Photo
shops adapt
24
October 2005
MotoPhoto – an endangered retail
species?
“Digital photography
and the Internet have opened possibilities we never dreamed of.”
Wayne Welch, President of Oregon Photo
Supply, in The New York Times
With the advent of digital
photography, many people expected film processing shops to disappear.
After all, digital pictures were making film obsolete -- people could
send photos over the internet or print them out at home. They no longer
needed to stop at a one-hour photo store.
Digital photography has
certainly been tough on the photo processing business. For 2005, PMAI,
the industry trade association, estimates that the size of the photo
finishing market will be $3.7 billion, about 60 percent of its $6.2
billion peak, achieved just five years ago, in 2000.
This decline in business
has forced a number of stores to close. Others, however, are finding
ways to thrive again by providing photographic services to the digital
market.
Consider Oregon Photo
Supply. Between 1998 and 2003, the small regional chain had to close
four of its five retail outlets. The company renamed itself, to Oregon
Photo and Digital, and its remaining store is now prospering, doing
almost the same level of business that it was experiencing at its peak
in 1998.
The sales mix at Oregon
Photo and Digital has changed significantly. Increasingly, the company
is printing copies of photos taken by digital cameras. They are also
offering a number of specialized services made possible by the digital
technology, such as archiving images on CDs or web-sites, and printing
images on t-shirts or greeting cards.
The rise of retail digital prints
The number of digital
prints is increasing, and more of them are being made at photo shops.
The volume of digital prints is up 68 percent between 2004 and 2005.
The share of prints made at home has declined, however – from 64
percent of all digital prints in 2004 to 48 percent projected for 2005,
according to the PMAI trade association.
One of the primary reasons
for this shift is price. Customers often move to the lowest cost
solution, and printing at home is about four times more expensive than
ordering prints from a retailer. Cost of home printing – primarily
paper and ink – can run around fifty cents a print, according to the
testers at Consumer Reports. Digital prints from photo finishers
like Sam’s Club can be as low as thirteen cents a print.
Retail vs home photo printing – lower
cost, higher barriers
Not only is retail
printing much less expensive than printing at home, it is also easier to
use, in that there is no software to install or printer hardware to hook
up.
Retail photo printing
remains at a disadvantage to home printing in its ease of purchase.
First, many customers just don’t know about the service. The photo
finishers have not publicized their digital capability, while home
printer manufacturers such as Hewlett Packard and Epson have made their
products very visible. Second, the logistics of buying prints at retail
are more complicated than printing at home -- customers have to drop off
their camera’s memory card (or a CD) at a photo store, and then come
back to pick up the prints.
Still, photo finishers
have found a niche in the digital world where they can survive, and the
price advantage over home printing is driving strong growth. As Neil
Cohen, the President of mail photo processor District Photo, told The
New York Times:
"Anyone who says that digital wasn't bad
news is lying, but at least it is a growing business."
More Information:
1.
PMAI stands for Photo Marketing Association International. This
trade association publishes a lot of great
market research on the industry.
2.
New York Times 2003
story on photo shops.
3.
New York Times 2005 story comparing
printing costs between photo shops and home printing.
4.
For background on the
4 Factor Model of Innovation Success, see this 2004 piece from
Harvard’s Working Knowledge newsletter.
