The Distribution Channel Weighs In on the Future of Imaging Retail

The Distribution Channel Weighs In on the Future of Imaging Retail

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Q&A Provides Unique Insight From Middle Link on the Product-to-Consumer Chain

When discussing the full spectrum of what imaging distributors bring to retail today, it might be easier to talk about what they don’t do, as that list is far more manageable. Let’s see, there’s inventory tracking, warehouse shipping, marketing support, product training, trend spotting and product placement to name but a few of the roles today’s distributor plays within the product-to-consumer chain.

As we attempt to further examine the imaging distribution market in this issue we thought we’d do something a little different this year. Instead of asking the industry’s various distributors to provide their take on the current state of the imaging industry, we thought we’d get a little more specifi c this time around.

We asked each of the major imaging distributors to answer the three questions below. As you’ll see, the questions have been structured as to provide the distribution channel’s take on the more immediate future of imaging retail.

1- What do you see as the future profit drivers for imaging retailers in the next 3-5 years?

2- Where does the printed image fit within an age of fast, inexpensive digital delivery and storage systems?

3- What role will the distributor play within this mix for the imaging retailer as the retail landscape continues to change?

The Ever-Evolving Consumer

As the imaging landscape changes and imaging retail continues to morph into this more “experience-based” model, the role played by imaging distributors will undoubtedly only gain in importance. Today’s ever-evolving consumer will continue to drive much of the aforementioned change and the distribution channel is well positioned to track those changes and help retailers and manufacturers react to and profi t from them.

And just as these “hands-on” capabilities of today’s distributors are gaining steam, so too is the distribution channel’s value in cyberspace. Many imaging distributors are expanding their Web-based services to include complete online product catalogs, Internet training, 24-hour order placement, market forecasts and much more. In short, imaging distributors have truly put the “full” in full-service today.

Our Q&A

The answers to our three questions that follow provide an interesting look at the current state of imaging retail from the perspective of a channel that certainly has a large stake in where that future is headed. Thanks again to all of you who participated.

D&H Distributing:

Rob Eby, Director of Purchasing

1 – Expanding their accessories line-up would be a good place to start, since this is an extensive category that can provide add-on sales. Retailers should give courses on digital photography, editing, printing, and maybe some scrapbooking to help drive customers to give them the skills to do more with their photos.

2 – The print image will continue to be viable, but only for those photos that are really people’s favorites. Storage is great, but people love to share their memories with others in some concrete form. Helping them get to the point where they want to preserve or display a photo in print is key. This leads back to the idea of offering classes to teach people how to produce and print the best photos. Digital picture frames are another avenue for this. Retailers can help consumers fi nd the right mode of storage.

3 – As a distribution partner, it’s our goal to supply the best accessories and storage from our inventory, servicing the retailer as quickly and efficiently as possible, with little inventory exposure for them. This will allow them to increase selection and be more competitive with less risk.

Rothman:

Russell Rothman, Owner, Vice President

1 – The price erosion of digital imaging hardware offers the end user a greater opportunity to purchase products that incorporate higher megapixel specifi cations and increased zoom capabilities. The acceptance of these products along with the increased penetration DSLRs will lead to more printing as well as add-on sales possibilities of high margin accessories – lens, fi lters, etc. This will also translate into additional ink sales for digital printers as well as larger capacity, faster speed internal/ external storage devices.

2 – The printed image will continue on the up- trend as consumers explore the expanded uses of the many digital images they continue to capture. The popularity of “scrapbooking” and convenience of digital printing has consumers printing larger quantities of higher resolution images. End user demand for better printed images will continue to rise as the quality of these printed images contin- ues to improve and becomes easier to obtain.

3 – Distributors will continue to play a vital part with regards to the future success of imaging re- tailers. They will be able to offer expanded assort- ments, non stocking solutions and a wide range of complimentary product in an effort to improve overall profitability. Distributors’ flexibility and expertise in all facets of supply chain management and reverse logistics will continue to be valuable assets for their digital imaging retail partners.

Omega/Satter:

Mike Hullett, Executive VP

1 – It seems clear that the number one profi t driver has to become photo printing services, including prints, enlarge- ments, photo gifts, and photo books. However, the sales of profi table ac- cessories for digital cam- eras are more immediate and established. DSLRs offer the retailer the best accessory sale opportunities, so the popularity of DSLRs has helped. This answer also depends upon whom you consider to be an imaging retailer. The traditional independent camera store depended on photo fi nishing for profi t more than other kinds of retailers who have a camera department but are not specifi cally a camera store.

