 business cards to hand out to family, friends and the community. She logs onto www.vistaprint.com and selects a template (or uploads her own logo/artwork), then inputs all of her contact information to appear on the card.

At checkout, she provides her credit card information and submits the order. The job is then sent to either the North American production facility in Windsor, Ontario (just across the border from Detroit), or its mirror-image European plant in Venlo, The Netherlands.

Herein lies the magic that has enabled VistaPrint to grow more than 50 percent annually virtually every year since its inception. Jobs are gang printed using a complex formula, according to Chris Connors, vice president of production, aggregated by such factors as paper stock type, run quantity, finishing (if any) and ship-by dates, among many others.

“What sets us apart is the rules engine—the business logic wrapped in code, which has grown over time,” Connors explains. “We’ve been doing this five-plus years, and our volume makes it complex. We’re able to gain more and more efficiencies. We look for those things and we code for them. The only way to get that many orders out the door every day is to make sure what’s being sent to the plant is being sent as efficiently as possible for printing.”

Also, by ganging various jobs, VistaPrint is able to reap the quality benefits of printing via the offset process. About 80 percent of revenues are derived from offset work, with quantities as low as 50, but most primarily in the 100 to 250 range.

VistaPrint’s success has had a snowball effect on the company’s ability to invest more technology dollars and, as the mousetrap improves, sales continue to billow. Since debuting its Web-based ordering system in 1999, the company has invested $45 million in its development. Another $20 million is ticketed for the next 12 months alone, augmenting areas such as:

• Controlling and helping the customer fashion graphic design within their own desktop publishing environment, as opposed to using off-the-shelf software such as Broderbund’s “The Print Shop.”

“We can offer 10,000 variations of design and 50,000 full-color graphic photographs that would never fit on a CD. So there’s more variety with VistaPrint,” Keane says. “Secondly, there’s desktop convenience and, three, we provide commercial-quality printing. We’re employing $4 million UV offset presses to produce postcards for local businesses. Ink-jet cartridges cost a fortune, and the quality isn’t the same as offset or even good digital output.”

In fact, Keane really only counts Broderbund, pre-perforated Avery Dennison cards and “bad clip art” as his only competition.

• Its database system, which reads the Internet-based orders that constantly flow in and seeks similar jobs to gang together, is constantly being improved. Clearly, the driving force behind VistaPrint being able to reap economies through gang printing is its Web-based template system. The template approach appeals to the mini business that can’t justify paying a graphic designer $500.

Testing Best Practices

“If you look back at when we began our real investment in our content, and growth from a revenue standpoint—while I’ve never looked at the data points—I suspect they coincide with one another,” Connors says. “We’ve developed a test infrastructure; we’re constantly running them on our site. We have an analytics group that spends a fair amount of time looking at what templates people choose, and then we prioritize them.”

• Software that is used to automate the back end of the workflow, from JDF-type files and PDFs that are cycling through, to the disaggregation process following printing.

“Because we do millions and millions of orders per year, we’re able to amortize the cost of that technology down to a few dollars per order,” Keane reveals.

Keane chose to go public in 2005 as another way of generating even more capital to invest in VistaPrint. Six Roland 700 series machines have been added in the past 18 months, and VistaPrint lays claim to being the first North American installation of MAN Roland’s InLineFoiler Prindor foil printing solution. Also, a 92,000-square-foot addition to the Windsor facility is expected to be completed by the end of 2006.

The $100 million reaped from the IPO helped improve its balance sheet, as well. “We’re in a business where the bigger we get, the more advantages of scale that we have,” Keane adds. “Our going public was part of a multi-pronged strategy to raise competitive barriers in the field within the specific segments of the printing market we have targeted.”

Keane refuses to stray from his master plan of catering to small businesses. He believes that by “sticking to our knitting,” VistaPrint can continue to dominate its space with further technology investments that enhance its product and service offerings. The company has rolled out as many as 10 new products in recent years, from rubber stamps to note cards and foil-stamped products.

And without a sales force in need of compensation, VistaPrint has even more dollars to divert into marketing campaigns. According to Janet Holian, chief marketing officer, all of VistaPrint’s revenues are generated via direct marketing. The company relies on extensive testing data to help guide its pricing and product offerings, aimed at deepening existing relationships and scaring up new business.

VistaPrint spends more than $20 million per year on advertising. Online outlets include e-mail, text and banner ads, as well as search engines. However, the company has also relied on the tried and true method of viral advertising courtesy of its “business cards are free at VistaPrint.com” tagline, which it places on the reverse side of free customer business cards.

Customers can get 250 free business cards that carry the advertising tagline, or pay $9.99 to remove the verbiage. Most, how-ever, are unconcerned about touting VistaPrint’s virtues and elect not to pay to have the tagline removed.

“We have more than two billion business cards being passed out with our tagline on the back of them,” Holian says. “That generates a lot of word of mouth and free advertising for us, which is great.”

VistaPrint tested a catalog last year that did well, and the company is on its fourth such release. It sends direct mail both inside and outside its client base. The company has done some print advertising, Valpak-type coupon bundles and sometimes piggybacks other product packages, including Amazon.com. Participation at trade shows, such as those for the Direct Marketing Association and the National Restaurant Association, provide the rare opportunity to press the flesh with new and existing customers. And VistaPrint is even testing three radio markets.

The ability to add new products, Holian notes, has been a catalyst for growth. “We’re focused on understanding our customer base,” she says. “One great thing about having a large client base is that you can send out surveys and, very quickly, get back statistically significant results.”

Going forward, Connors sees the company enhancing automation even further. “People who visit our manufacturing facilities are amazed by the workflow and level of automation we have through the cutting process,” he says. “Through the picking, packing and shipping processes, there’s a lot of low- hanging fruit. We’re looking to automate that, so within the same footprint of our plant, when it gets to 160,000 square feet, we envision a day where we can send out 10 times as many packages with the same equipment.”

Keane is excited about the growth potential for VistaPrint. He hopes the company’s expansion into 17 countries and the opening of the 250-employee Jamaican call center is a sign of things to come. With European business growing faster than that of North America, and the continued focus on strengthening its technology, VistaPrint management has reason to be optimistic.

“We’ve had a lot of success, but it’s critical that we never take that success for granted,” he stresses. “A successful niche does not have to be attractive from the perspective of other owners. It just has to be attractive from your own perspective.” PI