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SOUTHERN CALIFORNIA ENTERPRISE : Kinko's Gambles on High-Tech Services : Company Seeks to Shed Image as a Photocopying Service for College Students

October 17, 1994|PATRICE APODACA | TIMES STAFF WRITER

Kinko's Service Corp., known for years as the photocopy place, has big plans for motoring on the information superhighway.

Ventura-based Kinko's has since the late 1980s been adding higher technology services--the use of personal computers, sophisticated color copiers and fax machines--to its staples of basic photocopying and passport photos.

In April, the company launched its most sophisticated technology service yet when it installed video conferencing rooms in 100 of its 725 stores.

The next step Kinko's foresees is giving customers the ability to communicate with its stores electronically. For example, it wants to be able to let a customer in Los Angeles use his or her office computer to ask a Kinko's in New York to make copies of documents to be distributed there.

With such services, Kinko's hopes it can move away from the image that's stuck with it since it was founded 24 years ago: that of a photocopy store catering primarily to college students.

While Kinko's still serves the college market, more than anything it wants to be known as the "branch office" for entrepreneurs, telecommuters, traveling business people and local representatives of corporations based elsewhere.

It also wants to lure more consumers who will use Kinko's for personal tasks, such as creating custom party invitations. With the new services, however, Kinko's is taking some risks. Its strategy requires investing heavily in expensive technology--just one color copier, for example, costs about $50,000.

"All technology takes a burn-in period," said Kinko's President Dan Frederickson. Kinko's expects to invest $20 million in its video conferencing venture and, he said, "The gamble is whether the timing is right or not."

At the same time, Frederickson knows well that Kinko's has another problem: Many potential customers just don't seem to know about all the new services. "As long as we hear customers say, 'I didn't know you could do that,' we've got a problem."

Frederickson plans to install video conferencing centers in more--though not necessarily all--Kinko's outlets. The service is set up in a conference room equipped with a large-screen television monitor with a camera on top and a device that resembles an oversized TV remote control. A video conference doesn't come cheap--$150 per site, per hour--but Frederickson calls it a bargain compared with the cost of air fare, hotel rooms and other travel expenses.

In addition to business people, he said he believes families may use the service for video "reunions" and other special occasion meetings. The company is offering a half-price video conferencing holiday promotion.

The joint venture partner on the Kinko's video conferencing project is U.S. Sprint, which provides the phone lines and a toll-free number to set up a conference. Randy Doyle, Kinko's product manager, said he's now looking into adding PCs to the system so participants in a conference can share and manipulate data and graphics during the meetings.

So far, local Kinko's stores that have the equipment installed have found it slow going. The manager at the Kinko's store in Ventura reported averaging six or seven video conferences a week; managers at the Encino and North Hills shops say they see only one or two a week.

"The biggest problem is, people just don't know about it," said Kinko's Encino manager Robert Crawford.

Kinko's is the first in its industry to offer video conferencing, and Bob Hall, executive editor of Quick Printing magazine in Port St. Lucie, Fla., questions whether many customers will want the technology. "Somebody would have to show me where they're going to make money at that."

Don Lowe, president of a Kinko's rival, Sir Speedy, a chain of 880 quick-printing and copy centers, based in Laguna Hills, said that investing in technology is "a requirement today." Sir Speedy already offers electronic links to many of its customers, a service that is increasingly in demand because it's convenient and saves customers time, he said.

Lowe, however, said he decided to pass on video teleconferencing. He felt the technology was not yet sophisticated enough, and "by the time it is perfect, AT&T will have those units in every office in the country and most hotels will have it."

Lowe and others suggest that Kinko's might do better to expand into offset printing--which rivals such as PIP Printing and Sir Speedy offer--because of growing corporate demand for quick-turnaround print jobs.

"Ten thousand envelopes and letters can be significant bread-and-butter" business, Hall said.

The quick-printing industry has been undergoing a shakeout, but generally large chains like Kinko's are better positioned to survive and invest in the new services that customers want, Hall said.

Kinko's already enjoys some clear advantages because of its size, said Hall, including the ability to cut favorable deals with equipment suppliers like Xerox and Canon.

It also helps that about 100 stores are owned solely by Kinko's reclusive 47-year-old founder and chairman, Paul Orfalea, and the rest are co-owned in partnerships by Orfalea and other investors. Orfalea, who declined to be interviewed, also owns Kinko's Financial Services, an internal financing unit. This common ownership gives the company a strength of management, Hall believes, that franchised networks have difficulty achieving.

But Kinko's may be hampered by its low profile, which reflects the low-key style of Orfalea. "They're going to have to get the word out," Hall said. "It's great to have all these capabilities, but they don't do any good unless your customers want them."

Though Orfalea avoids the spotlight, Frederickson said the chairman is still very much involved with store operations, new products and strategy.

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