|June 11, 2008|
|FedEx Pays Dearly to Drop the Kinko’s Brand|
|By Greg Hazley|
|The Kinko's brand is going the way of Compaq and Oldsmobile.|
FedEx bought Kinko’s in 2004 for $2.4 billion in cash, but this week the shipping giant said it will take a nearly $900M charge to drop Kinko’s from its retail storefronts.
FedEx said it will re-brand the stores under the name FedEx Office, effectively killing the 38-year-old Kinko’s brand, which is still synonymous to many with late nights in college, jammed copiers and comically indifferent staff. [FedEx called it a “strategic decision to minimize the use of the Kinko’s trade name.”]
The acquisition just four years ago was a deal lauded by many because it made sense – Kinkos, which had risen up from its photocopy-store roots to become the purveyor of more business-minded “digital production centers,” made the documents and FedEx shipped them. It seemed like great synergy, as the PR people like to say. After all, a few months before, UPS gobbled up Mailboxes Inc. and with that move fired a salvo in the packaging transportation wars that really heated up with the Internet revolution and its boon to parcel delivery.
And so the merger probably was a good move for FedEx at the time, but that window of success might have already closing before the deal was made. Writing for Slate in early 2004 before the deal was consummated, Daniel Gross observed:
“Putting together a company that derives most of its revenues from sending documents and small packages overnight with a chain of stores where people go to create the sort of documents that need to be sent overnight—résumés, business plans, papers, reports—seems like a brilliant idea. For 1990.” [I should point out that Gross supported the deal as a way for FedEx to cut into UPS’ dominant ground transport business, and he was just acknowledging his initial criticism.]
But FedEx is back-peddling on the expensive purchase because growth at the 1,900 retail stores has been stagnant, despite more than $1 billion in revenue. The unit’s CEO was bounced in March. Brian Philips, its new chief, said Kinko’s was a “copy and print-service provider” when FedEx bought it. He said better represents the stores’ “broader” role as a back office or branch office for businesses and executives.
Kevin Dugan, over at the Strategic PR Blog, says FedEx can hang its head high with the move. He gave the company one of his coveted "Gallant" endorsements:
"FedEx purchased Kinko’s in 2004. Waiting four years to drop the name might seem odd for a company specializing in overnight delivery, but it’s not. FedEx was also adding a service by extending their brand to the uber-copy shop. This takes time to get organized internally and externally. Regardless of customer loyalty when the acquisition was announced, FedEx Kinko’s has now established itself as a successfully merged brand."
Rich Smith of Motley Fool was unabashed in his negative assessment of FedEx’s latest maneuver: “The reason FedEx should hang its head in shame is that its copy business does worse than both superior businesses such as Staples and Pitney Bowes and industry laughingstocks like Office Depot and Office Max. Changing the name won't change that. Especially when changing the name entails killing a great brand.”
And as the Kinko’s brand withers, so does FedEx’s fiscal fourth quarter profit.
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