‘It’s about how you change and adapt’
Monday, June 10, 2019
Almost 10 years ago to the day, Bluetree managing director Adam Carnell and fellow director and founder James Kinsella set up their online print shop in a borrowed office with a bank of inkjets from PC World.
Fast forward to the present day and the print wunderkinds head a 350-staff, £40m-plus group that, over its relatively short history, has invested close to £35m to become one of the UK’s leading online print businesses through its Instantprint, Instantprint Direct, Route 1 Print and Route 1 Connect brands.
And best of all, according to Carnell, with a huge factory expansion coming on stream early next year, the Bluetree story is only now nearing the end of the beginning.
Darryl Danielli I know it’s a fairly well-documented story, but for those that don’t know, what’s the potted history of the business?
Adam Carnell James [Kinsella, fellow director and co-founder] and myself were school friends.
Wow, so probably one of the longest relationships of your life then, other than parents, of course.
I’d never thought about it like that, but yes [laughs], from the age of 12. We were really good mates and were always trying things to make money on the side. When we went to university [in Bristol], we started working for a student night promoter down there. But within a year the company was crumbling, so we clubbed together with three other people and set up by ourselves to run student event nights.
While you were still studying?
Yes, this was going from first year to second year. I suppose it was our first proper business, well much more serious than previously anyway. We learned a lot, including buying print. So, roll on two years we had both come to the end of our degrees...
What did you study?
I studied economics and James economics and history.
He went for the softer option then?
[Laughs] Exactly. From there we came up with six [business] ideas. One was around print. We saw Vistaprint and Goodprint and how well they were doing, and naively perhaps, we were still wet behind the ears, just dived straight in. It’s actually our 10th anniversary of starting in June. We registered Instantprint on 11 June 2009, and that was actually before our final exams.
I can’t believe that domain was still available, was it expensive?
It was only £500. So, away we went.
So, how did the relationship with Bluetree come about? It was owned by Martyn and Paul Carnell, your father and uncle, right?
Correct. They used to run car franchises in and around Yorkshire, but sold out to a company called Dixon motors. They had a three-year lock-out from what was their ‘trade’ and in that time bought [wide-format business] Linda Davies Print [in 1999], which had been a supplier to their car business. They rebranded it as Bluetree. So, they got into print through that and brought in Bryan [Shirley, who retired from Bluetree last summer] in 2001. He used to run one of their car dealerships.
How involved are they now?
My dad is chairman, and Paul has helped out at various points, like when we moved here; he effectively looked after the move. But day-to-day, very little.
I think I read in a US article, that just as you were getting started in print, you were advised against entering the industry?
Yes, that was actually Bryan, in 2009. He thought we were crackers. In fact everyone we spoke to in the industry thought we were.
What were you being told?
Effectively that print was dying and why would anyone want to get into it at the start of their careers.
Just the kind of encouraging words you want to hear when you’re starting out?
[Laughs] Print is changing, but it’s definitely not dying. Certain sectors are clearly under pressure, but there are parts of print that are doing really well. It’s about how you change and adapt.
When you started the business, did you think of it as a technology business or a print business?
Truthfully, we probably didn’t think about it that hard back then [laughs]. But the heart of our business is probably technology, ultimately though we are a fast turnaround printer. Technology is an enabler to make us the best, fast turnaround printer we can be.
Was the business online from the start, or print brokerage too?
Completely online from day one. The first big challenge was the e-commerce side, from there getting the website set up, being able to transact online, and then getting customers to trust online. In terms of the print, we started printing from desktop printers that cost around £80 a pop.
Wow. So, the kind of printers people had at home?
Exactly that, we started with HP [Photosmart] 7600 and then moved to the Pro 8100 version.
Ooh. Could they do A3 or something?
They were just a little bit quicker. We literally had a rack with around eight or nine of the printers on it, and we were constantly filling the ink cartridges up with syringes. We bought the ink off eBay for £12 a litre or something like that.
But if the quality was good enough for the customers at that stage, then why not?
The quality at that stage was okay because we did it on uncoated letterheads and compliment slips, that’s where we really started. So [for that] home printers back then, were actually okay. Don’t get me wrong, you can’t compare it to the litho or digital quality we have now.
Absolutely, I don’t think anyone would. But back then, maybe that was the advantage you had coming from outside the industry? The ‘normal’ start-up route would have been to spend thousands on secondhand litho or digital production machines, loading the business with debt from day one.
