Magazine Article


Kodak Adds KIS Minilab Line

Big Yellow Ends Noritsu Arrangement; Will No Longer Sell Minilabs Direct

Kodak is making some substantial course changes in its approach to the mass/drug/grocery market that should result in lower prices to the customer and less burden to Kodak as it protects its valuable consumables franchise.

With this new plan Kodak has broken its favored arrangement with Noritsu and will be offering, in addition, minilabs produced by KIS-Photo Me Group in France, in its sales portfolio.

As explained by Alan Bullock, Kodak's minilab operations manager, U.S. & Canada, Kodak's sales force will offer both brands to its mass merchant accounts, allowing its customers a choice based on features and pricing.

In a departure from the past when the Kodak sales staff would open an order book and get the equipment deal signed, Kodak will no longer consummate the sale. Rather, they are shifting this responsibility directly to either Noritsu or KIS-Photo Me, France.

By removing itself from the equipment sales function, Kodak also sacrifices whatever profit it had built into the selling price of the lab with the savings being passed along to the customer in the form of a lower selling price. A classic case of eliminating the middleman.

The KIS-Photo Me DKS 900 minilab

No doubt, the need to eradicate the additional cost represented by Kodak's profit load on equipment sales was a response to the increased competition from the likes of Fuji and Agfa, both of which have carved away at Kodak's dominance as the prime supplier to these prime mass accounts. Notable, of course, is the Walgreens business, once coveted by Kodak but taken over in the last 2-3 years by the Fuji Frontier as well as some recent installations on the west coast by Agfa of its d.lab.1 system. These firms sell directly to the customer.

Passing on the sales function relieves Kodak of the need for minilab inventory investment, not an inconsequential element as the firm continues to tighten its financial belt.

While willing to forego the minilab sales profit, which is pocketed only once for each sale, Bullock said Kodak will still be able to lock up the consumables, paper and chemistry, and provide all of the installation and service through its huge Qualex field force.

The equipment maker gets the appetizer, Kodak the entrée. It's a win-win for all concerned: customer gets a lower price; Noritsu/KIS gets the sale of the lab; Kodak gets the ongoing consumable and service business.

Kodak caught the timing just right in the 1990's as it established itself as the only national operation capable of providing the mass/drug/grocery segments with the means of breaking into the burgeoning on-site processing business. It offered equipment, financing, consumables, service, training and more. These accounts were new to the business and gratefully accepted having their hands held by a leader, such as Kodak, as it walked through the maze. Besides, Kodak was already handling the overnight business via Qualex for these same accounts as well as selling them film. An easy fit.

For many years Gretag was the beneficiary of the very successful Kodak on site picture (OSP) plan. Kodak was Gretag's only U.S. customer, and a fine one at that, as there might have been 12-15,000 Gretag labs plugged in by Qualex technicians. But Gretag ran into serious service and supply problems, falling into bankruptcy in December, 2002.

Kodak already had a good relationship with Noritsu, its supplier of minilabs under the Kodak label for the international market and its partner in the U.S. as Noritsu steered its lab customer to Kodak consumables. With Gretag out of the picture, Noritsu easily stepped in and became Kodak's lab of choice for its customers. It has remained thus for the past 2-3 years.

Noritsu appears to be the loser in the new Kodak plan of presenting to its customers labs from two competing manufacturers. Not only will it impact the sales volume for Noritsu but their labs will be offered at a premium price to KIS. According to Bullock, this price differential could be about 10% in the lower-end models.

A Noritsu spokesman said his firm had no comment on the Kodak plan. Kevin Donohue, president of Digital Portal, the distributor for Photo Me equipment in the U.S., said, "The selection of KIS-Photo Me minilabs gives us important credibility for the DKS line in the U.S. market".

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