2- I personally feel that the printed image for con- sumers will never recover to the numbers that were enjoyed in the days of fi lm. The main reason for printing all your fi lm images is gone with the digital age, that is, to see the image initially. In order to see your fi lm images you had to have them printed. Now of course, you do not. But as consumers become more comfortable with utilizing retailer’s kiosks and Internet fi nishing sites, the numbers will rise, but not nearly to those previous levels. Consumers still want to print images to display in frames, and digital frames are not appropriate for all settings.

We know consumers are clearly taking more pic- tures than before, but are not printing them. Retail- ers and the companies that supply retailers have to fi nd ways to take advantage of the fact that so many more pictures are being taken. The digital frame business is a good example of this.

So I would say that there will certainly be a level of prints made at photo retailers that is higher than what they are getting now, but they cannot bank on the numbers being what they used to be.

3 – Distributors have to change with the times and offer products and services that fi t the new re- tail landscape. For instance, if retailers are empha- sizing Internet sales, then the distributor needs to provide services like imagery, and video clips and effective product descriptions for the retailer’s Web sites or auctions, and even develop products that are conducive to that type of selling.

It is also the responsibility of the distributor to pro- vide the retailer with accessory products that sell quick- ly and have high margins to help the retailer make up for the profi t they had lost on photofi nishing.

Gamla Enterprises:

Simon Douek, Vice President

1 – As we undergo our own version of “Moores Law” (more megapixels not more money), con- sumers will eventually hit a “critical mass” in terms of managing expectations from the classic entry-lev- el point and shoot “basic camera” and start looking for cameras with step up features such as more so- phisticated face detection, SLR-type feature sets and functionality, internal editing, image manipulation, etc. Making market performance accessible has al- ways helped maintain profi tability. Additionally the inevitable increase of megapixels will mean the need for larger memory cards as well as external storage devices – e.g., Terabyte drives. Also the need to dis- play images in a non-PC or e-mail platform (e.g., mobile/wireless devices) will mean an even greater increase in the sale of digital picture frames and other digital display devices from keychains to even wallets––especially as OLED type displays become more prevalent. In short, profi tability will be driven and maintained by accessories and add-ons as much as the actual cameras.

2 – While digital frames somewhat obviate the need for printed images (especially as frame sizes get larger and less expensive) there will always be a need for printed images, but when comparing inkjet printer output to online services – especially from a cost per page standpoint (sometimes 400% higher), the printed image vis a vis the personal inkjet print- er will only be used on an “as need basis” versus the more casual usage that’s common today.

3 – Customers will count on us more and more to act as a “fi rewall” in terms of “differentiating” products with real saleability and profi tability from products with little opportunity. The consolidation of categories and the demands for higher margins will be keeping retailers too preoccupied to follow the ever-changing landscape of technology retail- ing. At Gamla, our staff is constantly tracking in- novations and trends to see which have the most market potential – both on a niche and national level. Keeping our clients current with this infor- mation lets them focus on growing their business and is just one more reason why they value us as both a source and a resource.

Brandess Kalt Aetna Group, Inc. (BKA):

Barbara Brandess, CEO

1 – As it was with traditional (fi lm) photogra- phy, much of the future profi t and growth resides with accessories and con- sumables. Many of these straddle the worlds of both fi lm and digital im- aging, such as bags, back- drops and tripods; and many are specifi c to the photographer’s preferred method of shooting. The continued growth in sales of DSLRs has cre- ated a need for high quality maintenance of the product. Where we see signifi cant opportunities for our dealers are in items that protect their in- vestment and enhance ease of use. For example, sensor cleaning is an absolute necessity for anyone who changes lenses, and repeat sales are guaran- teed as essential fl uid and consumable products are used up. Memory cards are inexpensive but can be lost or damaged, so backup storage devices serve as critical protection for important work product. Consumables, such as ink and paper, will continue to be in demand. Finally, the diverse selection of bags and cases available insure secure portability of the equipment both at work and on the road. As always, accessories, such as lens cleaners, shutter releases, and camera straps will be essential add-on sales.

2 – Printed images are as vital, if not more so, than ever before. While it seems as if everyone has an electronic method of displaying their photographs in their pocket, the quality is not nearly as good as a printed copy. Photography is a visual, creative and artistic medium that calls out to be displayed; whether that is a formal portrait, an artfully dis- played still life or a simple snapshot of a family member. When using fi lm, the photographer had the option to develop all his negatives, but only the specifi c prints he wanted. Obviously that is true to- day – often the selection is made instantly after the shot is made!

But with digital photography, rather than nega- tives, the mode is electronic storage. The jury is still out on the long-term reliability of digital storage, whether in cyberspace, hard drives or CDs. Tech- nology changes in the blink of an eye; natural disas- ters and possible damages over time might destroy the memory saved electronically. A printed, high- quality copy of the photograph is one way to ensure the product does not disappear due to a technical failure of one kind or another.

