What can Brown do, if anything, to mass? - Stationery Update - Mail Boxes Etc. stores becoming UPS Stores

DSN Retailing Today, June 23, 2003 by Mike Troy

The marketplace for shipping, mailing and packing supplies and services is not what it used to be and neither is the competitive landscape of retailers vying for consumer dollars.

The playing field has changed considerably in recent years as retailers, suppliers and service providers have recognized the role shipping services can play in offering customer convenience. The category of goods and services also have become increasingly important in everyday life while presenting retailers with key seasonal selling opportunities during the back-to-school period and the holidays.

One of the most significant developments in the marketplace heading into the second half of the year is the ongoing rebranding of Mail Boxes Etc. stores to The UPS Store. UPS acquired Mail Boxes Etc. a little more than two years ago and in April began changing the name of approximately 3,000 locations in the United States. A 10-week, nationwide television advertising campaign was also begun at that time to let people know about the changes. The campaign plays off of UPS' now familiar slogan, "What can brown do for you?"

"We are pretty much telling people we are changing the name, but that it means more than that," said UPS spokesman Steve Holmes.

The UPS stores range in size from 800 square feet to nearly 2,000 square feet and can rent a customer a mail box, send a fax, make copies or, depending on the location, sell them a limited assortment of merchandise.

The potential for The UPS Store to be a more influential force in the marketplace is greater now than it was in the past because UPS is a $31 billion company with the desire and resources to grow the network of stores and expand the offering of products and services. Even prior to the acquisition by UPS, Mail Boxes Etc. was a rapidly growing franchise operation. Founded in 1980, Mail Boxes Etc. grew to 1,000 units by 1990. From 1990 to 1993 another 1,000 locations were added. By 1996, with the addition of another 1,000 units, Mail Boxes Etc. had 3,000 locations. The following year the company was acquired by U.S. Office Products, which at the time of the acquisition was already showing signs of financial problems with escalating debt and inventory levels and declining cash reserves. Growth slowed under the ownership of U.S. Office Products, and then three days before the company filed for bankruptcy on March 5, 2001, it announced the sale of Mail Boxes Etc. to UPS for $185 million.

UPS was already a major provider of services to Mail Boxes Etc., but it took awhile for the company to develop a strategy it felt could unlock the potential of a 3,000-store network and also would be agreeable to franchise owners. Then, last fall, UPS began a test in six markets, including Phoenix, San Antonio, St. Louis, Seattle, Harrisburg, Pa., and Greenville-Spartanburg, S.C., in which different branding concepts were used, and consumers were offered UPS-direct pricing. Perhaps more than any name UPS could have adopted for the store network, the change in pricing is what consumers responded to most since Mail Boxes Etc. stores had a reputation as being expensive.

Customers paid far more for boxes, tape and other packing supplies than they did at discount stores, and the prices for shipping services provided by UPS were also higher than customers would pay if they dealt directly with UPS. However, to do that meant visiting an inconvenient location often in an out-of-the-way industrial park.

Customers responded favorably to the low shipping prices, but it was the The UPS Store name that fueled the strongest consumer response, according to UPS, with December 2002 sales at UPS-branded stores that increased an average a 70% over the prior year.

UPS recognized that consumer access to its services was a shortcoming when several years ago it teamed up with office superstore operators Staples and Office Depot to install UPS shipping centers in their stores. The arrangement also addressed an office superstore shortcoming. While UPS needed to improve customer access to its services, Staples and Office Depot saw shipping services as a means to generate increased customer traffic while rounding out their offering of business services. Office superstores have traditionally relied on copy and print services as a means to increase the frequency of customer visits since the most frequent purchases in their stores tend to be copy paper and printer cartridges that small businesses typically purchase every two or three months.

"We have UPS services in all of our stores and it is a great convenience for our customers," said Staples spokesperson Deborah Hohler. "We also offer the same direct pricing as you would get at one of their stores."

Although Wal-Mart doesn't face the same traffic-generating issues as office superstores, it has begun experimenting with a mailing and shipping concept called the Wal-Mart Personal Business Center. Introduced last fall in approximately 10 stores in Florida, the Wal-Mart PBC is located at the front of the store and offers mailing supplies, packing and shipping services, check printing, copying and binding services.