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Vistaprint

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Vistaprint Limited
Type Public (NASDAQVPRT)
Founded 2000
Founder Robert Keane
Headquarters Hamilton, Bermuda, Bermuda
Area served Global, customers served in over 120 countries
Key people Robert Keane (CEO); Michael Giannetto (CFO); Wendy Cebula President - Vistaprint North America; Janet Holian President - Vistaprint Europe; Trynka Shineman (CMO)-Vistaprint North America; Nick Ruotolo (CMO)-Vistaprint Europe; Don Nelson (CIO)
Industry printing
Products Business Cards, Websites, Postcards, Magnets, Car Door Magnets, Invitations, Announcements, Hats T-shirts, creative services, etc.
Revenue US$400.7 million (FY2008)
Net income US$39.8 million (FY2008, GAAP)
Employees 1,600 (as of October 28, 2008)
Type of site e-commerce
Available in English (Australia, Canada, New Zealand, UK, USA), Danish (Denmark), Dutch (Netherlands, Belgium), French (Canada, Belgium, France, Switzerland), German (Germany, Switzerland), Italian (Italy), Japanese (Japan), Norwegian (Norway), Polish (Poland), Spanish (Spain, USA), Swedish (Sweden)
Launched 2000

Vistaprint is a large online supplier of printed and promotional materials as well as marketing services to small businesses (often referred to as SOHO) and consumers. In the 26th annual GAM 101 listing, the company is the 40th largest (by revenue) and the 4th fastest growing printing company in North America. It is also the 6th largest public company (by market cap).[1]

Vistaprint total revenues have grown from $6.1 million for the fiscal year ended June 30, 2001 to $400.7 million for the fiscal year ended June 30, 2008.[2] According to a compete.com survey, the vistaprint.com domain enjoyed 7,556,490 visits in June 2008.

Contents

[edit] Business

Based in Hamilton, Bermuda, Vistaprint employs over 1,600 employees globally in its offices and printing facilities. The company’s U.S. offices are in Lexington, Massachusetts, while its European offices are in Barcelona. Its two printing facilities, which total over 200,000 square feet (19,000 m2) of production space, are in Windsor, Ontario and Venlo, the Netherlands. Vistaprint uses patented technology to aggregate and print large numbers of customized orders in its automated production facilities in North America and Europe.[3] This technology enables Vistaprint to print an average of 44,000 orders daily.

Orders for customers in North America are printed in the company’s plant in Windsor, Ontario[4].

European and Asia Pacific orders that are placed by consumers are manufactured by Vistaprint B.V. in Venlo, the Netherlands[5].

The company’s customer service center, Vistaprint Jamaica Limited, is headquartered in Montego Bay, Jamaica and is staffed by company employees since its doors opened in November 2003[6].

[edit] History

Vistaprint was founded in Paris, France in 1995 by current President and CEO Robert Keane, immediately following his graduation from INSEAD Business School. Keane was interested in closing what he perceived as a gap in the printing industry’s market with regard to the micro or small business, and developed that plan while in school. Because traditional print shops typically generated orders only in the thousands, something many small businesses could not afford, Keane perceived a potential area for growth with short run, high volume printing. Thirteen years later that gap has been recognized by a number of retailers, including Staples and OfficeMax, but Vistaprint still remains as one of the leading suppliers.

Using advanced technology to group similar orders in large groups, Vistaprint produces large numbers of orders in short runs. This allows for consumers to get quantities in low volumes, as low as ten for example, rather than thousands. Using the Internet as a medium, graphic design is offered through online design studios. Anyone can then design a product and order it through the site. These processes and manufacturing methods have been incorporated across the company’s vast product line.[7] Although they do follow the CanSpam act to the letter, they are very difficult to get removed from sending emails. Many people have reported not being able to remove their email address even though they have notified the company to do so.

[edit] Move to U.S. and IPO

Moving to Massachusetts in 2000, the company needed to attract software and marketing talent, as well as venture capital. It succeeded in doing all three. In order to survive the burst of the dot com bubble, the company’s staff was cut from 70 to 20, but in 2001 the company started turning a profit. [8] Originally starting with business cards as its only product but then expanding to postcards, letterhead, stamps, and return address labels, the company started to see better profits as more and more consumers bought products online.

