TRM Copy Centers Corporation

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TRM Copy Centers Corporation

5208 Northeast 122nd Ave.
Portland, Oregon 97230-1074
U.S.A.
(503) 257-8766
Fax: (503) 251-5473

Public Company
Incorporated: 1981 as TRM Copy Centers Corporation
Employees: 570
Sales: $67.5 million (1996)
Stock Exchanges: NASDAQ
SICs: 7334 Photocopying & Duplicating Services

TRM Copy Centers Corporation is the top supplier of self-service photocopying worldwide. Through its ownership of over 32,000 “copy centers,” located within a wide variety of retail establishments ranging from hardware stores and pharmacies to gift shops and office supply stores, TRM services consumers in 66 metropolitan areas within the United States, Canada, France, and the United Kingdom. Identified by a prominently displayed, eye-catching trapezoidal yellow logo emblazoned with the company’s initials, each TRM copy center is an ultra-efficient operation: A self-service photocopy machine, machine stand, and signs advertising its location within its host retailer are its only requirements, while TRM field service personnel monitor usage, maintain supply levels, and handle upkeep of the machines. Engaging in a symbiotic relationship with the small-scale retail establishments in which its copy centers are located, TRM pays its hosts a 24 percent cut of gross revenues. In exchange for paying TRM a monthly “location” fee for each copy center housed in its place of business, retailers are able to enhance their offerings to customers and increase traffic through their stores.

In recent years TRM has begun to expand upon its basic service of providing black-and-white photocopying. By 1995 it could boast over 400 full-color copy centers, many of which also included company-designed BisCard machines that provided design-your-own business card services to entrepreneurial-minded customers. Company copy centers, which charge anywhere between 3 to 10 cents per copy in the United States (depending on location), remain a bargain for consumers desiring quick, low-cost basic duplicating services.

Company Founded on Friendship in 1981

In 1981, then nineteen-year-old Matthew J. Shawcross and two other friends combined their initials over a good idea and launched TRM. Using surplus used copy machines from their existing copier sales business, Shawcross and associates started their fledgling 5-cents-a-copy photocopying business out of an office in Portland.

The company was organized around a simple contract. Under a joint agreement between TRM and the owner of each of its host retail locations, the company received a fee of $95.00 for each used, reconditioned copy machine it installed. In exchange, TRM agreed to repair and stock its machines, retaining only a percentage of the standard 5 cents per copy that it charged consumers. The first installations, which occurred in the greater Portland area, were relatively easy to keep stocked with paper and toner, and repairs were handled through arrangements with local service technicians. However, what was simple on a small scale became unwieldy as the company began to grow.

By 1984, with 100 copy machines installed in small retail locations throughout Oregon, the tiny company was floundering. Edwin S. Chan, a Chinese immigrant who had just ended a 27-year career as manager of over 80 branches of Copeland Lumber Yards, Inc., took the reins of management at the struggling TRM. “I had been managing a $100 million business,” Chan would tell Dori Jones Yang of Business Week,” and now I had to make money a nickel at a time.” Foregoing a salary for the first six months in lieu of an increasing share of company equity, Chan successfully introduced several efficiency and cost-saving measures, including an automated billing system and an in-house copier repair service. Within four years Chan had turned TRM around; the once-flailing company was now experiencing an annual growth rate of 30 percent. By the end of 1988 net income was posted as $615,000 on sales of $5.9 million. At 5 cents per copy, this translated into over 118 million copies made at the company’s 3,550 copy centers, totalling 236,000 reams of paper.

