Digital is Killing the Photo Industry!

My Pessimistic Ponderings on the Photo Industry in General

I recently chose to downsize dramatically the retail photo department at Gene Taylor’s. This was not an easy decision, but one based on many factors. While we will remain to operate a photo lab, and sell just point and shoot cameras, this also will come under scrutiny sometime in the future. The Taylor’s have had no influence on the decision directly, but supported the decision after I showed them what I’m about to tell you. You don’t just close a vibrant, active department with 40 years of history on a whim. Some of you who receive this email won’t know me. I’m Scott Parsons. I’ve worked at a large general sporting goods store for close to 22 years and have actively managed, purchased for, and hired and fired for a full-line photo retail department with a full-featured photo lab. I’ve dealt with manufacturers’ reps, CEOs of photo companies, and consulted with many other retail photo stores. I’ve been-there done-that in retail photo. During the early to mid ‘90s the photo and lab departments would generate close to 2 million dollars per year, sales have decreased steadily thereafter, and have really decreased with the introduction of digital cameras.
The photo department started at Gene Taylor’s in the early ‘60s with the arrival of Frank Bietz and his photo business. Gene and Frank thought (correctly it turns out) that a photo department would go along nicely with general sporting goods. If you are going to go fishing or camping or hunting you will need to take photos to keep the memories alive. Through the ‘60s and the ‘70s Frank and his department grew as the store grew. Tens of thousands of customers grew to love photography through Gene Taylor’s and Frank. In the early ‘80s we took on Gene Bruce as manager as Frank decided to retire. In 1983 Gene Taylor started building the 50,000 square foot store you know today. The grand opening was in July of 1984 and soon after that Gene Bruce installed the first of three successive photo labs. Regrettably, health problems forced Gene Bruce to leave the workplace and I was asked to take over in mid ‘85, just 10 months after the first lab was installed. The lab and retail grew and flourished through the amazing decades of the ‘80s and the ‘90s. A lot of inventions and innovations kept photography interesting and fun. Films became so much better with the business wars between Fuji and Kodak. Cameras became easier to use and much more accurate in flash and ambient exposure. Auto focus introduced in the late ‘80s started another wave of photography interest and also transformed the point-and-shoot camera market. Now everyone could take great looking photographs without knowing anything about the nuances of traditional photography. Those were great times to be in the business. Everyone needed a camera and then needed us to process the film for them. This was happening all over the country. Photo labs with small retails attached to them were popping up everywhere. And most were successful. Some grew into larger regional chains like Wolff’s, Ritz, Inkley’s, Camera Den, Waxman’s and others. Customers needed us for their films and processing and also the myriad of accessories available, especially for the more advanced photographers.
In the late ‘90s things began to change slowly, almost imperceptibly. A great consolidation was at work. Kodak and Fuji were purchasing small industries they felt could help them in their business wars. They also were busy building up large regional processing centers to keep up with the demand from the large grocery chains and big box stores. At this time photo labs were becoming very easy to operate and relatively inexpensive. So now any grocery store or big box store could install a photo lab and be reasonably successful with it even with inexperienced operators. As these larger chain stores started to become a player in the photo industry, Kodak and Fuji were tripping all over themselves vying for long term contracts for majority control of the lucrative processing and retail in each location. If you were a large retail store chain like a Wolff or Ritz, Kodak or Fuji would be on your doorstep to discuss how important it was to sign a contract, with very valuable bonuses and incentives. Eventually Kodak and Fuji became important monetary backers in Wolff’s and Ritz’s aggressive expansion plans. (By the way, Ritz, with Fuji’s help, won. By the end of the decade Wolff and Ritz had bought up a large amount of successful photo chains including Denver-based Waxman’s, Utah-based Inkley’s, and many east coast companies, and eventually Wolff was unable to keep pace and Ritz bought Wolff). So up through the end of the ‘90s photo retailers were generally happy. Our customers were very busy taking and sharing photographs and the photo industry was relatively strong.
During the later half of the ‘90s some of the manufacturers started to play around with a new concept. What if, they thought, we didn’t use film at all to hold an image but captured it electronically? What if the image was in a computer chip and not on film at all? And why should only photo stores sell the best stuff? The computer industry was hot and happening. Lots of dotcom companies were making millions of dollars and computers were everywhere. Dell computer, Gateway computer, Apple computer, Microsoft, Compaq, Hewlett-Packard, all these companies were doing very, very well. Selling and moving grey boxes filled with diodes and RAM chips allowed for huge profits. And everyone was selling these! Radio Shack, Office Max and Depot, even Sears and Circuit City, not to mention all those dotcoms. So now we have our business paradigm. These retailers and all the manufacturers realized that they could sell any product in any environment. Why not put computers in Radio Shacks? Why can’t Sears sell Compaq? And while we are at it, let’s try some of those new cameras. What are they? Digital? Sure, put them in and let’s try it. And what do you know. Because the consumer is now conditioned to seeing electronics in unusual places, the placement of digital cameras in these same places seems to make sense. And they sell! By the hundreds of millions!
