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Retailers Getting Hooked on Photofinishing Fulfillment Online
As the digital revolution moves to make film only a fading memory, retailers are having to rely more heavily on high-margin online services to help bring up their dwindling roll counts


Ken McDonald
"The big trend for 2007 will be a tremendous move toward one-hour processing," says LifePics’ McDonald.
Joe Kowalik
"We are looking at new solutions on the back end to make CD/DVD production more efficient and cost-effective for the retailer," says Graphx's Joe Kowalik.
Ben Nelson
"We are looking at well over a billion prints this calendar year alone," says Ben Nelson at Snapfish.

According to PMA stats, digital print orders placed online and picked up at retail are continuing to account for a growing percentage of the market. The availability and awareness of this print option have increased, and as more households adopt broadband internet connections, it is easier for them to place online orders. Picking up prints at retail allows the customers to pass on shipping fees and the wait for delivery of online mail orders. In the three months ending in July 2006, online-to-retail orders averaged 11 percent of all digital prints made, including home. That is an all-time high for the channel, and the closest it has come to matching the online-to-mail market share. Online-to-retail does not appear to be eating into other online and retail print methods' market share, though; home printing appears to be the only method that has consistently lost market share over that time.

The total digital print market and each print method continue to experience increases in print volume, PMA also reports. According to a recent PMA survey, in the 12 months ending May 2006, digital print volume increased 75 percent over the prior year-long period. As the piece of the digital printing pie grows, shifts in market share are also occurring. The two quickest-growing methods are now online photo services and retail minilabs.

A hybrid of the two methods, online orders picked up at retail, has experienced continuous growth since its introduction. Looking at the three-month averages through April 2006, prints ordered online and picked up at retail accounted for 7 percent of total print volume (including home printing). That is more than double the market share this segment had during the same time in 2005.

There are a few factors that are contributing to online's success. First, the availability and awareness of the option to the general public has increased substantially. Many partnerships with various online firms have formed, enabling customers to place orders at popular online photo printing sites (and now online social networking sites) and pick them up at nearby retail locations. Second, broadband penetration in the U.S. is still on a meteoric rise. More homes having a high-speed internet connection encourages the option of placing large online print orders. Also, relative to other methods, ordering a large number of photos from a home computer might be more comfortable to some users than ordering and waiting at an instant kiosk or dealing with the cost and time of using paper and ink with home printers.

"At this point, photo kiosk input stations and 'Net-to-retail continue to have the most potential for growth because they are still relatively new and are becoming more widely available," comments Ann Morris, a research analyst for InfoTrends. "More retailers are offering not only 'Net-to-retail services, but also one-hour processing using 'Net-to-retail. This is definitely an attempt to deliver the convenience factor to consumers—something that is very important to them."

LifePics Offers Retailers a Profitable Lifeline

Boulder, CO–based LifePics (www.lifepics.com) is one of several technology companies that have developed a successful online infrastructure at retail. LifePics specializes in online imaging technology, applications, and solutions. The firm partners with independent camera stores, photofinishing storefronts, mass channel photofinishers, other dealers, or portals willing to offer Web digital photo services to their respective customers.

"LifePics offers our partners a cobranded online digital imaging internet site," says Ken McDonald, VP of marketing operations at LifePics. "We empower local storefront customers with the ability to upload their digital or traditional photos into an Internet album for long-term storage, to view, order, share, edit, and archive their images. Photos ordered online are 'fulfilled' or printed at the customer's chosen local camera or film processing store, implementing an online print fulfillment network."

Over the years, LifePics has basically become sort of the FTD of picture delivery. "LifePics has aggregated the world's largest network of photofinishers to provide the latest in online imaging services," says McDonald. "We serve clients big and small. We service independents plus larger chains like Ritz Camera, Wegmans, and Meijer's, as well as other major photo players in the food and drug space. We have about 400 retailers with 6,000 stores that utilize our services. We also offer a solution for pro photographers. We currently have about 1,500 photographers using our services."

One big trend that McDonald is seeing is that the solution for retailers has gotten a lot bigger. "There are many more products available for consumers to order from retailers," McDonald points out. "In addition, there are a lot more different places where those orders can go to be fulfilled. We are also seeing more photo novelty products and services being introduced for the consumer to order. Items such as photo books and even additional digital editing services are gaining in popularity. We work closely with Qualex and Fujifilm as wholesalers, as well as with a host of different gifting companies such as Milford Heirloom and Photo TLC. Today an order can touch many sites for fulfillment purposes. The routing is much more sophisticated, as well as the number of products that can be produced."

McDonald also sees a growing shift to one hour-processing online. "The big trend for 2007 will be a tremendous move toward one-hour processing," he says. "With retail giant Wal-Mart going on national TV promoting that service, it's driving everybody in the photofinishing industry in that direction. In order to be successful, you'll have to offer as many one-hour services as you possibly can. Look for a huge rush this year to get that infrastructure into place that will offer faster output fulfillment. The other thing that's changing tremendously is the online integration with the kiosk. The kiosk is turning into the ideal one-hour solution for the retailer. Customers can place orders in the store or from the comfort of their desktop at home."

"Another trend we are seeing there is a large number of images being taken and processed, trillions in some cases," he adds. "We are seeing orders coming from multiple channels. Having an online presence means you can receive orders from many different channels."

McDonald reports that online photofinishing services are helping gain back some of the lost film processing business. "If you look at data from the industry, it shows film print volume coming down at a very fast clip and online beginning to fill that gap. So if you are a savvy retailer and have a good business model, you can replace roll counts with online photofinishing. You have to be good at film, you have to be good at the kiosk business, and you have to be good at online business. In other words, to succeed in today's photofinishing market, you have to be on top of all three business models in order to keep your margins up."

"LifePics offers retailers a very profitable solution," he continues. "We partner with the retailer to help them drive orders in. It's a very open solution. We are not trying to sell equipment. Our service works with everything. We route the orders the way the retailer wants them routed. Orders can be sent directly to stores for one-hour service or routed to major wholesalers, gift providers, photo book manufacturers, or a variety of other printers. We offer the retailer a host of profitable output solutions."

HP Lands a Couple of Big Fish

HP became a major player in this market when it acquired Snapfish (www.snapfish.com) and then Silverwire (www.silverwire.com). Over the past year, Snapfish by HP has announced several new online photo services and products that enable its members (30 million, including such major retailers as Wal-Mart, Walgreens, Costco, Longs Drugs, Staples, and OfficeMax, to name a few) to share and create digital stories in new ways.

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