Retail Plus: FedEx Buys Kinko's

More than a quarter of the documents handled by Kinko's 1,200 copy outlets arrive in digital format.
One explanation for FedEx's planned acquisition of Kinko's can be summed up in a word: retail. But a combination of the companies would run deeper than simply giving the package-delivery company a greater street-level presence. It would involve virtual offices for on-the-go professionals, outsourcing services for large companies, and a document-duplication business that's increasingly digital. "We see this as so much more than a retail story," Kinko's president and CEO Gary Kusin said when the deal was disclosed late last year.

Few people may realize it, but more than a quarter of the documents handled by Kinko's 1,200 copy outlets arrive these days in digital format, a sharp increase from two years ago. And, in an initiative that promises to boost that trend, Kinko's plans to use Web services to let customers hit the "print" command within a Microsoft Office application on their desktops and choose to have their pages electronically transmitted to a Kinko's location for printing and delivery virtually anywhere.

Kinko's customer base is changing, too. While consumers and small to midsize businesses remain its core constituency--accounting for 20% and 50% of sales, respectively--large companies now generate 20% of its revenue. In addition to document copying, Kinko's rents PCs, Internet access, and videoconferencing services to mobile professionals, and offers document-management outsourcing to businesses.

When you add it all up--the retail footprint, digital documents, diverse customer base, and services portfolio--Kinko's represents a new world of possibilities for FedEx. "It diversifies our business," FedEx CFO and executive VP Alan Graf said during a teleconference with financial analysts Dec. 30. "Kinko's is the back office for hundreds of thousands of businesses."

Sure, FedEx's acquisition of Kinko's is aimed at filling the overnight company's delivery pipeline with ever more documents, but that only partly explains the deal. It's the many other business-to-consumer and business-to-business scenarios that may make this matchup difficult for others to duplicate.

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