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AnonymousInactiveConsumers Behaving Badly: Kiosks, One-Hour Pickup & the
Threat to Printer ManufacturersMarch , 2005
This past holiday season was a merry one for printer manufacturers. Current
Analysis data demonstrated printer sales were up 7.1% this past Black Friday
week compared to the same period in 2003. As families transitioned from
traditional 35mm cameras to digital cameras, they sought ways to print these
digital images. Retailers were well aware of this trend. Three of the top five
best-selling personal color 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% of all the rebate promotions for personal color
printers during the holiday season were for PCs; 14% 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 color 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, 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 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%) 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% 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% of U.S. home PC
households, they constitute 36% 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’ Web sites 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 photofinishing 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
favorable 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 that 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% of Wal-Mart’s store revenue this past year,
while printing accounted for around 75% 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 who 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 emphasize 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 used and the quality of the 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 in the middle of
the night or early in the morning if you want.
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% this year to 42% 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 Web site
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 favor 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.
- Kiosks are a family affair. Around three-quarters
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AuthorMarch 13, 2005 at 10:28 AM
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