NONFOODS: Big developments

When digital camera users ask Pat Woodliff, photo department manager at Gordy's County Markets, about digital processing, she throws down the gauntlet. "I tell them to bring in their digital images and I [will] print one out for them," explains Woodliff. "Then I tell them to take it home and compare it to what they can print. Of course, they find that the quality of ours is much better."

Obviously Gordy's, a two-store independent operator in Chippewa Falls, Wis., prides itself on the quality of the images it produces at its photo center, which is located at one store and serves customers of both.

But this grocer's moxie is backed up by sophisticated in-store equipment; a flexible, consumer-friendly program; and a commitment to out-convenience and out-value the at-home option. That's emblematic of the gains retailers of all sizes can make in the digital imaging market, especially if they work with processing equipment and services providers to craft smart in-store and online programs.

Gordy's photo center equipment includes AgfaPhoto's D-Lab and two Agfa Image Boxes for digital prints, which enable it to offer an impressive array of services.

"We do one-hour photo, we do next-day photo service, and we offer either one set of pics and a free roll of film, or two sets of pics for the same price for next-day service," says Woodliff. "We do all-digital processing and Christmas cards, we put digital prints on CDs, we can put 35-millimeter prints on CDs, we can do Advantix film -- and those we can also put on CDs. We also make a lot of print-from-print pictures."

Woodliff's digital photo customer base continues to grow, and quality and price are the reasons for it. "Plus our digital processing equipment has a lot of functionality. We can make the pictures sharper, we can zoom in on them, lighten them up, change the colors on them," she says. "We do a lot of promotions and advertising to make sure our customers are aware of this, including TV commercials and running photo specials every week in our fliers."

Gordy's success is just one example of the many small battles retailers have been winning lately in the war against at-home printing, a war they've been fighting since the advent of digital cameras, and the tide of which has begun to turn in their favor -- at least for now.

The challenge to retailers now is that the at-home photo printer manufacturers are pulling out all the stops. During this past holiday season, the entrance of every Staples office supply store contained huge displays holding that retailer's 38-page "Digital Photography Gift Guide," a catalog offering everything a consumer would need for digital picture taking. Among the hundreds of products listed were cameras, memory cards, accessories, and printers -- nearly two dozen of them -- as well as image design software and scanners for 35-millimeter film.

Retail printing volume up

According to the Photo Marketing Association's Photo Processing Survey for the year ended October 2004, the volume of prints made from digital still cameras grew more than twice as fast at retailers as the overall rate of 78 percent. (See chart above.)

Home printers continue to dominate the market for printing digital images, and growth in prints made at home continues to be around 40 percent -- closely following digital camera adoption rates. Home printing seems to be benefiting from new camera buyers, but has not seen significant gains by current digital users, according to the findings.

Standalone digital photo kiosks have also gained in popularity among consumers as increased output options and instant delivery of prints make kiosks appealing to those looking to print a limited number of images. The growth in prints ordered online continues, as well.

However, the rapid growth in the volume of prints made either by retailers or by consumers using kiosks has shifted digital printing share away from home. For the year ended October 2004, 58 percent of digital prints were made on home printers, down from 76.6 percent in the year-earlier period. Local retailers continued gaining as their share increased to 15.4 percent from 8.9 percent. Kiosks' share also grew, increasing to 15.1 percent from 5.9 percent.

Online service providers are best positioned to receive orders from clients who have transferred and archived their images onto their computers, or who want to process large orders without having to make a trip to the store.

Web players face competition, however, from brick-and-mortar stores that receive customers' orders online and deliver prints faster locally, such as supermarket chains with photo-processing centers.

For example, in November Wal-Mart launched a one-hour digital photo service that integrates Wal-Mart and Sam's Club's online and in-store photo capabilities.

The service allows customers to upload digital photos at or; edit, share, and order images online; and then pick up photo prints within an hour at any local Wal-Mart store, supercenter, Neighborhood Market, or Sam's Club location with a one-hour photo center. Each four-inch by six-inch print costs 24 cents at all Wal-Mart stores, supercenters, and Neighborhood Markets, and 18 cents at all Sam's Club locations -- prices hard to beat by printing at home.

To make the experience friendlier (and branded) for consumers, Wal-Mart and Sam's Club have partnered with Fujifilm to offer complimentary software called "My Wal-Mart [or Sam's Club] Digital Photo Center at Home," which equips home computers with functions similar to those of the photo kiosks inside Wal-Mart and Sam's Club locations. Users can download the software online or pick up a hard copy of the program -- at no additional charge -- at any store with a photo center.

Wal-Mart's not alone in collaborating with major photo firms to offer online digital photo processing. Kroger has established a similar service in conjunction with Kodak, by which customers can upload pictures to the Kodak site and pick them up at a participating Kroger the next day. Consumers can pay for their digital pictures online or at the store.

The rise in the quality of digital printing at retail, combined with the declining prices, is even affecting the sales of one-time-use cameras. According to data from NPDTechworld and PMA, while demand for digital cameras continues to be strong, the first 10 months of 2004 showed noticeable deterioration in unit sales of one-time-use cameras.

Gordy's Woodliff has seen a downturn in one-time-use camera sales among her customers, as well. "Nowadays the bulk of our one-time-use camera sales are for weddings and similar functions, where people will put them out for others to use to take pictures. The good part about that is when we do get them, we'll get anywhere from 20 to 25 at a time."

Keep focused

Even though digital printing at retail is on the rise, this is no time for retailers to rest on their laurels, because the state of the art in processing technology is a moving target. As consumer-focused technology continues to get better and cheaper, retailers will have to think of ever more creative ways to keep their digital customers coming back.

"I think you're going to get x amount of people who are going to go out and get their own digital pictures developed," says Jeff Schafer, general manager of Gordy's.

A close partnership with the photo vendor will be critical, according to Gordy's store manager Roger Schumacher. "Whatever Agfa can come up with that will let us compete with the home printer, that would be the key," he says. "It's a new way of doing things. When we got into this a few years ago, everything was 35 millimeter, and we had an outside source do it for us. Agfa worked with us to bring it into the store, and our business took off over 100 percent. As things continue to change, we'll explore new opportunities together."
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