3 – In many ways, the distributor’s role doesn’t change from the way we have always supported the retail market. Because distributors serve as a con- duit between a large number of suppliers, both in the United States and internationally, and an even larger number of dealers across the country, there is a great amount of information learned from mul- tiple sources. What works in one arena can often serve as a solution in another. A vendor’s question from California might be answered from a dealer in Arkansas. New trends and products can be intro- duced quickly and effectively and feedback can be gathered and shared. Our relationships with manu- facturing companies means we hear about new opportunities early and more frequently, and we can familiarize dealers with these prospects more effi ciently.

Retailers can test the waters by trying a small amount of a new product rather than the larger order required by a manufacturer or exporter. We minimize the number of shipments a dealer needs to receive by supplying a variety of merchandise within a single order. With the rapid changes in the world of photography and the economy today, this is an advantage that serves dealers well.

Almo:

Steve Bell, Vice President of Product Management

1 – The popularity of smaller digital SLRs will con- tinue to increase as their prices continue to decrease. Consequently, as they reach mainstream price points, digital SLR accessories will be a big margin opportuni- ty from lenses to fashion cases as the multicolor camera trend continues in the point & shoot market.

2 – The age of printed pic- tures will never go out of style, in my lifetime anyway. People still want printed images of the grandkids, children and pets for their wallets and purs- es, as well as scrapbooks which have been seeing a resurgence.

3 – Distributors will continue to play an impor- tant roll with both e-commerce and brick and mor- tar retailers. Not only does distribution give them “Line Expansion Fulfi llment” with a wider range of cameras and accessories, they act as a retailer’s warehouse, enabling them to operate more effi – ciently and cost effectively utilizing a just-in-time inventory model.

WYNIT:

Jay LaBarge, Vice President of Marketing and Product Management

1 – Digital imaging continues to expand beyond the realm of just digital cameras. More and more images are taken via cell phones. The popularity of viral networking sites like YouTube and MySpace drive interest in both digital images and video. As camera manufacturers devel- op DSLR products that appeal more to the general consumer, and fl ash memory continues to be faster, more affordable and larger in capacity, memory cards are becoming a storage medium, rather than just a transfer de- vice. More and more accessory items – bags, cases, lenses, tripods and so forth catering to digital im- aging, video and audio devices are reaching the market. Consequently, items such as DSLR cam- eras, digital camcorders, high-speed fl ash memory and accessory items will still provide profi t op- portunities. That being said, the key profi t driver for traditional imaging retailers will be their abil- ity to differentiate themselves from the Big Box stores and On-line sources. They must leverage their expertise and service offerings to continually expand a loyal customer base. Successful retail- ers will increase store traffi c and create a ‘sense of community’ by staging in-store workshops on key areas of customer interest. These can range from the basics of cropping and re-sizing digital images, to ‘master classes’ with experts working with the latest technologies. The addition or expansion of large format printing services will also drive prof- itability. While many customers can print 4×6 im- ages at home, there is a growing market for 8×10, 11×14 and larger prints professionally produced and framed by their trusted retailer.

2 – The main driver for printing images con- tinues to be the consumer’s need or desire for an actual hard copy image. With the decreased cost and increased availability of digital delivery and storage options consumers are no longer feeling the pressure to print their images or lose them. Film always had a limited shelf life, plus a longer process to go from image to print. Flash memory and disk storage are much more reliable and im- age-to-print processing is now so easy, and readily available. Consumers will continue to store their images and retrieve them as needed. A real oppor- tunity exists for retailers to expand add-on sales in storage and back-up peripherals. Many consumers never think about how and where they store their digital images. A “Your Memories Are At Risk” sign in the window can start a conversation leading to expanded sales of memory cards, external drives, and disc duplication add-ons.

3 – Distributors will continue to be pivotal in bringing consistent technologies and product of- ferings from a variety of manufacturers to mar- ket. They will do the legwork required to source, acquire and make these items available to their dealers. With the continued evolution of digital imaging technologies and associated products the distributor role expands to more than just ware- housing. Distributors will continue to evolve as consultants, aggregators, drop-ship fulfi llment specialists, manufacturer-customer liaisons and experts in their respective markets; all skills which retailers can utilize to help grow their business.

Liberty Photo Products:

Garry Green, President

1-Liberty has established a new category we call “lifestyle photo prod- ucts,” that we think is a significant profit driver. The idea is to offer printing options that addresses a consumer’s growing need for self-expression through personal photographic compositions and the lifestyle photo products that result. This moves the industry past the “gifting” aspect of “a square image on a white t-shirt” and into new options that will provide the retailers an abundance of ways to generate higher profit margins and new revenue streams.