Expands into the 1990s

By the beginning of 1990, with the previous year’s sales cresting at $10 million, Chan had already set TRM on a course down the road to major expansion. The company’s steadily increasing sales volume allowed it to purchase paper, toner, and other supplies in bulk, thus benefitting from price discounts and further increasing the profitability of each sale. And by relying on a streamlined “fleet” of just two standard copier models, TRM was able to cut the cost of machine repairs by stockpiling spare parts. This homogeneity also allowed the company’s repairmen to carry the most commonly used replacement parts with them when responding to service calls for individual machines. The company’s increasingly centralized management and more standardized operations also minimized overhead costs. By the close of fiscal 1990, with the number of copy centers now standing at 8,307, TRM’s earnings had almost doubled from the previous year’s level, rising to $1 million.

In the fall of 1991 TRM opened its first copy center in English-speaking Canada; it would soon enter Quebec as well. Chan was also busy laying the groundwork for expanding TRM’s markets across the Atlantic, where the company’s bright yellow logo would become a familiar site in London beginning in mid-1992. And the company continued to increase the number of individual copy centers in its core domestic markets as well. Even with the increasing sales that these expansion efforts would generate, TRM’s biggest stride forward was yet to come. In November 1991 the company finally made the decision to go public, offering 1.8 million shares on the NASDAQ National Market System. This stock offering raised $13.8 million worth of funding and debt reduction for the growing company, which TRM augmented during the remainder of fiscal 1991 with profits from its 11,382 copy centers in 26 metropolitan areas worldwide. By the end of fiscal 1992 TRM would post net income of $2.7 million on sales of $30.5 million. In the eight years since Chan had taken command, the copy company had grown an amazing 500 percent.

TRM Goes Color, 1992

In 1992, now with 14,000 copiers installed in 34 cities throughout North America alone, the company began to introduce color copiers in certain of its locations. By September of that year 80 color photocopy machines were available to consumers in test-market cities in Oregon, Arizona, and Washington; customers were charged 39 cents a piece for full-color copies. The company also signed buying agreements with photocopy manufacturer Ricoh that enabled it to receive favorable discounts on supplies and repair parts; it would do the same with Mita in 1993.

While the company realized that its entry into the European market would require a period of adaptation to a different environment and time to acquire the requisite goodwill needed to grow sales, by August 1993 TRM had established 860 copy “centres” in London alone. In addition, plans were underway to expand northward into the industrial city of Manchester. Although management acknowledged the increased expense incurred by foreign expansion, it viewed its first overseas venture as a learning experience. Future expansion operations, both overseas and domestically, would be increasingly streamlined, with a satellite system of new copy centers receiving initial technical and managerial support from profitable, more established operations.

Meanwhile, on its own shores, the company had expanded its full-color copy centers to 298, and customer enthusiasm for this new service would continue to expand that number. 1993 also witnessed the creation of BisCard Corporation, a TRM subsidiary dedicated to developing new, business-oriented products. The BisCard self-service, design-and-print business card venture was test-marketed in 50 kiosks located throughout Portland during 1993. By year end, with expansion of both locations and product, the company employed a total staff of 365 men and women to oversee its copy centers and kiosks and manage its corporate affairs. Together, these employees helped to earn TRM sales of $38.8 million, which resulted in 1993 net income of $3.3 million.

Competition at Home, Expansion Abroad, Cut into 1994 Profits

The year 1994 would witness the first copy centers to appear on the European continent, as the yellow TRM logo became visible in various retail locations throughout northern Paris. Total copy centers now numbered 25,563 scattered over 50 metropolitan areas, the vast majority still in the United States. While company growth continued, it slowed relative to previous years, a result both of increased competition by new local vendors within TRM’s core market and the disproportionate expenses associated with TRM’s continuing expansion overseas. While 1994 sales in Europe increased more than 500 percent over the previous fiscal year, continental copy centres did not begin to outstep their associated costs and turn a profit until the end of the second quarter in December. By the following June—the end of fiscal 1994—the company posted sales of $47.9 million.

Company Perspectives:

Headquartered in Portland, Oregon, TRM Copy Centers Corporation is recognized as the world’s leading provider of convenient self-service photocopying. The Company is positioned to grow its core business as well as expand into other products that can build upon its installed customer base and its well established network of sales, service, distribution and support.

