Profits Move Beyond Prints

By TWICE Staff -- TWICE, 8/7/2006

TWICE: How can retailers capitalize on the archiving and storage opportunities presented by billions of images piling up on hard disks?

Carr: It could be as simple as getting a CD or DVD back when you get your prints. That's one-step towards archiving.

Lee: Well they already do that. Unfortunately a lot of customers don't avail themselves of it and they don't understand it. They think, “Well, I've got a copy of the image on my computer, and I've printed some of these that are important to me. I'm all set.”

Lundeen: I've heard of various success with CD sales as an attach to a digital- or to a film-developing order. I've heard as low as, well, zero and as high as 70 percent. Some retailers have really honed in on the message to get a 70 percent attach rate.

Campbell: I think that consumers are going to be looking for two different types of solutions. They're going to look for that full-service retailer where they can walk in and say, “Please provide me with my pictures on a CD and give me my prints, and I can walk out and I'll be happy.” Then I think there's the customer that's going to want to try to do it themselves. Whether it's home printing or the ability to take an SD card, put it into the DVD recorder and burn their images themselves.

Carr: Plus, for the retailer, the more that they offer these types of digital services, the more it will draw back the customer into the store. Maybe I had my vacation pictures printed at the retailer and had a CD made, but at the end of the year I want to do a book. If I've got it on CD, I can do the book whereas if I just have the prints, I can't. Retailers can position themselves as a digital imaging partner, offering to take all your pictures and at the end of the year, create a year-in-pictures book. These are high value, high profitability, services.

TWICE: Is there a certain type of retailer that these solutions are more appropriate for?

Hoffman: I've been seeing it in photo specialty, especially where they're not just educating them on product, but also taking them to the final solution, the print. They have print stations set up within their retail establishments where you can sit down in a relaxed atmosphere and learn how to print, how to add borders, or messages or how to create calendars on your own. Consumers are going to continually come back for that service.

Carr: And your photo specialty doesn't have to be a stand-alone photo specialty store. It could be a photo specialty department within a Walgreens or a CVS. CVS does it very well. Target does it very well — servicing the imaging consumer needs totally vs. just printing pictures out for them.

Peck: Plus the retailers also recognize that a certain portion of the business is going to be home photo printing. They very clearly recognize the importance of stocking ink and paper. And I'm not just talking about 4 by 6 or 5 by 7, but all types of fine art paper, all the inks. And it's very profitable for them.

Carr: The advantage of all of the online services is that the pajama mamma can do her thing at home, send it up to the Web and pick it up later on when she goes to pick up her kid's prescription. She loves that she can do it at home but doesn't have to deal with the printing. That's become very popular among consumers.

Technological Evolution Spurs d-SLR Growth

TWICE: Where is the digital SLR market headed? Has digital photography changed the demographic make-up of the SLR photographer? Is the market broader now than in the 35mm era?

Lee: We certainly think so at Nikon. I think that the creativity of a digital SLR user has been enhanced since the film days, when they would try many different things, they'd shoot and then they would have to wait to see if their creativity worked or didn't work. Today it's instantaneous. So you see a lot of guys, they take a picture and look at the back of the camera and say “ooh” — we call it “chimping.” So we think there's a much bigger opportunity with digital SLRs than there was with film because of that instant gratification.

Peck: The film SLR peaked in the mid-1980s, and then from the mid-1980s down it was just a downward spiral for almost 20 years. We talked earlier about the second- and third-generation digital camera buyers. They understand the limitations of point-and-shoot digital cameras, primarily shutter lag. Most lack the ability to put an extra flash on, or the focal length is not adequate for what they want. They recognize that SLR cameras can change lenses, you can add flashes, you can put more accessories onto it. There is no shutter lag. So soccer mom — who got dressed from her pajamas — wants the pictures of the kids in the action shot, not a split second after they kick the goal. So they're very well aware of what an SLR camera can do and what a point-and-shoot camera can't do.

I agree that the SLR market can certainly become much bigger than what the film SLR market was 20 years ago.

Hoffman: With the evolution of live view, consumers who did have a point-and-shoot digital camera who were used to seeing that LCD screen when they shoot, now have that option with the digital SLR. And that's also going to be important as they migrate from what they're used to now into the digital-SLR category.

Lee: I think another dynamic to it is that in the film days, a customer bought his camera back when he was in the Korean War and that camera worked forever. And now digital, the technology continues to evolve, so already we're seeing second- and third-time buyers of digital SLR cameras. They've upgraded as the technology continues to drive forward.

Peck: David's absolutely right. We have customers still using models they bought in 1976 and they work fine. There were not tremendous changes in technology in film cameras. Auto focus came, auto exposure came. But the time between those technology changes was years and years. Now you're measuring this in months between these quantum leaps in technology.

Campbell: I think we agree that you're going see more consumers moving into the digital SLR space than you did in the film SLR space. Taking a good picture is very aspirational. Consumers want to make sure that they've got the right product to be able to do that.

Carr: The wild card that we see as we watch this industry is huge consumer electronic giants like Sony, Panasonic and Samsung entering the SLR category. That was reigned by the kings — Canon and Nikon. So it will be interesting to see what these new entrants are going to do to the pricing and features. It will be very interesting to watch that from the side.

Lee: We actually think that's its going to be very positive because we think it will drive the industry. It's more promotions. It's no different than the consumer side of it. But there is a bigger price of entry and I think that's an important thing to note. You have to have the system, the lenses, the accessories and you have to have the heritage.