Why CafePress Will Never Be Great Again

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Cafe Press
This should be a great time to be CafePress.

We're heading into the final three months of what has been -- and will continue to be -- a heated presidential campaign. Anyone on Facebook (FB) knows that fans of either candidate have no problem letting all of their friends and family members know exactly how they feel.

CafePress (PRSS) -- the one-off printing specialist -- should be raking it in as its millions of shop owners have the potential to crank out politically charged merchandise with slick designs and clever sayings.

Well?

Shares of CafePress collapsed Tuesday, dropping more than 40% after it reported disappointing quarterly results. The company posted an adjusted profit of $0.10 a share for its second quarter as revenue climbed 26% to $47.1 million. That's pretty much in line with expectations. Things get ugly in the current quarter for the company that lets anyone sell their designs in the form of T-shirts, mugs, and other merchandise.

CafePress is looking to earn just $0.05 a share to $0.07 a share in the third quarter on $42.5 million to $45 million in revenue. Wall Street was expecting on an adjusted profit of $0.10 a share on $49.8 million in revenue. The problem here isn't just a matter of an outlook that falls woefully short of what analysts are projecting. The company's guidance calls for top-line results to slide sequentially.

How can that be? This is an election year!

"Revenue from political gear and international channels was slightly weaker than expected during the period," CEO Bob Marino said in Monday night's earnings release.

Really? Is CafePress missing the opportunity of a lifetime, or is it simply that its merchandise is ridiculously overpriced for even the politically engaged -- or politically enraged -- shopper?

It's easy enough to open a shop on CafePress.com. There are no upfront fees, and there were 3 million virtual shops on the site when the year began.

However, selling through the shop is a lot harder than the simple setup process. There may be more than 300 million unique products available, but CafePress shipped just 7.8 million products last year.

Do the math. Is a model truly sustainable if the average "store" sells less than three items a year? It's free to set up a storefront. It's a breeze to add everything from iPhone covers to baby bibs once a design has been uploaded. However, even hobbyists may cringe if the average store rings up less than $100 a year in sales -- and just a handful of dollars in royalties.


cafe pressThere's a Problem Here

The base price on a T-shirt is $18. If a store owner wants to score a $5 profit, we're talking about a consumer-facing price of $23. Good luck selling a $23 T-shirt online!

This has always been the stumbling block at CafePress. There are performance bonuses for the more successful stores and CafePress is aggressive in pumping out promotional discount codes, but at the end of the day, the products are still a hard sell.

The trend toward customized merchandise is real, and there are plenty of publicly traded companies cashing in on that movement beyond CafePress.

Shutterfly (SFLY) turns digital snapshots into personalized photo books and jigsaw puzzles. Stamps.com (STMP) will put that photo of your lovely nieces on postage stamps. Vistaprint (VPRT) gives businesses an easy way to order custom-ordered business cards, rubber stamps, and bumper stickers.

CafePress adds an entrepreneurial element to the model. That should be the mother of all motivators, but it's not. Customers just aren't interested in overpaying for merchandise, even though we live in exciting times where blatant self-promotion through Facebook, Twitter, or YouTube should benefit anyone with something worth selling.

In the end, folks that are truly ambitious about cashing in on their designs will turn to Etsy or eBay (EBAY), where they have the freedom of competitive pricing and access to economical sourcing.

CafePress went public earlier this year at $19. It fell into the single digits at the open on Tuesday.

Oh, if only the same could be said about the pricing of the items at the more than 3 million CafePress stores.



Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Facebook. Motley Fool newsletter services have recommended buying shares of VistaPrint, Facebook, and eBay.


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25 Comments

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momilton4

I do agree that Cafepress is guilty of being 'greedy' with the royalties paid to artist's and the drastic changes, however, I can't help but note some of the comments from artist's in this section strongly suggest the 'greediness' of many designers. I believe I read below about a markup of $10 to maybe $13 for a t-shirt! Also, someone commented about shops making $50,000 per year! Perhaps that was way back in the early days when print on demand first became popular and people were stupid enough to buy on sight without shopping around. I might also add that perhaps with the many additional art becoming available from a multitude of other artists, it is just plain stupid to expect your design is going to net you quick and easy money like the old days. I would venture to say I never did trust Cafepress as the royalties never seemed to match what they were set to be. Who can ever say if these online print on demand companies are upfront about all the designs an artist has actually sold since we only go by what we are told of. Zazzle is a bunch of junk however I like the flexibility of the images after uploading. When I search for my products on Zazzle, they seldom come up; even with a unique name. Cafepress offers a better variety of products, yet places your image in a fixed position. I don't like how difficult it is to find my products in search on Cafepress since unless someone knew there is an entire shop, the search won't let you see it. Furthermore, I have sold quite a number of items on both sites and have earned some spare change. I typically adjusted my royalties to 10% and sometimes 20%. Guess the 5% at Cafepress is a bit of a adjustment to the pocketbook, but like I said, they never paid the correct percentage anyway. Hope you greedy artists out there don't have to actually work a little bit harder to make up for the drastic marginal difference from the previous greedy percents you were used to. In the end, hope everyone gets their just desserts!! One final thought > Society6 does not protect your images and charges $1 just to get in. If you complain, they lock you out of your account, then try to charge you another $1 to get back in. Let's see, at $1 an artist, and perhaps a trillion artists out there trying to sell their work, the $1 fee should set them up regardless of any sales!!

