Online grocery retailing may have a cloudy future, but the picture is clear when it comes to leveraging the Internet in digital photo processing. Retailers say that offering some form of digital photo finishing is an increasingly important component of having a photo center, and tying it into a Web site provides a convenience for customers and can help generate incremental revenues.
Many retailers are already steering their traditional photo-processing customers towards the Web to view digital versions of their prints. Analysts say the challenge for retailers is to drive more of those customers to convert those digital images into additional prints or other photo gift merchandise, such as mugs, mouse pads, calendars and T-shirts.
"One of the interesting things about digital imaging technology is that you can re-purpose those images," said Ron Glaz, research manager, IDC, Framingham, Mass. "You're not just limited to 3-by-5s and 4-by-6s. I believe that as digital technology becomes more prevalent, users will want to do more than just print them at home. They will want to make higher quality pictures, have them made into calendars and other things. If the infrastructure is available at retail, they will start using the retailers."
In a recent report, Glaz predicted that digital images printed at retail would increase to 41% of overall print volume by 2005, up from 6% in 2000. The rise will be driven by the proliferation of kiosks and the digitization of mini-labs, he said.
Although the supermarket channel lags behind its drug store and mass merchant rivals in photo finishing, some grocery companies have been aggressive in courting that business, and a few have begun to see the new opportunities being presented by digital photography and the Internet.
"We're definitely looking towards some form of digital-imaging capability interlinked with our Web page," said one nonfoods category manager at a large regional grocery chain. "It's the wave of the future." She asked not to be identified.
She said the chain has been evaluating various vendors to provide this service. The company currently has one-hour photo labs in 41 stores, and has drop-boxes for overnight photo processing in every location. The 41 stores that have one-hour photo labs also feature Picture Maker kiosks from Eastman Kodak, Rochester, N.Y., that allow customers to make enlargements, reprints or prints from digital media in a self-service environment.
"We have updated Fuji machinery [for in-store photo processing], so our one-hour machinery is up to date with anything that is out there," she said. She said having the ability to make prints from digital images would "compete the circle" of the chain's offerings.
Digital cameras accounted for 18.3% of all camera purchases in 2000, according to the Photo Marketing Association, Jackson, Miss., up from 1.7% in 1997, and an increasing amount of traditional film is being uploaded to the Internet in the form of digital imaging.
Some people in the industry see an opportunity in that trend for consumers to use the Web for photo-related e-commerce. About 14% of households that own a computer and have Internet access have used Internet photo services, the PMA reported in its 2001 U.S. Consumer Photo Buying report, released in June.
Consumers who use supermarkets for their photo-processing needs are less likely to order prints from the Internet than the average consumer is, however, according to the survey. While an average of 4% of the consumers who have Internet access at home have used the Web to order prints, only 1.7% of consumers who get their film processing done in supermarkets have logged on to order prints.
"Basically that means there's a lot of room to grow there," said Gary Pageau, associate publisher, editorial, at the PMA.
With printer makers like Epson and Hewlett Packard touting their ability to print high-quality images at home, retailers have their work cut out for them in trying to convince consumers to buy prints from retailers using their home computers.
Supermarket retailers have been steering their traditional photo-processing customers toward the Web, however. Shaw's, East Bridgewater, Mass., for example, offers to post its customers' images on the Konica OnLine Photo Center for $5.99 or on a floppy disc for $4.99 when they pay for traditional film development.
"We've been doing that for about three years, so it must be working," said Bernard Rogan, spokesman, Shaw's.
Wegmans, Rochester, N.Y., offers to post customers' images from traditional film on Kodak PhotoNet Online. One store in New Jersey charges as little as $6.99 to both develop a 24-exposure roll of prints and post the digital images online.
Safeway, Pleasanton, Calif., advertised in at least one Denver newspaper this summer a similar service connected with America Online. For $5.95 plus the price of prints, Safeway offered to upload customers' images to AOL's "You've Got Pictures" Web site.
Drug store chain Rite Aid, Camp Hill, Pa., offers to post customers' photos online for $3 or burn them onto a compact disk for $6.
"You'll see a lot of that on a trial basis this year," said Pageau. "It's fairly affordable. You can get a CD back for $6 or $7 with your images on it, and it's just a matter of checking another box on your form."
Ever the low-price leader, Wal-Mart, Bentonville, Ark., last month launched a promotion in which it included digital conversion in the price of a disposable camera.
"The idea is to introduce the customers who may not have done this before to the advantages of online," said Cynthia Lin, a Wal-Mart spokeswoman.
The camera, priced at $6.84, is being promoted with large, in-store displays, she said. The retailer uploads the images to the Walmart.com Photo Center when customers bring in the camera to be developed. Then, when customers come in to pick up their prints, they are also given a certificate that enables them to access the digital images online.
Once they access the Photo Center from their computers, they can order pictures and customize photos on the site, e-mail images to friends and relatives, or order photo gifts like T-shirts or coffee mugs with personal images on them.
In fact, people in the industry say the sale of auxiliary photo gift merchandise is getting a boost from the advent of digital imaging.
"In general we run something over 10% revenue from gift items, and I think it's certainly up above that in the Christmas season," said Mark Waldin, vice president of sales and marketing, PhotoAccess.com, Seattle, which offers a turnkey online photo-processing service for retailers.
"Those kind of novelties are always fun," said the nonfoods category manager. "Having the ability to sit in the comfort of your own home and do that" makes it much easier than ordering such merchandise using traditional prints.
Although some analysts see digital-imaging technologies evolving to the point where photo developing will become completely self-service, many in the industry say customers still need a lot of hand-holding.
"My feeling is that type of business really lends itself to a service area, because pictures are very near and dear to our hearts," said one general merchandise buyer at a chain in Northern California. "Even sometimes dropping your film into the big black hole in the merchandiser doesn't really give them a high level of comfort, so I think the service level of that business is really important, especially when you start delving into uploads and downloads from the Internet and digital services."
