Kodak's typical arrangement, unlike the Target deal, is to lease machines to chains, such as CVS or Rite Aid, and supply consumables and tech services leaving to store management the responsibility and financial burden for personnel and promotion of photo activities. Kodak presently services about 10,000 locations under that arrangement—down from over 13,000 when it had the entire Walgreen's chain, since lost to Fuji. Kodak's income stream from this arrangement is to receive revenue based on each click of the machine, representing one image being printed. I understand this click charge would usually fall in the 11-14-cents/click, depending on the deal.
The Target model, more or less a leased department setup, while unusual is not unique. Kodak had a similar arrangement with BJ's Wholesale Club, Natick, MA, a 150-store membership operation along the East coast, and a few military post exchanges. BJ's would not return calls for comment on how many of its stores had on-site departments or what they would do once Kodak withdrew its own people and equipment. I understand that they plan to abandon the on-site business and rely solely on Qualex drop-box service.
A not-so incidental element to the breakup of the Target-Kodak arrangement is the equipment that Kodak will have to physically repossess. Almost all of the Target and BJ's labs are old Gretag machines. Since they are for optical application only and this has become a digital world, these systems are hardly in demand. I spoke to an executive of one firm that would normally buy any used equipment and he felt that if these old Gretags were offered to him he would probably not return the phone call. "There is simply no resale market for this unit," he said. He did allow that there could be some play in Eastern Europe where optical is still popular and Gretag has a better name than in the U.S. or South America.
In all probability, Kodak will strip these machines of what ever parts they find valuable to service a rather large family of Gretags still in their system. Then what? In a previous deal some years ago when Kodak re-po'd a bunch of equipment, I suggested, whimsically, that they were dumped into the Pacific Ocean. Kodak heard from some environmental group about this and had to apologize for me. Sorry. Committee notwithstanding, these Gretags would make a great artificial reef for scuba divers and fish off the New Jersey coast. No other use.
Throw into the mix the fact that the huge refurbishing center that Kodak maintained in Durham, NC, was scheduled to be closed last month suggesting that the returned Gretags will probably just be scrapped in the field, the cheapest solution, no doubt, as the equipment is being written off. Also, the very sophisticated call center in Durham is likewise scheduled to be shut down with those services being turned over to an outside third party, I'm told.
Jerry Lansky is president of MiniLab Consultants, P.O. Box 475, Colts Neck, NJ 07722. Tel: (732) 946-8484. E-mail: Jlansky@att.net