by Greg Scoblete
The story of David and Goliath has been transfigured from an Old Testament tale to a cultural metaphor writ-large. Its message is as familiar as it is inspiring: diminutive David, odds against him, fells the giant and wins the day (nothing about getting the girl; these were pre-Hollywood days, you see). It's as inspiring as it is unlikely.
In the real world - which looks nothing like the TV show - most Davids get ignominiously crushed underfoot before they even fire off a single stone from the slingshot. Yet the analogy transfers easily to the real world and its retail landscape, where the reigning Goliath-Wal-Mart-has been crushing competitors
Our Davids - small photofinishers, mom and pop stores in suburban markets - have hit upon harder times. They are arrayed not just against the Goliath, but a veritable army of them: national food and drug store chains (Rite-Aid, Eckerd, CVS), other national mass merchants such as K-Mart, CostCo and Target. But it doesn't end there, two other factors have rolled together to create (if we may mix metaphors) the perfect storm for smaller processors: a weak economy and the rapid growth of digital cameras.
Even the most stout-hearted Davids can be excused if they reach for the Tums.
The Fronts Collide What are the Davids facing? The economy, languishing in a not quite recession/not quite recovery has taken its toll on film sales. Last year, PMA estimated that film sales were down one percent and that they will drop another three percent in 2003 to 982 million units (compared to its peak in 2000 of 1.055 billion units). But, more troublesome, PMA found that even when times were flush, the traditional side of the business was lagging. "Even during the years of strong economic growth in the 1990s, revenue generated from film processing failed to keep up with overall consumer spending...This trend is a result of increased competition caused by a growing number of photoprocessors entering the market," the association noted in its Photo Industry 2003 Review and Forecast.
Photofinishing sales were at $6.68 billion last year, down from $6.72 in 2001 and $6.93 billion in 2000. The sheer number of prints being made is down - from 33.1 billion in 2000, 32.3 billion in 2001 to 31.6 in 2002, which does explain photofinishing revenue loss. When examining both film unit sales and film camera sales, the outlook for processing remains uncertain. Film camera sales have fallen off from about 14 million units in 2001/2002 to a projected 12 million units in 2003 and this year will be eclipsed by digital cameras for the first time.
A bright spot in the bleak traditional market is the continuing strong sales of one-time-use cameras, which PMA estimates will hit nearly 220 million units in 2003, an 8 percent gain in unit sales. Those sales lead directly to prints. PMA also indicated that almost 9 percent of U.S. households use a one-time-use camera as the exclusive picture-taking device.
But digital cameras are surging, predicted to reach about 30 percent penetration this year in U.S. households. This outcome wouldn't be so perilous if not for the well-documented disinclination to printing among digital camera owners, at least, printing at retail. In 2002, only 20 percent of digital camera owners made prints of their digital images, and most of them (96 percent with multiple responses allowed) made them at home. Contrasted with the other responses, retail printing of digital images looked shaky. Six percent of those surveyed (with multiple responses) said they brought their images to a retail store/minilab, up from 3 percent the last two years. Another 4 percent said they made prints at a self-service kiosk.
Then there are the online photo sites, which, while still a niche, are also growing. According to a recent report from InfoTrends, 19 percent of U.S. Internet households have used an online photo service, and the average number of photos posted per month nearly doubled to 24 photos. The most important number, the average number of prints ordered online per month, increased by more than 30 percent over last year.
The good news in digital is that the total number of digital images printed is up from 14 percent of printed digital images last year while the share of images e-mailed has remained stationary at 13 percent. PMA optimistically noted in another recent report (The Path from Pixels to Prints) that 'preserving memories' surpassed 'e-mailing images' as the top motivator for consumers when buying digital cameras. PMA interpreted 'preserving memories' to mean printing images, which would neatly coincide with the increasing female/family usage of digital cameras, which the association also noticed.
So faced with a shrinking processing pie, and with PMA Marketing Research showing warehouse and drug stores gaining share in fast roll processing (versus overnight) from 2002 to 2003, what's a little David to do?
The Battle Is On Out of all of the above causes, smaller photofinishers say they are most concerned about the digital camera owner.
The problem is, of course, that Wal-Mart is also after the digital shooter. According to a story in the New York Times, approximately 1,800 of the 2,500 Wal-Mart stores with photo centers now process digital photographs, with the remainder being brought up to speed by November. That brings a fairly large footprint to bear on the digital processing market. Independents and mom and pops have their work cut out for them if they are to be competitive.
Or maybe Wal-Mart's competition is a blessing in disguise?
This is no time for wailing and gnashing teeth, say Glenn Omura, associate professor of marketing at Michigan State University, and frequent lecturer on digital photofinishing issues. "In the digital space, this competition is good for both [Wal-Mart and the smaller finishers]. Smaller
And Wal-Mart's frontal entry into digital printing will actually be a good thing, Omura says, it will create a market for digital camera printing through its massive advertising budget, which exceeds any marketing muscle local shops can bring to bear.