Online Printing Grows As Retail Solution

New York— While the principle focus of retailers with a stake in digital photo printing has been physically driving the consumer back to the store to make prints from their digital photographs, some are increasingly turning to the Internet to do the job for them.

Still considered the dark horse contender for the bulk of the digital printing dollar, photo Web sites have grown steadily since their introduction, and more retailers are embracing the services as a means of earning additional printing revenue.

Online digital photo services let consumers upload their digital photos to a central Web site and either store them permanently online, e-mail them to friends and family, or order prints that are mailed back to them or in some cases can be picked up in-store.

Major manufacturers, such as Kodak, Fujifilm and Sony, offer both their own direct-to-consumer online processing sites in addition to powering the Web sites for major retailers. Kodak, through its Ofoto acquisition, powers Amazom.com's photo processing. Fujifilm helps drive print orders to Ritz Camera Centers. Best Buy offers online photo processing in partnership with the consumer photo Web site Shutterfly.

Online services have enjoyed increased usage thanks in part to the advance of broadband. According to the Scottsdale, Ariz.-based market research firm In-Stat/MDR, broadband Internet subscriptions reached 25 million households in 2003. That number is expected to nearly double to 47.3 million by 2007.

More and more retail outlets, including large national chains, have begun offering some form of online digital photo fulfillment, said Jill Aldort, senior research analyst, InfoTrends Research Group.

According to her firm's Sept. 2003 survey of retail photofinishers, 29 percent currently offer online photofinishing services, and another 20 percent plan to add that capability within the next six months. And this was a survey based heavily with independent chains and single stores, Aldort said.

"We're seeing much more integration of online services with retail outlets," Aldort said.

According to InfoTrends, online usage among consumers has actually increased as a percentage of the overall print volume, doubling from 2002 to 2003 from 4 percent to 8 percent of the total digital print market.

David Bagshaw, president and CEO of the online photo service Shutterfly, expects the online market could ultimately account for 20 percent to 25 percent of the total digital printing market, gaining most of its ground by luring away disgruntled home printers.

"Home printing has given digital printing a bad name," Bagshaw said.

Kodak's Ofoto service is currently storing 300 million images from 11 million members and has experienced daily uploads that have hit 1.5 million images, said founder and now executive VP at Kodak, James Joaquin.

There is still a lot more "headroom" for the online market to grow into, particularly as it embraces new services, Joaquin said. He pointed to Ofoto Mobile, which serves as a destination for images captured by camera phones, as an example of how Ofoto and Kodak are attempting to embrace the dynamic market of digital photography.

Chris Chute, senior analyst at IDC, said his firm is predicting the online business to fragment into two segments: an Internet-to-retail model with services like Fujifilm's Get the Picture Online and a pure Internet mail order model, like Shutterfly.

IDC said that total Internet driven business (including both Internet-to-mail and Internet-to-retail) accounted for roughly 11.8 percent of the total digital print business in 2003, a number expected to grow in the years ahead.