Small Print Jobs For Peanuts

VistaPrint's online design tools for clients and whizzy presses can slash costs by 80%
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The last place you would expect to see an ad for adult film star Erika Caliente is anywhere near announcements for "Luke and Jacqui's Wedding" in western Michigan. Except, that is, if you visit VistaPrint Ltd.'s (VPRT ) Windsor (Ont.) printing plant. Here, postcards hawking Caliente's show at Randy's Bar & Entertainment in Queens, N.Y., are printed on the same 40-by-28-inch piece of card stock as the happy couple's save-the-date mailing. At traditional printers, batching these two jobs would be unlikely. For VistaPrint, it's no problem -- and that's shaking up the $19 billion small-biz printing industry.

By using Web technologies to standardize the piecemeal world of printing, VistaPrint is putting slickly finished products within the reach of small businesses. VistaPrint does that by combining online design tools for customers with sophisticated printing systems. This eliminates high-cost design and makes the most of every scrap of paper and dram of ink. The result: Prices that can be 80% to 90% cheaper than at custom print shops. Now, VistaPrint churns out 15,000 orders a day for 7 million customers and claims 80% of the online small-business printing market. "They're transforming the business with a truly disruptive model," says Mark May, an analyst at Needham & Co.

It's a classic case of using tech to create a market. Individuals and small businesses are often priced out of professional-looking printing. Graphic designers can run amok with customized borders and pricey paper, pushing up costs by several hundred dollars. The alternative for most is desktop printing. Founder and CEO Robert Keane's business model is based on the idea that 90% of professional printing can be standardized.

It's tough to argue the point when a full sheet of print work rolls off one of VistaPrint's $5 million-plus presses. The company's software pulls together batches of similar jobs the presses can handle most efficiently in one run. That's how postcards from different customers end up on one sheet of paper. And by cutting orders jigsaw fashion, there's little waste. Local print shops, and even FedEx Kinko's (FDX ), can't match that efficiency since they address each job separately. Of course, with VistaPrint, shipping costs must be factored in. (Delivery usually takes about a week.)


VistaPrint's online tools help clinch the deal. Clients design business cards and brochures from scratch or use templates at VistaPrint's site. Because the programs are easy to use, almost 90% of orders are uploaded by customers or done online. David Boris, co-founder of men's-lifestyle site, says the low prices and easy ordering prompted him to use direct-mail postcards to supplement online marketing.

These innovations have made VistaPrint one of the best-performing initial public offerings. Shares of the Bermuda-based company, whose operations are run from Lexington, Mass., have zoomed 125% since the IPO last September. Analysts expect revenues this calendar year to rise 66% above 2005's $117 million.

If there's a threat to VistaPrint, it's potential competition from giants like Staples Inc. (SPLS ) or FedEx Kinko's. The company's 11 patents will slow down foes, but the real barrier to entry is the complexity of VistaPrint's technology. Rivals are trying to catch up, but VistaPrint established a lead when competing services, such as a partnership of Inc. and Kinko's, failed to gain traction during the Web boom.

Still, Keane may join big players rather than fight them. The company says nothing is imminent. But Fergal Mullen at Highland Capital Partners, a VistaPrint investor and director, hints that VistaPrint will sign a partner so it can sell through in-store kiosks.

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By David Kiley

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