Day One and Day Two came and went without incident; the new FedEx Kinko’s teams had met their goals. Past Day Two, the steering committee scaled back the weekly meetings to once a month to deal with lingering issues, such as unfinished rebranding work. Once the newly merged organization had passed its greatest test — the peak holiday season — with flying colors, there was one final matter to confront. The integration team had to shut down almost 180 FedEx-branded World Service Centers, as their staffed retail outlets were known, where there was overlap with new FedEx Kinko’s branches and redirect all the customers to the new stores.
To pull that off smoothly, the marketing work stream developed in-store advertising to explain the shift to FedEx Kinko’s. They then sent messages to all affected World Service Center customers telling them which of the nearby FedEx Kinko’s stores would now service their account. With that completed, the integration team shut down. It had taken less than a year.
The jury is still out, however, on the results of the integration. Accustomed to seeing nearly immediate bottom-line results from almost every prior FedEx acquisition, Wall Street is not satisfied with the performance of FedEx Kinko’s. Operating margins have fallen from about 7.5 percent at the time of the acquisition to 4.8 percent in recent quarters. FedEx blames those results partly on integration costs, including rebranding and installing shipping services in all the stores. But overall revenue growth at FedEx Kinko’s was just 1 percent in 2005. “It’s not bringing them anything yet,” says Jim Corridore, a transportation equity analyst with Standard & Poor’s. “It’s far too early to say it’s a disaster, but it is presenting some challenges.”
Mr. Philips says he’s happy with the results of the integration so far, but he stresses that it is only a start. The next stage will involve adding 3,000 new FedEx Kinko’s outlets globally. “The beginning was all about the basics,” he says, “but the integration needs to go further from a customer perspective. The next step is to target small businesses, large businesses, and consumers with customized bundles of offerings.” That, he says, would enable FedEx Kinko’s to finally capitalize on the goal of serving just about any kind of customer and boost its revenues.
Beyond Shipping and Copying
FedEx will certainly continue to expand and, per Fred Smith’s commitment, change. It is experimenting with different store sizes and product offerings to meet the needs of customers in more suburban settings, recently introducing a series of compact stores at strip malls located near residential areas.
If Peter Drucker’s “knowledge worker” trend is correct, and evidence suggests it is, the number of people working outside the support structures that a company and an office can provide will just keep growing. But no matter how connected via electronic communications, people still like face-to-face contact. There is no reason to think that FedEx Kinko’s couldn’t become the social and professional gathering place for the kind of work force that Mr. Drucker describes. Kinko’s, after all, pioneered the office-away-from-home concept, and built an infrastructure that can sustain decentralized businesses. Now FedEx Kinko’s executives are working on such on-site offerings as direct mail, office products, and e-commerce solutions — all on a contract basis for individuals or for groups of mobile workers.
And FedEx Kinko’s could grow in another direction, exploiting the power of next-generation printers to deliver everything from books to engine parts on demand. Next-generation digital offset printers will make it cheap enough to print entire books on demand. And 3D printers can already “print” items in materials ranging from plastics to metal. Customers could order goods online, or create something themselves using computer-assisted design programs, and either pick up the item at the nearest FedEx Kinko’s or have it delivered. The company could emerge as the circulatory system for just about any transmission of data in the retail environment, whether that data ends up on a computer screen, on the page, or as an object. It’s a different form of delivery, but it’s still true to FedEx’s mission.