OK, where are we now? Its mid 2003 and a great change is underway. It started in the late ‘90s and is gaining incredible momentum. It’s called digital, and it will irrevocably change the face of photo retailing. In the past the camera manufacturers would help small specialty camera retailers by letting us sell different products than you would find at BigBoxMart. Either it was completely different or maybe packaged in a kit form with case and battery or date back. But the manufacturers can no longer afford this game. They have shareholders and CEOs with golden parachutes to fund, so the new business model is to sell all the cameras as quickly as they can, and to whomever they can. No longer is the specialty dealer getting anything unique or different. We are all on the same playing field. Kind of. Because the small specialty dealer is just that, small, we cannot afford to purchase vast amounts of gear to bring the price down like BigBoxMart or Dotcom. So in order to compete at the price that the customer is finding, we drop our profit to sell that item. This eroding profit margin has already claimed thousands of specialty retailers around the country. In a 100 mile radius from Gene Taylor’s, I know of six closed specialty photo retailers and rumors of shaky ground on a few existing stores.
Now let’s look at it from the manufacturers’ perspective. They will invest literally tens of millions of dollars in research and development costs on a new product. Then comes manufacturing, shipping, and warehouse costs. Add to that advertising to tease and interest a prospective new customer. They also have other cameras in development coming soon to replace this very camera on the market now. So of course they are going to be very aggressive in the selling and marketing of this camera. The camera needs to move very quickly and in as many retail outlets as possible in order to sell out. Because version II is on the way, and they don’t wish to have any version I left over. So now we don’t just have a specialty retailer competing with BigBoxMartCityMaxDepot, they are starting to have to compete with each other. Who can sell the most at the lowest prices? While this is generally OK with most consumers who don’t need clerk service, it eventually also means that if BigBoxMart continues to sell this camera at such a low profit margin, then they also will discontinue carrying the camera. Even they have limits, however low. So the manufacturers have entered a one-way street. Try to sell lots of cameras to anyone they can, watch their name-brand become synonymous with low-service, low price discounters, and then not have any specialty photo retailers left to go back to when they realize the error of this marketing model.
Ok, lets try a sporting goods analogy. If you are a skier you’ve seen a dramatic change in the tools you use. Skis have changed overall shape and have become easier to use. You cannot purchase ‘straight’ skis anymore. Also more than one half of the skiing industry has changed to snowboarding, which didn’t even exist a few years ago. If you fish you have seen changes in line technologies, rod and reel technologies and also lure sciences. Lures are coming pre-saturated with pheromones and other attractants to aid you. What about shooting sports? Rifle cartridges are continually being experimented with. Hand gunners are big on reloading and playing with ‘wildcat’ powder and bullet combinations. All of these industries are continually changing, but all of these new ‘tools’ still require an ongoing revenue stream. Skiers still need lift tickets and clothing. Fisherman still require new line yearly and new lures. Gun enthusiasts still purchase ammo and reloading supplies. Only in the photo industry are we promoting a line of products that require little or no future ongoing purchases. Once the photo industry reaches that magic saturation point where a majority of users are digital, then what? Paper and ink supplies alone won’t pay the light bill.
Digital cameras are neat little self-contained bundles. Customers love the size and immediacy of the images and generally are ready for the time needed for home printing. For those customers with no interest in dealing with the home computer or the time allotment needed to be a home photo lab, their option is to visit one of the many digital photo labs in place at any grocery store, BigBoxMart or gas station and get cheap prints made, maybe as low as 39,29 or 19 cents each. Digital cameras do not need many accessories after the sale. A memory card perhaps, a battery or two, but that’s it. No continuing film or processing sales. No long-term commitments. Done. Finis. The photo manufacturers have cut our own collective throats. The ubiquity of product is killing the specialty shops. And the manufacturers don’t care. Why should they? Right now the money is in the hands of the discount stores. So the manufacturers are doing all in their power to get their share. Camera whores. Get it while we got it. Cheap.
This trend obviously scares me. While I know that Gene Taylor’s Sports will be fine and stable in the future, I have doubts about the photo industry in general. When photo specialty stores close a great source of knowledge and expertise leaves with it. Tricks and techniques learned over decades are disappearing. Who will be left to teach traditional darkroom techniques? Who will be left to fully explain the delicate balancing act between shutter and aperture? Where is the art and romance of photography going? At what cost is the loss of all this? When will the manufacturers realize that by turning their back to the specialty store they are also constricting their own futures? No one will be left to explain, to teach, to help, to counsel. And the manufacturers will be left looking over their shoulders at their own ignorance. That rushing sound in you ears is the future coming at you. Which way will you move? -Scott Parsons-