June 12 2014 at 10:55 PM Report abuse rate up rate down Reply
victorweb

There is a change.org petition against Cafepress' Artist Royalty Practices. I encourage everyone to sign it and share the link. http://www.change.org/petitions/cafepress-com-pay-artists-original-royalties

November 16 2013 at 1:06 AM Report abuse rate up rate down Reply
ryckman13.clarissa

I was also appalled by the latest changes at Cafepress and by Jason Falls's arrogant and stupid response to the outrage shopkeepers expressed on the forums. I guess management wasn't running Cafepress into the ground fast enough, so they looked all over Louisville until they found the village idiot and hired him. His name is Jason Falls.

November 13 2013 at 9:22 PM Report abuse +1 rate up rate down Reply
1 reply to ryckman13.clarissa's comment
Karen

hey ryck, do you think it's something that they're legally allowed to do? I'm referring to the hoop jumping/barriers to getting a commission for your designs? this seems highly highly questionable, and if the designers wished to, something might be sought to correct this.

November 15 2013 at 2:35 PM Report abuse rate up rate down Reply
Karen

hey, cafesucks! isn't that appalling? thanks for the full story. what a nasty way to screw more money out of the designers! just wow, they're pushing the designers to the brink with giving them pennies for their designs if they don't jump more hoops, not sure how that's okay to do.

just when people who were making $100-5000 a month thought their hard work on designs and managing their shops and promoting were getting them a steady income, the great cull of 2008 occurred and they negated about 60%-70% of people's commissions, now, they're changing the goal posts again by forcing several hurdles to get even 8-10%! If you don't, you get a FUGGGGING NICKEL for every dollar someone spends on your design! You're welcome Cafemess! LOL Zazzle is great, I wonder if the others out there are just as good as them in paying and ease of use (I prefer Zazzle to CP for designing since they let you shift the size and location of your design in many ways).

November 06 2013 at 12:38 AM Report abuse +2 rate up rate down Reply
cafesucks

Cafepress is truly a lousy company. I can't stress that enough. I signed up about five years ago, and for a while spent quite a bit of time learning the ropes, creating designs, promoting my store, etc. I built it to a point where I was making a decent amount of extra pocket money that I felt it was worth the effort I had made, assuming the revenue would keep on coming. Then CP changed the terms and my income fell to less than half. This month, they have done it again. Now you have to jump through hoops to make a 10 percent commission, which is what designers made before. Now, it seems, my maximum commission will be 8 percent (and in some cases, far less).

I'm not sure what's the worst part: the constant changing of the rules in detriment of the designers, Cafepress' dishonesty ("We are not lowering your commission! If you don't want to jump through hoops, that's your fault!") or the utter cluelessness of the imbecile who decided to make the latest changes. Jason Falls is the moron in charge, who had the gall to respond to a designer who criticized the changes: "How long does it take to log on and upload a design?" Well, not much, obviously. Creating a design, on the other hand, does take work, time and talent, none of which Cafepress deserves.

If you're looking for print-on-demand companies to buy/sell products this holiday season and beyond, please stay away from Cafepress.

November 05 2013 at 9:10 PM Report abuse +2 rate up rate down Reply
Karen

http://www.thestreet.com/story/12056473/1/cafepress-inc-stock-downgraded-prss.html?puc=aol&cm_ven=aol

November 05 2013 at 2:54 AM Report abuse +1 rate up rate down Reply
Karen

How about a 5% commission rate?! Cafepress is now forcing you to get followed, follow other shop owners, log in, upload images, and fill out 80% of your profile or you'll get about 5% of the sale price. No joke... I just heard from a shopkeeper. Must have started this week.

EVERYONE tell your friends ZAZZLE for Christmas presents, not cafemess!

November 05 2013 at 2:45 AM Report abuse +3 rate up rate down Reply
Keith Williams

I only use Zazzle.

zazzle.com/ferald

September 09 2013 at 1:45 PM Report abuse +2 rate up rate down Reply
Coral Ellie

Anyone has experienced with printing Clock, rugs, pillows, flipflops on cafepress? I have read so many bad reviews about their quality, I would like to know is it true they can't get the products printed correctly most of time? I have designed a bunch of things for a perspective retail client, but reading a lot of negative comments on the print quality really took me back. It's too risky for commercial clients, isn't it? I'd greatly appreciate if anyone can share your insights regarding their print results and quality. Thank you!!

May 30 2013 at 10:42 AM Report abuse rate up rate down Reply
rebecca.xoxo25

cafepress used to be awesome, but not anymore. i used to love cafepress, i used to promote them and share with friends, but not anymore.

now i absolutely hate cafepress. i will never do business there again nor will i purchase anything there again. and i know a lot of other people that hate cafepress the same way i do.

cafepress completely screwed their customers (their shopkeepers). one day they just decided to give a big middle finger to them and ended up biting the hand that fed them. they did a bait and switch for a quick cash grab. promised customers their own markup and then switched it to a fixed 10%. they changed the rules, they got too greedy, and now they will pay the price. they will eventually go bankrupt, its only a matter of time. and when they do, i will celebrate the day that shady business and its scumbag owners go down in flames.

March 27 2013 at 12:40 AM Report abuse +2 rate up rate down Reply