Digital Services Seek Novelty In Land Of Flagging 4-By-6

By Greg Scoblete On Jan 5 2006 - 8:00am

In a market where inexpensive editing software can turn run-of-the-mill digital photos into dynamic slideshows, animated cartoons or art-deco calendars produced in the comfort of your living room, it's no wonder retailers are casting about for a sexier alternative to the 4-inch by 6-inch photo print.

“The film industry brainwashed people into thinking the 4 by 6 is all there is, but digital photography gives you so many more options,” said Heather Mackenzie, marketing VP, Siberra.

The quest for a profit model beyond volume-driven, standard-size printing is also being propelled by sagging print volumes. While digital printing activity has picked up — especially at retail — it has not compensated for the precipitous decline in film printing. Given that close to 70 percent of digital images never leave the computer, retailers must find ways to capitalize on higher ticket, shorter-run photo-related output, said Dimitrous Delis, market research director, Photo Marketing Association (PMA).

“The challenge,” said Harry Loyle, CEO of the photo specialty franchise MotoPhoto, “is that digital printing is becoming a commodity much quicker than analog one-hour film processing, because the mass merchants introduced digital printing first.”

Smaller specialty shops, which were the mainstay of photo printing, were burdened with older, more expensive and more user-intensive film processing equipment while mass merchants were free to buy cheaper, operator-friendly digital printers, Loyle said.

“We see a lot of retailers falling by the wayside with digital printing,” said Yuval Yashif, CEO, Pixology. “In the film world, everything was simple. Digital made everyone confused.”

Arrayed against these market forces, retailers have begun branching out, offering digital photography products such as hard bound photo books, mugs, calendars and online ordering that command higher margins.

More inventive and higher ticket offerings beyond the 4- by 6-inch print are necessary for retailers to sustain printing profitability, said Ed Lee, digital imaging analyst, InfoTrends Research Group.

Moving from an output-centered model to an activity-centered model is one potential avenue, Loyle said. He noted that MotoPhoto was studying the success of retail outlets like Build-A-Bear Workshop, which focus less on the actual product and more on creative process occurring in-store. “The best opportunity is not the digital print, but what people do with the image. Not the product, but the activity. The print is just the destination. We should focus on the journey.”

To that end, the company set up “print cafés” using Lucidiom's Automated Photo Machine (APM) kiosks. The kiosks are arrayed in decorative furniture, some for express ordering and others for creative projects where consumers will park themselves for a lengthier time period. The stores also feature a children's play area so parents can bring the kids.

“We've increased customer hang-time by 30 minutes,” Loyle said.

A similar strategy is being pursued by Philadelphia-based Dan's Camera City, which uses APM kiosks in its DigiPrint Lounge, which the company describes as a “coffeehouse style” layout.

One of the growth markets for retailers has been what InfoTrends analyst Jill Aldort termed “net-to-retail” printing, where consumers upload their images at home to a store's Web site, then travel to the store to pick up the prints, often in as little as an hour. Thanks to the widespread adoption of broadband Internet access, the net-to-retail model is increasingly popular, said Rich Tranchida, executive VP, Ritz Camera Center.

While the vast majority of online service users belong to net-to-mail services like Snapfish and Shutterfly, net-to-retail is growing quickly and the net-to-mail Web sites are forging retail partnerships to stay competitive, Aldort said.

Net-to-retail service provider Siberra is also looking at “packaged services” such as automated CD burning for archival purposes, Mackenzie said. Since Siberra, a Best Buy subsidiary, has partnered with wholesale photofinishers in the United States and Canada, it can offer a complete net-to-mail solution for retailers with no printing equipment in store, Mackenzie added.

“Retailers are seeing lines developing at their kiosks, so they need to do something to streamline that traffic,” said Kyle Hall, executive VP, PNI Digital Media. “Our service lets the home PC be the kiosk.”

FujiFilm has equipped several major retailers, including Ritz, with that capability under its Get The Picture Online program. The service is currently targeted only at FujiFilm's kiosk and mini-lab customers, but the company is looking to expand into an equipment-agnostic model, according to digital services product manager Howard Locke.

While Get the Picture users can elect to have prints mailed back directly to their homes, 90 percent choose to get off the couch and pick up their images in-store, Licke said.

“We got in at the inception, July 2003,” Tranchida said. The volume of online printing is growing at 100 percent per month, he added.

The service did well initially with a longer order time, Tranchida said, but has grown rapidly with the introduction of a one-hour turnaround time.

The biggest hurdle in the net-to-retail model is customer awareness, Tranchida said. “A lot of people still don't know how to get the pictures off their cards and what they want to do with them. There's still a learning curve.”

“The onus is on us to make it easy,” Yashiv said.

While uncertainty persists over whether retail digital printing will constitute a viable business for all its current practitioners, retailers were confident they had the best solution.

“There was a lot of doom and gloom in the industry because home printing was thought to be the heir apparent to retail photofinishing,” Locke noted. “But we can make the case that online is faster, cheaper, easier and offers better quality” than home printing.

“Who wants to sit in the computer room and wait for three 8 by 10s,” Tranchida asked. “It's much easier to let us do it.”

Ultimately, since digital imaging has ushered in an era of choice, retailers have to be flexible, Loyle said. “It's like a bank. There's an ATM, a branch office, online banking. The consumers will deal with you on their terms in a manner that fits their lifestyle.”