In September 2005, the company went public with a successful initial public offering. Now publicly traded on the NASDAQ, Vistaprint has consistently seen growth rates in the 50-60% range, according to its earnings statements. [9] All of this growth has been organic, as the company has not made any acquisitions since its IPO. Working to expand and focus on markets outside of the U.S, Vistaprint opened a European office in Barcelona, Spain in September 2006.

[edit] Vistaprint process

Vistaprint applies the principles of mass production to printing, Vistaprint uses presses and processes of industrial printing for short-run commercial printing, while achieving units costs close to that of industrial printing.[10] Using proprietary technologies, Vistaprint has managed to shift the conventional cost-volume curve, so that relatively short runs are still relatively inexpensive. This is a major competitive advantage, with many aspects of the process patented.[11][12][13]

Vistaprint uses self-service design, proofing and ordering at the front-end through the web, and controlled printing, cutting, packing and dispatching at the back-end through printing plants. The key aspects of the process are system integration, aggregation, standardization and automation.

Vistaprint's proprietary process involves multiple software components, and the management of multiple production components, in an end-to-end production workflow from "click to ship".[14] Vistaprint is vertically integrated with two large production facilities, one for North America in Windsor, Ontario[15] and one for Europe in Venlo, Netherlands.[16][17] This allows the company full control over the entire production process, and allows it to invest in the most efficient presses (such as the MAN Roland 700) and technologies as part of its printing assembly line.[18][19]

Vistaprint processes thousand of orders from many customers worldwide through their web site. Because of the high volume of orders, there is considerable homogeneity. Jobs can be gang printed using a complex formula based on such factors as type of job, paper stock type, run quantity, finishing (if any) and ship-by dates, among many others.[20][21]

Vistaprint minimizes user selectable options typical in the low volume commercial printing world. They print standard types of printed materials, such as business cards or postcards. Within each category, it supports a specific size, paper stock and ink colors. This results in higher numbers of similar jobs which can be ganged together. It also results in faster changeovers because there's less need to change paper or inks between jobs.[22]

Vistaprint uses Computer Integrated Manufacturing techniques to minimize human intervention and labor costs.[23] Using browser-based desktop publishing environment, customers act as their own designer and proof-reader. Jobs are routed for printing without intervention. Through capital investment in the latest equipment (for printing, cutting, packing, and shipping) the entire printing process can be computer/software controlled. The printing is done in a single pass on automated, high-volume, large format professional quality presses. Once printed, the products are cut down to size using a computerized robotic cutter, assembled, packaged and addressed using proprietary software driven processes, and shipped to the customer.[24]

In a form of mass customization using as little as 60 seconds of production labor per order versus an hour or more for traditional printers, Vistaprint is able to print orders faster and at lower costs than traditional printers.[22] Their strategy is to target small-run orders usually excluded from conventional large printers.[21]

Because of its low labor and production costs, Vistaprint achieves low unit costs, which allows it to profitably serve very small customers. The process also achieves very low marginal cost for both incremental quantities (500 business cards instead of 250) and incremental orders (another business card order, or a set of address labels). This is the key enabler of Vistaprint's free business cards offer, a long-running viral marketing campaign, as the unit cost of any one free business cards order is very small. It also means the process becomes more profitable when a customer upgrades quantities, or adds another product. Vistaprint's process results in a virtuous circle where high volumes of customers drive down unit costs, and lower unit costs allows the company to charge lower prices to attract even more customers.[20]

[edit] Business Units Established

In May 2008 the company changed its organizational structure to consist of two geographically-focused business units, one in North America and the other in Europe. The North American unit will be led by President - Vistaprint North America Wendy Cebula, who was formerly the chief operating officer; former Chief Marketing Officer Janet Holian has been promoted to the position of president - Vistaprint Europe and will lead the European team from Barcelona, Spain. [25][26].

