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Snapfish Goes Retail, Exploring Marriage With Its Online Service



Everyone is looking for ways to compete and grow in the era of transition from film to digital. Retailers who have not yet bought into the need for the investment for digital equipment are struggling to make money; then again, retailers who have made the investment are also struggling to make money.

The competition for an on-site processor used to be the nearest on-site lab, whether it was an independent store or a mass merchant with the identical equipment to his own.

Today's minilab competitor is more than likely to be his own customer who has a digital camera and found other means to convert images to prints: print at home or upload images to a website that will make prints, calendars, mugs and even store images in convenient albums for others to share. I don't know of any Harvard case studies that focus on how to compete with your own customer.

To put this matter into perspective, the most recent PMA report on digital printing (June, '04) indicates that for the previous 12 months, 57.3% of digital prints were made on home printers (thankfully down from 77% a year earlier); 17.7% were made at self service kiosks (up from 3.6%); and 14.9% made at local retailers, excluding kiosks (up from 8.7%).

The trend is definitely shifting away from home printing and back to a retail site—though the volume of home prints is still huge. Either the early-adopters are moving on to other, newer gadgets to occupy their interests or the most recent crop of digital camera buyers are more comfortable relying on the sources they've always used to get their prints made. Maybe the industry's education story is finally getting through.

As the figures show, the transition to digital is somewhat fluid with customers casting about for the best way to fulfill their need for prints and other services while the industry is looking for the best channel to serve these digital shooters. Both sides are looking for comfortable solutions.

The one segment of the digital world that seems to be holding steady over the period are prints ordered for online fulfillment. For the past two years, according to PMA's report, this sector is printing about 6.3% of all prints made from digital. The big players here are Ofoto, owned by Kodak, Shutterfly, Redwood City, CA, and Snapfish, San Francisco, CA. While the percentage is stable, the number of prints ordered is growing rapidly as digital usage expands.

The online print business is extremely fragmented. Many retailers have their own online print programs and have found a very comfortable niche business as a supplement to their brick and mortar operations. Mitch Goldstone, 30-Minute Photo, Irvine, CA, is an outstanding example.

Equipment manufacturers have created sophisticated online programs for their dealer network. Fuji's program, available to all of its Frontier dealers, is hailed by Ritz Camera where it is actively promoted to customers who can upload images and pick up prints at a Ritz store in four hours. There are also a number of software packages available to retailers who wish to play the online game. Bob Banasik offers one through Digibug.

Online processor Snapfish has gone the "Bricks and Mortar" route with a new retail store in Virginia.

Of the big three in the onlines, Snapfish seems to offer the most interesting case study in terms of casting about in all directions to serve the digi-shooter. The one ingredient in this firm that separates it from the other online biggies is its owner, District Photo, Beltsville, MD.

Driven by Neil Cohen, CEO and a former PMA president, this family-owned business has always managed to see the horizon a little closer than most and has not been shy about moving early as new trends develop. Founded in 1949, the firm became a major player in the mail order business (brands: Mystic, Clark, York, Truprint, etc.) and has built a significant wholesale operation with plants in Beltsville and in England where it serves accounts there, in France and other European countries. District is also a Kodak contractor and serves all Qualex overnight (now 2-night) customers in the mid-Atlantic states from Georgia to New Jersey.

In the mid-1980's, the family saw the trend of on-site and opened about a dozen one-hour retail labs in the Washington DC metro area called Snap Shops 1-Hour Photo. There are four left, all Kodak KICS locations. Maybe not so incidentally, District's VP of marketing and business development, Al Steinman, worked on the KICS program when he was a Kodak employee.

Along came online. Snapfish was founded in 1999 and established itself early as a player in the online game. District wanted an entrée to online and became Snapfish's fulfillment source from Day One. Once more, whiffing the future, District stepped up and bought Snapfish in 2001. It continues to be operated as an independent business in San Francisco by its president and co-founder, Raj Kapoor.

According to Raj, Snapfish is #2 in the online business with about 10 million customers to about 13 million for Kodak's Ofoto, and growing at the rate of about 400,000-500,000 a month.

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