There are lots of little things that we did in the early days that we didn’t think too much about, but looking back now from a business perspective, they were absolutely the right thing to do and made a big, big difference to our story. One is that going online meant cash up front, so cashflow has always been in our favour, especially as we’ve grown. We started out with lots of these super small digital printers, so the norm from day one was that if a job came in today, we expected to get it out the next day. It was a very simple two-stage process really. I guess all the things that weren’t [common] in the industry back then, but are the norm now, were baked into us from the start.
And I suppose it was very scalable. If one of your machines went down in 1999 you lost 10% of capacity, but if you had spent all your money on one secondhand machine and that goes down…
...Then you’re dead in the water. You have no capacity.
Kinsella (left) and Carnell have been business partners since school
So, what was the year one turnover?
Honestly, we didn’t have an accountant or anything, if I said £20,000 I would definitely be overcooking it. I remember that at the same time as running the Instantprint domain, we used to sell posters on Amazon and this was when ‘Keep Calm and Carry On’ was doing really well. One day we got 16 orders in for a grand total of £25, I think, including postage, and we thought we did well that day [laughs]. So, a very slow start really.
Who was doing what when you started, in terms of you and James? Was one the online tech and the other production?
When we started we were both fairly equal on the tech and print, and then we diverged. James is now fully into understanding e-commerce and IT infrastructure, how websites should be built, and the customer experience and I’ve gone down the print production route.
Did that happen fairly naturally?
Bizarrely, during the first three months it was the other way around and then one day we fancied a swap and we’ve never gone back.
So, the division of labour happened organically a bit like the growth of the business?
True. The way we started, was very minimal [in terms of resources] and in those early days we learned important lessons that still hold true today.
That if we took a job on outside of our core, we would almost always lose money on it. Because we’re good at what we do, but as soon as we try and do anything else we risk falling over. So, making sure that the products we offer all fall within our core skill and understanding and not take on what other people might see as minor changes to the job spec.
So, only taking on work that fits your business rather than taking on anything just to fill capacity?
Exactly. In those early days we often took on jobs we knew we probably shouldn’t have. I remember once producing 10,000 booklets with a stapler, it was ridiculous. But that still stands true today. If we take on something that doesn’t fit within our process, even if, on paper, we will make money from it, in reality once we factor in the amount of time we put into it and reworkings and possible disruption, it never stacks up.
But if you look at the portfolio of products you offer, you’ve clearly added lots. Do you accept the initial pain knowing there was an endgame?
With some products we definitely accepted there would be initially pain and invested a lot to ensure they would work for us. But we actually have quite a limited portfolio compared with our competition. That’s a conscious decision, though. We will look to expand the range, but we will take that at the right speed for us.
And I suppose the bigger you get, when you introduce a new product, you need to be able to scale up instantly.
I think one of the things that’s very special about print is that the customer journey goes through every single department. So, for example, in a law firm, you will go through the contracts department or the conveyancing team; whereas here, the first team you touch is the marketing team, then web development, then the studio and artwork team, then into pre-press, print, finishing and despatch all the way through. A customer will touch every single department. It’s a chain and if any one of those links is broken it either doesn’t work for the customer or ourselves.
Don’t you use technology to minimise those touchpoints though?
Massively, but that works against you when you try to launch new products. Because if you try minimising touchpoints then that means automating as much as possible, which means right from the start you have to invest all the time and energy to get a really slick process. So, we definitely go lighter on our new products, if you like, so we have more touchpoints and more manual checks and then only try to automate once the volumes build and we really understand the processes involved [in the new product].
What were the benchmarks then in terms of the company’s growth spurts?
A big one in the very early days was when we moved away from just business stationery to business marketing materials. So, moving away from just letterheads, comp slips and business cards into flyers and leaflets as well. That was when, week on week, we saw some really big jumps.
Did you add them because customers were asking for them or because you saw an opportunity?
Customers were asking for them, and it was a natural progression for us. But it meant investing in a small digital toner machine because the little inkjet printers didn’t have the quality, and very quickly from there we invested in production toner machines and we really started to grow. I think that was because the new products really suited our really quick turnaround model, because if you want material for an event, speed is critical, and very standardised products. That rapid growth happened all the way through to merging [Instantprint] with Bluetree. We knew we needed to invest in premises and litho, because were competitive up to around 1,000, but we had lots of customers asking for 5,000 or 10,000.
How did you the merger come about?
