Drug chains retain the lead in competitive photo market

Drug Store News, June 18, 1990

Drug chains retain the lead in competitive photo market

The photo department remains a competitive battleground, with stand-alone one-hour developing labs carving out a huge chunk of the lucrative photoprocessing market and supermarkets and discount stores coming on strong. In fact, drug stores have given ground to all three competitors in recent years while retaining a slim lead in number of rolls processed, according to the most recent research from the Photo Marketing Association.

The PMA shows the drug channel with 23.8 percent of the total market for rolls of film processed at retail in 1988, the latest year for which figures are available. Stand-alone minilabs remained in second place with 21.1 percent--a remarkable feat for a channel of trade that began the decade virtually at ground zero.

For drug stores and minilabs, however, those numbers mark a slight decline from the previous year. They also represent a concession of sorts to supermarkets and discounters, both of which made market share gains in the same period.

The market for film has also been roiled somewhat by intense trade channel competition and by recent price hikes from the major manufacturers. Supermarkets continue to squeeze drug chains for the business with their one-stop shopping efforts, while rising film supply prices have forced retailers into new decisions. Manufacturers pushed up the price of their rolls to help recover from last year's cutthroat competition, and retailers have had to choose between passing along the higher prices and risking a loss of business, and swallowing some or all of the higher cost and watching margins shrink. Most chains seem to have done a little of both.

Despite these headaches, however, the photo department continues to earn its keep as a major foundation of general merchandise retailing in the chain drug store. Photo processing remains a high-margin, traffic-building business, for all its competition, and film is still one of the fastest-turning products in the mix. In addition, cameras and flash accessories are small but profitable contributors to this mix.