Retailers Get Online Partners To Help Drive Photo Revenue

By Greg Scoblete On May 21 2007 - 6:00am

Two of the largest retail chains have teamed with two of the largest online photo sites to provide consumers with access to photo prints and merchandise online and in-store.

The partnerships, between Best Buy, Kodak Gallery, Target and Shutterfly, also mark the expansion of both the Gallery and Shutterfly into retail through prepaid cards and in-store product demonstrations.

Kodak partnered with both Best Buy and Target to offer co-branded online photo centers that will sell a range of Kodak photo products.

The new Best Buy online photo center debuted May 3, replacing the existing photo center with a co-branded one offering the full range of Kodak's photo merchandise products — such as photo prints, books, calendars and mugs.

Best Buy will promote the new online capability with in-store photo merchandise displays by its digital cameras in all of its stores, said Kevin Winneroski, digital imaging merchandising VP, Best Buy.

Additionally, Best Buy stores will sell three prepaid cards for use with the Gallery: a one-year subscription to Premier membership and a classic photo book for $34.99, a photo book plus two collages for $29.99 and a prepaid card for $25 worth of merchandise or photos.

"Kodak's breadth of offerings allows us to offer more for our customers," Winneroski said. "We see a lot of growth potential in photo merchandise."

According to a recent study by InfoTrends, the North American market for photo merchandise (not including prints) is expected to reach $800 million by 2010.

Winneroski noted that Best Buy is continuing to explore other options — like in-store printing. "Consumers need to find something different at a Best Buy" than at other chains that offer retail photofinishing, Winneroski said.

Silver halide orders, including photo books, placed through Best Buy's site will be produced by Kodak's wholesale subsidiary Qualex while other products will be produced by third-party partners, said Madhav Mehra, general manager, Kodak Gallery.

Initially, online orders will be mailed back to consumer's homes.

"We are excited that the blue shirts will actually be demonstrating these photo products for consumers," Mehra said. "It is the real 'clicks-to-bricks' concept coming to life."

Other retail outlets sequester their photo centers behind the counter while Best Buy had a more fluid layout that encourages more interaction, he added.

"We think there is a lot of overlap between Kodak and Best Buy customers," Mehra said.

Kodak offers several retail partnerships through the Gallery, including a recently announced partnership with Rite Aid that will allow Gallery consumers to order prints online and pick them up at Rite Aid.

The current partnership with Best Buy is a three-year deal, Mehra said. It marks the second high-profile partnership between Kodak and Best Buy in recent months. Kodak launched its new line of inkjet photo printers exclusively through the CE retailer.

Kodak announced a similar online partnership with Target last week. The deal includes the creation of two co-branded Web-sites — www.target.com/photo and http://targetphoto.kodakgallery.com — that go live at the end of this month, along with the ability for Gallery users to have prints made at their local Target stores for in-store pick up. Target will begin displaying Gallery products and selling prepaid cards later in the fall.

The Gallery boasts 60 million members and over 2 billion images, according to Kodak. With the addition of Rite Aid, Kodak now has 12,000 retail stores in its printing network. According to the company, 85 percent of Gallery customers now live within five miles of a retail pick-up location.

Shutterfly, which used to offer a co-branded Web photo service with Best Buy, also teamed with Target for its first foray into online-to-store ordering.

Shutterfly photo items will be available through two websites: www.targetphoto.shutterfly.com and www.target.com/photo. The later will serve as a jumping off point where consumers can choose offerings from Kodak, Flickr and Shutterfly.

Users will be able to upload their images and make prints and photo merchandise through the sites which can be mailed back to a consumer's home. Photo prints can also be ordered online and picked up in Target stores with a one hour turnaround time.

Target will also display Shutterfly-produced photo books and greeting cards in store to promote the new service and sell prepaid cards for purchasing Shutterfly products online.

The retailer's online photo operations were previously run by Yahoo! Photos. Yahoo! announced earlier this month that it was migrating its photo service over to its Flickr photo blog subsidiary.

Target is the first retailer to offer in-store pick up for Shutterfly orders.

"We've been approached by a lot of retailers," said Jeffrey Housenbold, Shutterfly CEO. What attracted the company to Target was, among other things, a vision of digital imaging "not as the 4 by 6 model but as memory keeping."

Online printing has been the fastest growth segment in the digital printing business, according to the Photo Marketing Association. As of 12 months, ended February, online ordering activity grew at a rate of 120 percent. Orders placed online that are mailed back to the consumer's home accounted for 12.1 percent of all printing activity during the 12 months, ended February, while an additional 9.8 percent were ordered online and later picked up at a retail location.

This "net-to-store" model will likely grow faster than net-to-mail, said Allan Bullock, InfoTrends Internet imaging trends service associate director. "People want to avoid shipping costs as it inflates the price per print, while retailers want that traffic back in their stores."