Well, there was the family connection, of course, we were also quite close to Bryan as we used to speak to him every few months about the business and technical things. He could see the internet was going to shape how customers buy everything and was interested to see how we were doing that in print, so he came to Newcastle to see us. He pitched the idea of putting the two businesses together and we immediately saw how it could solve a lot of our problems.
At that stage Bluetree was a digital and screen large-format printer?
Correct. Virtually everything they did was high-street POS. So, yes printing, but very different to what we did. That was why the merger made sense. We were small-format digital wanting to put litho in and they were large-format digital, which immediately expanded our product range. And it did the same for them.
But they were presumably a lot bigger?
We had 20 people and were turning over around £1m and they had around 35 people turning over £3m. Although technically and financially we were one business, if you went to the factory it felt like two separate businesses.
So you guys were the junior partner, in that the old Bluetree bit was the ‘proper’ print business in the old-world view and Instantprint was a bit different.
Definitely. It was never spoken about in that way, but at that time we had no idea about accounting, or health & safety and Bluetree bought a lot of that expertise readymade, almost a business in a box. James and myself learned a lot from the early years, but I suppose the growth really took off about a year after we merged.
Because now you’re around £40m – that’s massive growth.
Last year we did around £41.5m, and it’s still going strong.
Managing that kind of growth must be hard though?
I think that’s our biggest challenge: making sure that we keep all the plates spinning while we grow, because we’re a business where every department is reliant on others; we’re only as strong as our weakest link. So, I guess the key challenge is what area we need to focus on and make sure it gets the attention and investment before it comes under too much pressure.
You’ve had to invest in a lot of technology here though. I’ve done the tour and the factory is fantastic, but it’s a bit of a Noah’s Ark in the sense that you have two of everything and there are so many technologies and processes. How do you make those investment decisions?
A lot of our growth comes from our existing product portfolio, so it’s largely about looking at our existing products and thinking about what the most economical way is of producing that work – given the caveat that we need to meet our customers’ expectations on both delivery time and quality. So you have to have the right level of reliability, of service and support and clearly the [output] quality has to meet or exceed the standards. But then within that we look at the different cost models of the different processes, and even vendors, and pick what’s best for us by product type or product attributes to maximise the return. That’s why it’s a bit of a Noah’s Ark, in your words, because essentially each machine or technology has a sweet spot and how we’ve built it is by adding the machines and taking advantage of those sweet spots.
And I guess as a data-driven business, when you look at an investment you can look at your product mix and run the numbers on the technology, almost a virtual installation before you’ve spent the money to check the ROI?
Definitely, and as time’s gone on we’ve got better and better at that. Taking our pie of work and looking at which slices give us the best financial outcome.
And you’ve got the Landa press coming soon too?
Yes, which will be exciting.
Back to the growth though, what have been the key learnings?
Honestly, and I know this is a cheesy statement, but it’s absolutely true – yes we’re a technology business, but the most important factor is the people. Equipment choices have had an impact, yes, but if you have the right team on board you could choose any equipment and get a similar outcome. I think looking at your team and recognising that they’re ultimately what makes your business succeed or fail is probably the only real differentiator between you and your competition.
I was going to ask about that, because looking around it’s a pretty young company, in an industry that struggles with that. What’s the secret to attracting young people?
I guess the reality is that we tend to try to promote from within. So, a lot of recruitment is at the entry level and we really try and nurture and grow people.
So it’s more about a cultural fit rather than experience?
They’re the key qualities we look for in people, the right attitude, want to be part of a growing business, want to get stuck in, have the work ethic and are also bright and switched on. If you find those attributes, you can train them to do a fantastic job in virtually any area. I also think what we see is a lot of people want to join Bluetree because we’re growing and they feel that they can have a real impact on that growth and direction.
Empowerment, I guess, which everyone talks about but is very hard to deliver.
It is difficult. Difficult both to let go and also get the level right and ensure you empower the right people in the right areas.
Has that delegation been a challenge? You and James started this with just the two of you, has letting go been difficult?
We’ve gone through phases as we’ve grown, where we’ve both reached points when we realised we weren’t doing what we had on our plates anywhere near good enough. So, we’re forced to delegate and then you start delegating more and more. And then you get to the point where you can focus on specific areas, because you have the time, start to build your next plate of work, as it were, and then delegate that out and move on again.
That must keep it exciting for you too though?
And it took us a while to recognise it, but provided we delegate to the right person, they always do a better job than we did.
Surely just because they have more time, you were just too busy?
[Laughs] That will be it.
Up until now the growth has been essentially organic?
