Vistaprint 2014 Annual Report Download - page 8

4
or time consuming and the latter too amateurish for business purposes. A graphic designer can produce a
professionally coordinated portfolio of marketing products and services, but this is a significantly more costly and
time-consuming alternative, whereas a traditional self-service model typically produces less sophisticated and lower
quality output. We believe that neither alternative satisfies the needs of most micro businesses, which typically lack
the resources or skills to generate satisfactory results using either approach. As a result, we believe the micro
business market has been underserved historically.
Through customer research, we have analyzed the market opportunity related to micro businesses with
fewer than 10 employees into three conceptual market segments:
• Price Primary Market Segment: This part of the market has the largest number of small businesses but the
lowest per-customer annual spend. These businesses choose a customized product primarily based on the
price of the product offered, and are often incentivized to purchase through a promotional discounted direct
marketing approach and cross-selling of products. Vistaprint has historically gained the most traction in this
segment, and we believe our biggest competition in this space is either non-consumption or printing from a
desktop or photocopier. It remains an important part of our business as we are able to aggregate millions of
orders from customers in this segment, enabling scale advantages in our business.
• Higher Expectations Market Segment: This part of the market is made up of fewer small businesses than
the Price Primary segment, but with higher per-customer annual spend. We believe the segment is highly
fragmented in terms of suppliers and several times the total revenue opportunity of the Price Primary
market segment, as these customers typically purchase a broader spectrum of marketing and promotional
products from multiple vendors. These customers have more sophisticated marketing needs and choose
their marketing providers not solely on price, but on a blend of value, supplier reputation, product quality
and selection, customer service and overall experience. We believe this segment represents the most
significant growth opportunity for our Vistaprint brand over the long term.
• Locally Focused Market Segment: We believe the third market segment is the largest and most fragmented
among the micro businesses. The customers in this segment often choose to work with local graphic
designers, agencies, resellers and local, offline print shops to meet their marketing needs as their primary
purchase consideration is personal service. Many of these graphic designers and resellers, or the
customers themselves, have a level of graphic design sophistication that enables these customers to
create and manipulate images in professional publishing and design programs, rather than rely on design
templates. They also typically require a broader selection of specifications. Our Vistaprint brand serves very
few of these customers in comparison with the Price Primary and Higher Expectations market segments.
However, we are now serving this segment through brands that are managed by our Pixartprinting and
People & Print Group subsidiaries.
Online commerce provides significant advantages and opportunities to micro business customers seeking
customized marketing products and services at affordable prices. These customers do not typically need the large
quantities that are traditionally required to achieve low per-unit pricing and do not maintain dedicated procurement
departments to negotiate pricing effectively. We believe that the highly fragmented, geographically dispersed nature
of the micro business market is ideally suited for Internet-based procurement, as the Internet provides a
standardized interface through web browsers, availability to interact and transact seven days a week, 24 hours per
day, the ability to offer a wide selection of products and services, and the opportunity to efficiently aggregate
individual orders into larger and more efficient production units.
In addition to physical marketing materials and promotional items, micro businesses are also increasingly
seeking to establish an online marketing presence, via websites, email marketing, and social media. While adoption
of digital marketing approaches has been slower among micro businesses than in large companies, it is a growing
component of marketing spend for micro businesses. We believe that a coordinated portfolio of marketing products
and services, including digital marketing services, can help micro businesses appear more competent and
professional, which can enhance their marketing efforts, customer relationships and prospects for success.
The Marketplace for Customized Products and Services for the Home and Family
While the market focus of our Vistaprint brand is primarily on micro business marketing products and
services, many of our product formats are also purchased by consumers seeking customized announcements,
greeting cards, calendars, stationery, apparel, personalized gifts, photo books and related photo products. In the
past, many such products were supplied by an industry comprising print manufacturing wholesalers and local