Despite an increasingly competitive retail environment, between 1991 and the final quarter of 1994 TRM had managed to successfully expand its network of copy centers from 26 to 41 urban areas in the United States alone. The introduction, as well, of three Canadian cities and six European metropolitan areas would result in a company presence that generated combined sales of $43.7 million in North America compared with just over $4.2 million in Europe, where the United Kingdom remained home to the majority of the company’s copy center outlets.

Paper Prices Mask Rising Sales Base

Notwithstanding a dramatic worldwide increase in paper prices, 1995 would be a banner year for TRM. On the strength of its 570 employees, the company posted sales of $60.5 million, complemented by a jump in net income from $3.3 million to $3.7 million from the previous year. The company now maintained 43 service areas in the United States, three in Canada, seven in the United Kingdom, and one in France, encompassing 28,995 individual copy centers. Of these, the TRM copy centers scattered throughout the United States accounted for 80 percent of the company’s total annual revenue.

In 1995 Chan would retire as president and CEO of TRM. He was replaced by Michael D. Simon, a former vice-president of Sequent Computer Systems. This changing of the guard signaled a reorganization within the ranks of the company’s middle management and a renewed commitment to upgrading skills and reevaluating key operational areas. In addition to improving profitability and continuing its policy of aggressive expansion, TRM also looked to broaden its business by finding new ways to cater to its small host retailers.

The increasing automation of company systems that had been underway since Chan’s first year as CEO now began to reap dividends in more ways than through heightened efficiency. From the data generated by its centralized computer system, company analysts were now able to calculate the price elasticity of various market areas throughout the world, resulting in price changes at 25 percent of TRM’s copy center locations. Poorly performing machines were relocated to areas that indicated potentially higher volumes. And the servicing strategy for each of the company’s photocopy machines changed from an “on-call” policy to scheduled servicing by field technicians, thereby enhancing timely maintenance, customer satisfaction, and the most cost-effective use of each technician through reduced drive-time to each service site.

Looking Ahead

By the close of fiscal 1996, TRM maintained over 32,000 copy centers worldwide and a field service network of 400 employees. With year-end net income of $4.1 million on sales of $67.5 million, the company was still burdened by the inflated costs of paper on the world market. But significant growth of its European locations—by year-end, a total of 6,552 company-owned photocopy machines were placed throughout the United Kingdom and France—and TRM’s continued pricing adjustments to its domestic copy centers allowed for an 11.5 percent rise in net income over the previous year.

In the future, as in the past, TRM has anticipated a strategy focusing on the search for ways to increase operational efficiency, leverage its ever-increasing buying power, and expand its core markets in North America. 1996 marked the beginning of company-wide efforts to integrate its field service and field sales operations; TRM’s new “service selling” program would provide an incentive for each service technician to promote the TRM program to retailers within his or her service areas. In addition, the company began to investigate its market potential within both larger retail chains and through stand-alone service centers. Expanding its operations throughout Europe remained another priority: by company estimates, despite the higher costs of consumables like paper, toner, and photocopier parts, the European market had the potential to be even more expansive than the U.S. market. And for TRM, expansion has always translated into profits.

Future growth was expected to continue to come from expanding not only markets, but consumer services as well. While products not related to the company’s basic service of black and white photoduplication generated less than 5 percent of total sales, TRM continued to experiment with these offerings. An expanded use of color copy machines was planned. Enhanced software and an increase in user-friendly features contributed to the rising success of the BisCard kiosk network—350 sites in 1996—and prompted the planned installation of another 150 in 1997. Other product enhancements, including coin-operated machines and an electric receipt printer that makes stepped pricing (i.e., copy #1 for 10 cents, copies 2-10 for 7 cents, and so on) possible were planned for test-marketing in 1997. These enhancements were seen by management as a means to gain a winning edge in an increasingly competitive, single-price market where TRM was still the leader.