[edit] Patents

Vistaprint has been active, since its inception, in applying for a large number of patents for various aspects of its proprietary technology platform, and one of its early hires was an in-house patent attorney.[27] The company recognizes that developing and protecting its intellectual property creates additional value in the company, and acts as a business moat to deter competitors. So far, Vistaprint has secured 15 issued patents[28] and has applied for almost 40 more.[29] The company has described its objective as a "minefield of patents" and has been active in pursuing companies that it considers to be infringing on those patents.[30] In 2006, VistaPrint filed a patent infringement suit against Print24 GmbH and UnitedPrint.com AG. A German court ruled in favor of Vistaprint in July 2007.[31] Separately, in May 2007, Vistaprint filed a patent infringement suit against two Taylor subsidiaries 123Print and DrawingBoard. This action is currently ongoing.[32]

[edit] Strategic Partnerships

In 2007, Vistaprint announced a strategic partnership with OfficeMax to provide an in-store station in up to 900 OfficeMax stores in the US and Mexico.[33][34] OfficeMax ImPress is a white label, OfficeMax-branded web site for small business printing based on Vistaprint technologies. The agreement marked Vistaprint's first major move offline. In 2008, Vistaprint announced a strategic partnership with Intuit, the leader in accounting software with 3.5 million active small business customers. This ties Vistaprint's service into Intuit's QuickBooks software using a white label, Intuit-branded web site for small business printing based on Vistaprint technologies.[35]. At Vistaprint's April 2009 third-quarter earnings presentation, the company also announced it will also supply services for the FedEx Office brand[36].

[edit] Controversy: Rewards Program

Like many ecommerce companies, Vistaprint frequently uses its pages to promote its business relationships with third-parties, through which the company generates referral, affiliate or advertising revenue. This form of co-marketing is popular because the revenue derived has almost no associated cost, and hence is highly profitable. In general, where such co-marketing results in a one-off customer purchase there is little criticism. However, this is significantly more controversial when it results in recurring (membership-related) billing.

In particular, Vistaprint's partnerships in the United Kingdom have attracted criticism[37][38]. Critics have stated that Vistaprint's customers are enrolled without their knowledge in a reward voucher scheme operated by an associated company, VPrewards.com, at a cost of £9.95 a month, that no information on the reward scheme is provided to customers subsequently and that it is up to the customers to detect the fact that they have been enrolled as members and to cancel unwanted membership. A similar scheme operates in the USA[39]. The number of complaints is significant enough to generate awareness on the web and to be a cause for concern. For complainants, the company claims publicly to cancel the membership, and refunds the monthly membership : however there have been examples of complaints where the company has not done this or stopped charges and then continued them one or two months after. The others complain that Vista Print did not responded as quickly as customers would have liked.[37][38]

In August 2008, the company announced that class action lawsuits relating to the membership discount programs offered by third party merchants on Vistaprint's USA website have been filed against Vistaprint USA, Inc., Vistaprint Corp., and two third party merchants (Vertrue Inc. and its subsidiary Adaptive Marketing LLC) in Texas and New Jersey.[40] Two additional class-action suits were subsequently filed in both Massachusetts and Alabama. The four complaints, all filed in federal courts, allege that the defendants are in violation of the Electronic Funds Transfer Act (which protects from unauthorized charges) and the federal Electronic Communications and Privacy Act (which prohibits the unlawful access of financial information). "As we allege in the complaint, we believe that Vistaprint and Vertrue are acting in concert to access consumers' credit card information and then begin charging them relatively small amounts," says Jerome Noll, counsel for the plaintiff that filed the Massachusetts suit. "You're talking about $14.95 a month or $12.95 a month, hoping that consumers just won't notice." [41]

It should be noted that in its latest 10K for FY 2008, the company states "we expect that referral fee revenue from membership discount programs will decline in absolute dollar terms over that period of time ["by the end of calendar year 2010"], including possibly to as low as zero."[42]

