Magazine Article


Online Photofinishing

Online Photofinishing

The Sun is Shining Behind the Clouds

By Frank Baillargeon

Until this decade one fact both drove and limited market forces — film had to be processed and images printed in order for a consumer to view ("proof"), share, and archive the important events of their life. Digital changes that, and with it the market forces that will ultimately determine new consumer expectations and behaviors going forward.
The incumbent threats and opportunities of this unknown emerging market leave us, large and small, longstanding industry members or new, deep pocketed or threadbare, with challenges on a scale heretofore unknown. In no segment of the industry is this more evident than in the photofinishing segment, and, within that segment, it is profoundly evident within the online photofinishing segment.

In 1999 and into 2000 a combination of market forces led to a proliferation of online photofinishers. The explosion of digital camera sales worldwide and the rapid penetration of home Internet access created an obvious opportunity to create a new "photofinishing" relationship with the consumer. Add to that the pregnant sense of entitlement that marked start-up ventures in Silicon Valley during this time and it's no wonder that talent, energy and money poured into the new photofinishing business.
The formula for success in the "New Economy" included unprecedented competencies in PR and advertising. Tens of millions of venture capital dollars were expended to create awareness, brand identity, and activity. That "activity" only infrequently included sales. Photofinishing was suddenly free. There was, indeed, a new kid in town. The industry took notice. Analyst and pundit forecasts called for online printing to reach multi-billion dollar levels in a few years, surpassing home printing and approximating retail printing. Fear of loss would prove to be a great motivator.
By the end of '00 several leading photofinishing retailers had online photofinishing businesses up and operating. Wal-Mart, via its majority ownership of, launched a site with a high level of integration with its retail photofinishing. Ritz and Wolf both engaged in the development, integration, and launch of online photofinishing sites. Several retailers cooperated with Kodak in the launch of co-branded efforts (e.g. CVS, Kmart/ Mail order photofinishers were quick to leverage their direct-to-consumer relationships and to provide Internet ordering and image management to their efforts. In Europe CEWE, as usual, was quick to recognize both the threat and the opportunity and rapidly built a fully-integrated online network for their retail partners. On-site equipment manufacturers (minilabs & kiosks) offered integrated online photofinishing Websites to their retail partners.

Sun Behind the Clouds
What a difference a year makes. The "New Economy" is no longer (was it ever?). Online printing forecasts were off by many factors. Digital camera sales increases, though robust (est. 35%+), have fallen far behind projections. Overall printing activity for new digital households is low and seemingly going further south. The global economy is in recession. Comparative film sales have been plummeting since the end of Q3 '00. September 11 has had a sobering and devastating impact on recreation, consumer confidence, and picture-taking. In this post-dot-com-meltdown, post-September 11 atmosphere one would hardly expect to find genuine enthusiasm and confidence in those involved with online photofinishing. But, that's exactly what I found during the past two weeks as I interviewed a cross-sample of online photofinishers.
The interviews were by and large a clear-eyed reflection of all the new realities facing the industry collectively and online photofinishers specifically. In evidence was a new level of differentiation of both market position and philosophy. Also in evidence was recognition that growth would be slow and future profits determined by managed, focused sales growth and aggressive cost management. Universal was the recognition that the contribution being made by their organization was of real and fundamental importance to the photofinishing industry.
It's not the intention of this author to appraise the market positions or philosophies of today's online photofinishers. It's probably safe to say that none is profitable today. It's certainly safe to say that lack of profitability has more significance to the survival of some than others. Without doubt the landscape will continue to change. Mergers, acquisitions and failures are inevitable, as are new entries by retailers and manufacturers.
What there should be no doubt about is that online photofinishing will continue to successfully weave itself into the fabric of the photofinishing industry and that it will continue, in very real and substantive ways, to deliver exceptional new services, products and values that not only fulfill the promise of digital imaging, but also are critically important to the financial health of the photographic industry. Following are some reflections of online photofinishing businesses by leaders in the industry:

"Quality Snapshots" for Photo Retailers Corporation recently announced a new service for independent photo retailers dubbed Quality Snapshots today.
The folks at PhotoAccess explain the service thusly: within 24 hours of signing up, an independent retailer can begin directing its customers to for complete online digital photo finishing services, complete with in-store print pickup. For a $100 set-up fee a merchant's store and location are listed on the site and the merchant receives a complete merchandising kit including $75 worth of retail stock.
PhotoAccess also told PTN that, "Merchants receive generous margins on customer orders while providing their customers great services."
We are told those services include:
• High quality, professional prints;
• Convenient, digital photo management;
• Permanent online album storage;
• Flexible print and merchandise ordering methods,
• Fast delivery of prints for in-store pick-up.

The idea here is one that has had some success at retail in the past for retailers that need their own Website, but do not wish to invest in one. PhotoAccess is pitching the concept to specialty camera stores, single-location drug, grocery, and gift stores with the promise that Quality Snapshots will, "increase store revenue and income, increase customer loyalty, and offer full digital printing and merchandising services that would otherwise be unaffordable."
PhotoAccess handles all customer service inquiries and sends participating merchants a monthly check for the previous month's transactions.

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