A View from the Bottom – Retail Photo Output in the U.S.
by Frank Baillargeon & Meg Weston
It has been a long and painful descent this decade for U.S. photo output retailers and most of their manufacturing and service providers. Finally, however, the bottom has been reached. That bottom is a grim 50% of 2000 peak category revenue, though total category revenue remains at $3.5B+, with promises of renewal. It is undeniable that margins on conventional photo output (especially 4x6 prints) will continue to shrink and that retailers and their category partners will face powerful economic headwinds that will hinder capital, infrastructure and labor investment – especially in a category that has had 8 years of steady revenue decline. That being acknowledged, however, our view from the bottom is one of a steady upward staircase built upon the steps of product innovation, technology adoption, new consumers and new consumer needs, and effective new retail merchandising initiatives.by Frank Baillargeon & Meg Weston
Our current projections include only projections for those printed personalized photo products that are currently offered by retailers (primarily greeting cards, calendars, posters and photo books). They do not include any revenue for the streams of likely new products that will emerge and be effectively merchandised by retailers for traditional consumer photographers and others whose needs include convenient delivery of image rich gifts, business output and digital output of many forms meeting many emerging consumer needs. It is likely that there is a missing bar on the above chart that should be labeled “other digital output” and is as large, or perhaps much larger, than the red bar projecting Personalized Print, which itself is certainly understated. [F/22] Consulting believes that the total revenue opportunity could be as large as $6+B by 2012…..reaching the historic peak levels of the late 1999 and 2000.
This is not your father’s photo business
The former peak revenues in the U.S. retail photo output ($7B) were driven by the dominance of retail as a destination for film processing, the household demand for film and one-time-use cameras, the absolute requirement to print every image captured, and the growth of popularity of double prints. Retailer dominance grew as the superior values of timeliness (i.e. overnight delivery from central labs followed by 1-hour printing in-store), quality, and low price made mail order largely irrelevant in the U.S. market. As the retail revenue grew and shifted to retailers with on-site production capability the managing competencies became largely operational. Specialized capital investment decisions, infrastructure development, and securing and training a dedicated skilled labor force became the skills that distinguished the retail leaders from competing retailers. The industry expected (hoped) that the same values, behaviors and competencies would drive similar results in the digital era. The industry was wrong.
What has changed?
How to recognize emerging leaders:
What will distinguish the future retail imaging output leaders will be the ability to embrace marketing as the competency that will best insure both overall category growth and specific retailer share growth. In particular the marketing practices that will matter most are:
- New Product Development Focus and Disciplines that go far beyond the consumer photo.
- Removing the consumer pain….fast, easy, accessible create and order experiences in-store, at home, on the Internet (it’s not about “capturing users,” it’s about creating product and service purchase opportunities).
- Focusing on redefining product merchandising (in-store, at home, on the web)
- Focusing on seasonal, event and co-merchandising opportunities (families of products). Digital is the age of variable data printing and product opportunities limited solely by lack of imagination.
- Focusing on selling activities vs. production activities. Facing the customer.
- Creating sensible product menus and sensibly coordinated experiences geared to the consumer’s environment (in-store, on the desktop, on the web).
- Exploring creative ways to collaborate across merchant groups to connect image capture to adjacent products and output services (devices, appliances, media, subscription services, etc.).
- Watching for and engaging emerging technologies that can advance consumer experiences and category shopping opportunities.
- Closely collaborating with capable partners and walking them to the leading edge of effective new category possibilities.
- Remembering what Franklin Roosevelt said at the start of his first term during the Depression…."Do something!”
