FedEx Kinko’s Thinks Small
FedEx Kinko’s, an operating company of FedEx Corp., is moving aggressively ahead with the rollout of a new store concept that combines a reduced footprint with enhanced services. The smaller format is designed to manage growth more efficiently by reducing costs associated with construction, equipment and overhead. It is part of the company’s larger goal to give consumers more access to its office and print services and FedEx transportation network.
Executive editor Marianne Wilson spoke with Tom Leverton, FedEx Kinko’s senior VP, operations growth and development, and chief architect of the new concept, about the chain’s strategy.
Chain Store Age: Tell me about the traditional FedEx Kinko’s format.
Tom Leverton: It operates on a hub-and-spoke model in that there are larger stores, approximately 6,000 sq. ft., with clusters of smaller ones around them. The larger stores do the production for the smaller stores, so the same equipment isn’t needed at every site.
CSA: How does the new format compare?
Leverton: It is a smaller store—the average footprint is 1,600 sq. ft. to 1,800 sq. ft.—that more effectively leverages the hub-and-spoke network. Previously, our smallest stores were in the 4,000-sq.-ft. range.
CSA: How does this affect the store’s service offering?
Leverton: Because of the hub-and-spoke network, it doesn’t. Our new format offers the same services as a traditional FedEx Kinko’s, including full-service and self-service copy and computer rentals. We provide full customer service at all our locations. If a customer needs a small job, 500 copies for example, the work is done on site. For larger or more complicated orders, we take the order and send the job digitally to a larger production store. The job is ready for pickup by the customer the next day, at the location it was originally dropped off.
It’s really a seamless experience for the consumer. But it more effectively leverages our production capabilities to keep our costs lower.
CSA: What are some other features of the new format?
Leverton: We doubled the retail SKUs we carry to a total of about 700 items, with an emphasis on things geared for the traveling professional. We’ve increased our selection of business papers and writing instruments and added new technology products such as cell phone and laptop accessories and DVD media. We also enhanced our pack-and-shipping stations, with more shipping supplies and materials.
Headquarters: DallasAnnual sales: $2.1 billion (fiscal 2006)Number of stores: Approximately 1,500Areas of operation: Nationwide and select foreign markets
Also, every one of the new stores opens with a notary service. Having the notary on site speaks to the needs of our core customers, small- to mid-sized businesses and mobile, or traveling, professionals. The new format makes it much easier for customers to handle their office, printing and shipping needs in one convenient stop.
CSA: It would seem that some of these new or expanded services have a great synergy with FedEx.
Leverton: Yes. For example, oftentimes, a document needs to be notarized before it can be sent out. Now they can take care of both those needs under one roof.
CSA: Will any of the new features be added to existing stores?
Leverton: We are rolling out the notary service, which has turned out to be a big success, chainwide. Currently, we are in the process of determining which of the new SKUs we want to implement in our older stores.
CSA: How has the new format impacted your real estate strategy?
Leverton: It’s been a real win in helping us realize our goal of penetrating smaller markets. Traditionally, Kinko’s were on pad sites or corner locations. With the new model, we can open stores at sites that were previously not available to us due to the size of our footprint. We’re now going into suburban areas and industry parks, sites that put us closer to our customers. Several of our new stores are inline in shopping centers.
CSA: How have customers reacted to the smaller store?
Leverton: Very positively. I’ve spent a good deal of time in our new smaller stores and what is most amazing to me is that the customer treats these stores like a neighborhood store. The format definitely affects the way in which customers interact with our associates. There is a more personal feel, with customers often calling the associate by name. It’s also helping us improve customer loyalty.
CSA: Who designed the new prototype?
Leverton: We did it ourselves, internally.
CSA: Is the new concept cheaper to build?
Leverton: Yes. We have decreased our construction costs by more than half. The reduced footprint helps, but mostly in rent. Most of the savings have come as a result of reengineering our fixtures and the way we do build-outs.
CSA: Has the look of the store changed?