The core of the business has a real momentum behind it. In many respects we’ve actually stripped out the complexity within the business, so now we just focus on the online business. So, we merged with Bluetree in 2012, but we closed that element of the business in 2017.
You mean the wide-format side?
No, I mean less about the print processes, more about the sales process. Selling to retail or high-street POS either direct or through print management. Now we’re just focused on Route 1 and Instantprint.
What’s the revenue split between the two brands?
They’re roughly equal. Both are still growing strongly, but you only have to look at places like Germany, where the top five online print companies have combined revenue of around €1.5bn. The proliferation of online printing in Germany is so far ahead of here.
Why is that?
We’ve been asked that question many times, I really don’t know – we’ve had loads of theories.
But you think there’s a big growth opportunity in the UK?
Massively. I’m not sure we’ll ever catch up with Germany, but there’s a big gap to close.
On that though, European groups have snapped up a few UK online printers – you must have had a few approaches?
Yes, we have. But we just feel we’re still at the early stages of our story, I don’t think we’re even into the middle yet. We see a big opportunity in the next five to 10 years of where we can grow and where we can take this business.
Would you look at buying a rival online business?
We would have a look. But we know that a lot of customers deal with a basket of online providers. So, one plus one probably wouldn’t equal two with an acquisition.
So you would just be taking out a competitor, rather than growing the business?
In terms of the online landscape, it’s super competitive though – that must be a challenge?
It’s a constant battle, because there’s a mentality in the sector that slashing prices brings more custom. While that’s true up to a point, there are diminishing returns. Competition is one thing that we’re clearly focused on and I think within our niche there will be a lot of changes in the next few years.
More consolidation as some people struggle?
I think there’s definitely businesses under a lot of pressure. But there are also people with very deep pockets.
You guys have got pretty deep pockets too though?
But to maintain our growth, we need to continue to invest and we need to fund and support that by making sure we secure a return on everything we do.
So it’s not about having loss leaders?
The key is making sure those decisions are active ones. It’s not like half the jobs on the floor are making us money and half are losing money. It’s about knowing or understanding all the jobs we are taking on. We know where we are with them and we’re making conscious decisions about where we want to be [margin wise]. We know that certain products are more about attracting customers or becoming the go-to supplier. But by no stretch do we sell any products at a loss. Yes, we might accept tighter margins on certain products because of the other benefits that brings to the business, like increasing average basket size. The biggest thing is, putting 20,000 to 25,000 jobs through a week: how do we know which ones are making what margin? That’s what’s really driven all the development from a data point of view, really understanding our factory.
A bit different from the early days then?
[Laughs] Just a bit, we only ever used to worry about the bank balance at the end of the month.
With the competitive landscape though, what is customer loyalty like?
We’re built on repeat business. So, customer loyalty is definitely not a one-size fits all – you will always have fickle customers who are only focused on the best price, and if someone comes along that is 50p cheaper they will move. But the majority of customers do value other things to a point, and that’s key: to a point. It’s not just speed, you also need the best customer service team that can respond to any queries. Because if someone has had an issue and it’s dealt with quickly and satisfactorily from the customer perspective it builds their confidence as they know they can rely on us and we’ll always sort their problems.
I suppose it’s the triangle of price, quality and service that, okay, if the price is slightly higher then provided you deliver on the other two people are generally happy?
True, but we always try to hit all three points on the triangle with the caveat that we take a large amount of choice away, which means we can deliver on all three.
In terms of the future landscape of the UK online sector, do you mean fewer larger companies?
I think so.
What’s the opportunity for you guys then?
In our opinion, within the next five years there will be an online printer in the UK turning over well in excess of £200m.
And you want to be that company?
It’s definitely our ambition.
Do you have a 12-month plan, a three-year plan, a five-year plan – or is it much more fluid?
It’s much more fluid. In many respects we have the long-term vision that at some point there will be a business of that size. But we only ever have a 12-month plan.
Is that because things change so quickly?
One-year plans, we’re usually within 2%-3% of target. But every time we’ve had a three-year plan it’s rarely worth the paper it’s printed on.
But then looking at the growth trajectory of the business over the past 10 years, that clearly works?
Final question then, bearing in mind the advice you were given in 2009, what advice would you give someone starting out?
I always think there’s a lot more potential from the less trodden path. So, in some ways being told we were crackers to start a print business, was kind of a blessing. The fact that print wasn’t seen as the big sexy industry that is pulling in huge amounts of talented people, was part of the attraction. And it’s probably still seen that way, so I think that still represents a huge opportunity.