The picture of health develops as tide turns on photo business

Drug Store News, June 21, 2004 by Michelle L. Kirsche

Digital printing could be the cash cow retailers are looking for to revive a flat photo business. The Photo Marketing Association International estimates U.S. camera sales totaled more than 25 million in 2003, with digital cameras accounting for more than half of all sales. Meanwhile, less than 4 percent of all distal photos are converted to print, according to industry analysts. Spotting that opening, late last month Kodak launched a national TV ad campaign armed at educating consumers about printing digital photos at retail locations using its Picture Maker kiosks.

"Digital still cameras are at a point where they have entered the mass majority and are mainstream products. Digital printing, on the other hand, is at its tipping point," said Kodak spokeswoman Kathy Rauschenberg.

One of the most important things retailers need to do is to assess the current customer experience in their stores, ensure that they are delivering a high-quality product and flawless in-store execution, then make sure they are driving awareness, that digital printing is available."

Some chains are going one step further. Through its partnership with Kodak, CVS became the first national retailer to outfit all of its one-hour-photo locations with the ability to print photos directly from camera phones.

"Meeting the expected growth of on-demand printing of camera phone photos is part of our strategy to be the easiest pharmacy retailer," said Grant Pill, CVS category manager of photo processing. "Today, 13 percent of our digital photo customers are new to CVS."

And, with more and better-quality camera phones entering the market, analysts forecast digitally captured images will leap to 70 billion in 2007 from the current estimate of 26 billion.

"More images captured leads directly to more image printing," Pill said.

Retailers also are adding higher-ticket removable digital memory cards to store shelves to help drive category sales.

Currently, about two digital memory cards are sold for every one digital camera. The opportunity for drug stores lies in that consumers typically will buy one card when they buy their digital camera and then will purchase a second card about a year later. "That's the [target consumer] for the drug store channel," said Tim Sullivan, worldwide vice president of sales for Lexar Media, which recently partnered with Kodak to manufacture and distribute a range of Kodak-branded memory cards.

Sullivan noted that Longs Drug Stores ran TV spots educating consumers that memory cards are sold there.

At a suggested retail price of about $20 to $50, many retailers are stocking a representative sample of the products "to let customers know they will be there to supply the digital products they need," Sullivan said. "Drug chains want to make sure they don't leave anything behind."

The memory cards also allow for cross-merchandising opportunities in the photo department, as well as with recordable CDs and DVDs.

Moving forward, Sullivan said the biggest trend to watch for in the category is the low-price, low-capacity memory card that manufacturers are testing now.

While the digital still camera has been adopted by the masses, more than 70 percent of digital camera owners still continue to use film products, said Andrew LaGuardia, spokesman for Fuji Photo Film U.S.A.

"Even as digital camera use continues to rise, we believe film will continue to play a profitable role at retail due to the consumer base of film users. These consumers are comfortable with film and film products and will continue to look to their local drug store for sales and photofinishing services," LaGuardia said

Another sign traditional film has not entirely gone by the wayside: one-time-use cameras were up 8.7 percent in unit sales for a total of $345.5 million in the drug channel, according to Information Resources Inc. data for the year ended Dec. 28.

And manufacturers are updating one-time-use cameras continuously. Fuji recently added four new designs to its QuickSnap disposable camera, including a Nascar-inspired series.