Leverton: It’s more open and bright than our traditional store environment. We used a variety of whites on the wall, with one very large purple wall that brings a FedEx message into the store. The design is customer-friendly in that everything is very simply laid out for the consumer. We know that every time a customer enters, they are working on something that is critical to them and we want to make it as stress-free and easy as possible for them to use our services. We think this new model improves the overall experience.
CSA: Financially, how are the stores performing?
Leverton: We have been very pleasantly surprised by the results of our first 90 stores.
CSA: How many do you expect to open?
Leverton: We’re on track to open a total of 200 stores in the first year, or by summer. But this is long-term program. We look at these first 200 as the beginning of a much larger expansion that will see us more than double our size within five years.
CSA: FedEx Kinko’s operates stores on a company-owned model. What do you see as the main benefits of owning your stores vs. franchising?
Leverton: Operating a network of stores instead of individual locations allows us to deliver faster turn-times, more targeted prices and larger job fulfillment by optimizing production across the country. In addition, we can provide consumers with a more consistent customer experience. Over the years, we have found the company-owned model truly works best for our customers’ needs
CSA: What’s it like working at FedEx Kinko’s?
Leverton: One of the things that is so great about this organization is that we act as a relatively small company underneath the much larger umbrella of FedEx. It is the best of both worlds. We’re able to stay nimble while marshalling the resources of the larger corporation.
Working here is very rewarding. We help people with real needs. I know—I used to be a customer. It’s great to be on this side of the equation now.
Home Depot Projects Lower Profit in 2007
Atlanta, The Home Depot Inc. said Wednesday it will pump $2.2 billion into improving its business this year even as it expects lower earnings and slim sales growth. Home Depot said that for fiscal 2007 it expects sales growth in the range of flat to an increase of 2%, a decline in comp-store sales in the middle single digit percentages and an earnings per share decline of 4% to 9%.
Including the effect of a 53rd week in its fiscal year, consolidated sales are expected to increase by 1% to 2%, and earnings per share are expected to decline by 3% to 8%, Home Depot said.
CEO Frank Blake told investors at Wednesday’s conference that like last year, “2007 also will be a difficult year.” But he said it will be a year of focus on Home Depot’s priorities and a year with “hopefully less noise.”
The “noise” was apparently a reference to the investor furor over former CEO Bob Nardelli’s hefty compensation in light of the company’s lagging stock price. Nardelli resigned in early January after six years at the helm of the company. He took with him a severance package valued at $210 million.
To improve its business, Home Depot said it will invest $2.2 billion this fiscal year in key priorities, including the opening of 115 stores. The investment includes $1.6 billion in capital spending and $600 million in expense.
Home Depot said it will recruit master trade specialists, simplify its staffing model, use more technology to aid customer service, and redesign employee compensation and reward plans. It also will invest in new merchandise and review its pricing strategies. Additionally, the chain will spend money on customer loyalty programs, direct-ship programs, credit programs and other specialty sales initiatives.
Federated Plans Name Change
New York City, Federated Department Stores on Tuesday said it would ask shareholders to approve changing the company’s corporate name to Macy’s Group Inc. A vote to amend the corporation’s charter to accommodate the new name will be held in conjunction with Federated’s annual meeting on May 18. If approved, the company will be known as Macy’s Group Inc., effective June 1. The move comes on the heels of the company changing most of its store nameplates to Macy’s.
“Macy’s Group is the appropriate name for our company, given that about 90% of our sales involve the Macy’s brand. That said, Bloomingdale’s is—and will remain—a very important part of our company,” said Terry J. Lundgren, Federated’s chief executive. Federated Department Stores also said stronger sales at established stores and lower costs drove a 5% rise in fourth-quarter earnings. For the quarter ended Feb. 3, net income rose to $733 million from $699 million the prior-year period. Sales fell 4% to $9.16 billion from $9.57 billion, as the company shuttered 80 “duplicative” store locations. Comp-store sales rose 6.1% in the quarter.
During the quarter, Federated lowered its selling, general and administrative costs 11% to $2.31 billion.
The company also announced a $4 billion increase to its stock buyback program and said it will immediately repurchase 45 million shares for $2 billion under the plan.