THE KIOSK DESK

[Anonymous]

 The kiosk desk
: May 05
This past holiday season in the US
was a merry one for printer manufacturers. As families transitioned from
traditional 35mm cameras to digital cameras, they sought ways to print these
digital images. US retailers were well aware of this trend. Three of the top
five best-selling personal colour printers were sold as part of bundles during
that week. These bundles included such items as PCs, digital cameras, paper and
flash memory. Approximately 5 per cent of all the rebate promotions for personal
colour printers during the holiday season were for PCs; 14 per cent of these
promotions bundled digital cameras.

Bundles were a major focus of
retailers in the consumer electronic superstore (CESS) channel during the
holiday season. Best Buy, Circuit City and CompUSA reflected this trend. The
more business-oriented office superstores such as Office Depot and Staples
focused more on instant savings promotions, but supported the photo printer
craze nonetheless.

Personal colour printer sales have boosted revenue
for printer manufacturers while providing consumers with the convenience of
printing pictures whenever they want. Even though printing these pictures on
older inkjet models can cost $1 or more per
page when the prices of cartridges and paper are factored in, most consumers
have been blissfully unaware of the actual expenses involved in the process.
Given their dominant market share, Hewlett-Packard (HP), Epson and Canon have
been the major beneficiaries of this trend because it is predominately their
customers who have been purchasing high margin printing supplies.

For
manufacturers, it was just too good a situation to last. Retailers such as
RadioShack, CVS and Rite Aid have begun adding printing kiosks. Customers can
use their digital camera memory cards to print professional-quality pictures at
prices as low as $0.24 per picture.

That’s a blow to printer
manufacturers because, ironically, the people who use US kiosks are the
financially savvy ones who could best afford the price of a new printer or the
cost of printing digital images on their current inkjet or photo printers. A close look at the
results of MetaFacts’ 2004 Technology User Profile report reveals the following:

• Kiosks are a family affair. Around three-quarters (73 per cent) of
users are married.

• Game players and users of MP3 players use kiosks in
disproportionate numbers – double the national rate.

• Women,
particularly those between 20 and 29, use kiosks at a 30 per cent higher rate
than their population would predict.

• Kiosks are not the province of
the poor. While people with household incomes of $75,000 or more comprise 25 per
cent of US home PC households, they constitute 36 per cent of households using
kiosks. A subgroup with household incomes of $150,000 or more uses kiosks at
twice the national average.

Retailers want this affluent group’s
photography business because they want them in their stores. Wal-Mart and
Costco, as well as other chains, have another option for these upscale customers
who would rather not print out their own pictures, but don’t want to wait for
online services such as Shutterfly and Ofoto to mail back finished pictures. It
is possible to upload digital pictures to these companies’ websites then pick up
finished pictures at their brick-and-mortar stores within one hour. The price
per photo is very attractive. Recent promotions have seen the prices per photo
drop to $0.24 at Wal-Mart, $0.18 at Sam’s Club, and even $0.14 at Costco.

Capturing this group’s loyalty is even more important right now, given
the explosive growth of camera phone popularity. While it is one thing to save
and view these pictures, the rubber hits the road for printer manufacturers and
retailers when these customers decide they want prints of the photos. Yahoo!
reports that its Mobile Photos site gets the most traffic of any online photo
site. For people who don’t want to wait for pictures to be shipped back to them,
Fujifilm and Sprint have partnered to allow Sprint camera phone users to upload
their pictures via the latter’s Picture Mail service, then pick up finished
pictures at Fujifilm retail photo finishing locations. Kodak has gone a step
further by equipping its G3 family of photo printing kiosks to receive camera
phone images via Bluetooth wireless or infrared transmission. Customers in Asia
are already printing photo camera images on Kodak kiosks thanks to the company’s
long-standing partnership with Nokia.

Printer manufacturers have
countered retailer efforts to erode their customer bases by engaging in a very
public war of words. Epson fired the first round by advertising its PictureMate
printer at $0.29 per photo and HP responded at this year’s PMA tradeshow with a
bundle that brings the cost of photos down to $0.24 per picture. This approach
is self-defeating, and neither company will win. By focusing the customer’s
attention on cost per page rather than benefits such as convenience and absolute
control over what ink and paper are used for
quality prints, the printer manufacturers have waged a war on terrain that is
far more favourable for retailers.

Imagine Wal-Mart’s delight in being
able to ignore questions about quality and be able to focus on just the cost, an
area where it knows it can win. With its sheer volume, Wal-Mart can wring out
concessions from film processing partners and paper suppliers to keep lowering
its prices. Film processing represented only about 2 per cent of Wal-Mart’s
store revenue this past year, while printing accounted for around 75 per cent of
HP’s revenue.

As HP and Epson look for cheaper sources of paper and ways
of re-engineering their printers to be more cost-effective, even decreasing the
size of print cartridges to save on ink, they
face a no-win situation. Lowering prices to stay competitive with Wal-Mart and
Costco hurts their bottom line profits far more than it hurts the retailers
which can count on impulse buying by customers, lured into their stores by cheap
photo processing prices. What printer manufacturers should do is focus on the
following:

• Photo finishers do not routinely remove problems such as
red eye. They should improve their free editing tools to give unsophisticated
users an easier way to improve the quality of the printed photos. They should
also emphasise that no one is in line behind them impatiently urging them to
hurry (as might be the case at a kiosk).

• Accelerate the offering of
wireless interfaces for photo camera printing and mount an extensive education
campaign to show how easy it is to do.

• Printing a picture at home
means total control over the type of ink and
quality of paper used.

• Focus on longevity. Smaller retailers tend to
use dye-sub machines that have very poor image permanence (as low as five to
seven years for some, according to Wilhelm Imaging Research).

• Focus on
the environment. Large volume retailers like Costco or Sam’s Club tend to use
silver halide-based printing techniques. While longevity is good (50 to 60
years), the process produces hazardous waste water

• Focus on
convenience. You can print at any time – including the middle of the night.

For the long term, it appears that printer manufacturers are fighting a
losing battle, and the only question is how much they can slow their rate of
customer attrition when it comes to printing photos outside the home. IDC
seconds Current Analysis’ view and, in fact, forecasts a drop in home photo
printing from 69 per cent this year to 42 per cent in 2007. Keep in mind that
the overall photo printing market will be far larger in 2007 because camera
phones and digital cameras are both likely to be ubiquitous.

Perhaps the
most likely scenario is that consumers will have far more options and be far
more selective when it comes to photo printing than they are today. When it
comes to printing dozens of pictures for an event such as a wedding, where it is
impossible to determine which pictures friends and relatives will want, an
online service where website visitors can select the specific photos they want
to print makes a lot of sense. However, for the majority of situations,
uploading pictures before heading to a major retailer is likely to become part
of the normal shopping process for many people.

Finally, there will
always be occasions when people will want to print out a few pictures from their
digital cameras and camera phones immediately in order to show people, and that
situation will always favour the home printer. The degree with which printer
manufacturers can turn their customers’ attention away from cost per page and
toward quality and immediacy will determine how much they can slow retailers’
inevitable advance toward photo printing dominance.

[Author]

May 12, 2005 at 11:13 AM