From a financial perspective, some observers and analysts contend that this type of highly profitable third-party revenue distorts the company's finances. A relatively small referral revenue can have a relatively large impact on the net income. While Vistaprint, as a public company, properly includes this revenue in its quarterly figures, it is argued that excluding this revenue gives a better picture of the company's true profitability and the value of its stock.[43][44] For example, in FY 2008, Vistaprint's revenue was $400.7m with 6.9% of this ($27.6m) coming from referral fees, the "majority" of which comes from the rewards program. This can be contrasted with the net income for the same period of $39.8m.[45]

[edit] Business Practice: Bermuda Holding Company

Like a number of publicly listed companies, Vistaprint has an offshore corporate structure consisting of a parent company in a low-tax jurisdiction (in this case, Bermuda) and subsidiary companies in countries where it conducts substantial business. It has operated with this form of tax-efficient structure for more than seven years without challenge. Each individual operating company is taxed only on the revenue and income generated in its country of incorporation. The overall effect is to reduce the company's net corporate tax rate, while remaining compliant with the tax regulations of each country (and the listing requirements for a US public company). As a multinational offshore company, the company potentially attracts criticism for employing legal but controversial tax strategies and structures. In particular, while the company was originally founded in France, the company's largest single market is now the US, and its key executives are based in the US, and the company is listed in the US. Therefore, it is possible that future changes by the IRS in relation to corporate taxation, may reduce or eliminate Vistaprint's ability to continue to enjoy the benefits of its current tax structure. Relative to more highly taxed competitors, this increases net income and free cash flow. Some observers and analysts contend that this reduced tax burden distorts the company's finances, and does not provide a true picture of its profitability and the value of its stock, especially given the known concern in the US about the loss of potential tax revenues offshore.

[edit] Awards

Year Award Name Recipient/Rank
2008 The Globe 100, The Best of Massachusetts Business Vistaprint #32[46]
Internet Retailer Top 500 Retail Web sites Vistaprint #57
NEDMA Marketing Prodigy Christine Wallace[47]
ComputerWorld Premier IT Leaders Wendy Cebula[48]
Graphic Arts Online 101 Top North American Printers Vistaprint #40[49]
2007 Deloitte Technology Fast 500 Vistaprint #205[50]
CIO 100 Vistaprint[51]
Deloitte Technology Fast 50, New England Vistaprint[52]
ComputerWorld 40 Under 40 Wendy Cebula[53]
Internet Retailer Top Retail Web sites Vistaprint #79[54]
The Globe 100, The Best of Massachusetts Business Vistaprint #12[55]
Boston Business Journal Best Places to Work Vistaprint, Midsized Company Honoree[56]
NEDMA Creative Excellence Award Silver Medal - Best Catalog[57]
Marketing Sherpa Email Awards Lifetime Achievement Award, Vistaprint[58]
Printing Impressions 400 Vistaprint #32[59]
Graphic Arts Online 101 Top North American Printers Vistaprint #39[60]
2006 Internet Retailer Top 500 Retail Web sites Vistaprint #96
Small Business Technology Magazine Product to Watch Customized Printed Products[61]
Foil Stamping & Embossing Association Bronze Leaf[62]
MetrixLab Best Website of the Year www.vistaprint.es
Deloitte Technology Fast 500 Vistaprint #140[63]
Deloitte Technology Fast 50, New England Vistaprint
Printing Impressions 400 Vistaprint #46[64]
Graphic Arts Online 101 Top North American Printers Vistaprint #59[65]
2005 CIO 100 Vistaprint
Print Excellence and Knowledge Awards, Sponsored by Print Solutions Magazine Vistaprint
Ernst & Young Entrepreneur of the Year Robert Keane[66]

[edit] References

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  2. ^ VISTAPRINT LTD (VPRT) 10K - filed 8/29/2008
  3. ^ Patent 6,976,798: "Method for processing aggregate print jobs"
  4. ^ "Plant Expansion Creates 100 Jobs". Windsor Star. May 14, 2008. http://www.canada.com/windsorstar/news/story.html?id=c2c87866-9e12-4642-8911-8801cc3aeb31. 
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  16. ^ At the Forefront of Innovation - Venlo, the Netherlands
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  18. ^ MAN Roland 700
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