Deluxe

Company Description

Deluxe Corporation is the largest supplier of checks in the United States, providing check printing services for about 10,000 financial institutions and selling direct to small businesses and consumers. The demise of the check has been widely predicted for the past two decades because of the spread of ATMs, increasing use of credit and debit cards, and – more recently - Internet payment/on-line banking options. Yet in the U.S., checks continue to be consumers' preferred method of non-cash payment. According to the Federal Reserve, some 42 billion are written each year.

Still, the volume of checks written has declined from their mid-1990s peak of around 50 million as debit card use has soared, and Deluxe's unit volume has declined 5%. Deluxe also faces challenges as banks continue to consolidate. Financial institutions accounted for 80% of checks ordered by consumers and small businesses, and as mergers produce larger institutions, Deluxe faces pressures to cut prices due to higher volumes. To address these challenges the company has sought to build its direct-to consumer business and offer checks with premium-priced designs as well as offering value added services to financial institutions (e.g., outsourced check ordering through Deluxe's own call centers).

Between 2000 and 2002, the company offset the impact on volume declines by increasing it's per unit revenue realization by 7%. Deluxe's strategy also focuses on customer retention and, responding to pricing pressures, improving customer profitability through ongoing cost reduction efforts across its entire business system.

Background

In early 1996 Deluxe announced plans to trim operating costs by $150 million over a two-year period. Included herein was the planned closure of 26 of the company's 41 check-printing plants, a 30 percent reduction in capital spending, the implementation of a centralized purchasing function, and layoffs for 30 percent of the company's officers....