These “storytelling” lifestyle photo products include DVDs, CDs, wide format collage-posters, photo books, fashion forward apparel, calendars, greeting cards, jewelry, professional photo printing and much more. Products that you would find in a high-end boutique are now available for consumers to create themselves to further personalize and express their lives.

The continuing trend will have lab equipment shrinking, opening up more available space on the lab floor. Moving forward, the lab can maximize and leverage the profi t per square foot of occupied real estate by delivering high quality lifestyle photo products, and other services. This not only improves revenues, but it also encourages consumers to return to their favorite kiosk for these products—improving brand loyalty.

Interesting products and services designed to in- crease the revenue per square foot may also include a Community Print Location (CPL) service center, where labs can provide mobile printing services to their wireless consumers. Like a mini print shop, CPL lets consumers leverage any means to print, whether they are on-site and send the file for print from any device on-hand or on the road and send their files to a specific retail location to eventually pick up. Consumers can print virtually any file—including Word documents, PowerPoint, Excel documents—from any wireless device—PC, laptop, or wireless handheld, such as a cell phone or PDA to a Community Print Location. The lab can also use the equipment solutions on hand to supply binding and high end printing to fully package presentations that might be sent through the CPL.

2-The consumer awareness of personalized photo products is rapidly increasing as major retail chains promote this as an added value service. Add to that the availability of low cost digital cameras and flash memory, and higher resolution camera phones, and there are more photo images circulating than ever before. This is creating new demands for products that help with storytelling using these images, and for the lab, creates an amazing opportunity to up-sell consumers into these higher priced photo lifestyle products. In this current era of digital photography consumers are printing differently, not less, and they require new products and ways of preserving and sharing their images.

This trend in personalized lifestyle printing delivers new revenue generating business models for labs way beyond the 4×6 photofinishing model ever offered.

What is needed is a systemized packaged approach to creating these new “lifestyle photo products” that can help the lab increase profitability per square foot while enhancing the consumer experience of photo storytelling and self expression, ultimately providing the opportunity to print more high revenue products.

3-The distributor that is continuing to improve its sourcing and logistics expertise, while delivering a creative vision of new products and services, will become the driver of these new trends and thus a key partner for the labs. Our ongoing commitment as a distributor, is to proactively deliver unique equipment and packaged solutions; everything from wide format printers, and sophisticated high end photo book binding to kiosks and “fashion statement” photo printing. An important factor is to also offer a value chain of equipment solutions that are smaller in footprint, more cost effective and work together as a whole solution, supporting the creation of much needed new revenue streams.

We think an advanced logistics and sourcing platform, efficient delivery and warehousing systems, advanced ERP solutions tied into report-focused e-commerce Web sites (not to mention strong inhouse expertise), will enable the distributor to create the next generation of best-in-class products. The distributor then becomes the driver of new trends in lifestyle photo products.

New Age Electronics:

Fred Towns, Senior Vice President

1 – The real driver is being able to get back to consul tive selling. We should look to advise the customer, as the knowledge expert, on all of the opportunities a product can offer, along with the breadth of other extensions that can bring value to that product. Today, when a customer is looking to purchase a camera, there are likely a number of features they simply won’t use. However, if you can show them one or two key features that will excite them based on the type of photography they typically do, the customer will value your ideas and solutions. By engaging in consultative selling, your product recommendations will more naturally be on point, whether you’re offering a high-power zoom or optimal stabilization.

2 – Even in today’s highly digital marketplace, we’re finding that consumers still like the immediate gratification a printed image can provide in certain scenarios. For example, my daughter recently went rock climbing with her friends for her birthday party and some of the kids did not want to brave the climb. Instead, they stayed on the ground and took pictures and still had a great time. We printed the photos on the spot and that immediate satisfaction is still a thrill. Friends left the party with their pictures in-hand as mementos and some even sent them back as thank you cards. Many times, when we look at how we do things today, this new technology gives us the flexibility to do it, change it, manipulate it, and physically have it extremely fast.

3 – One of the key roles is showing the retailer how we can enhance their ability to make margins on their sales floors today. We help them compete by guiding them in solutions that will help them turn their inventory and keep it fresh. We also provide retailers with a variety of ideas about other solution sets we can offer that will enable them to have webbed resources. This often includes enabling them to do job fulfillment and sending the product to the customer, or guiding them on how to run a Web site and properly manage it.

The other key is to make sure imaging retailers understand the latest and greatest in features as they relate to the products. We can help them understand product roadmaps and better anticipate changes, essentially guiding them so that they are in the game competing on even ground with big box stores from a solutions standpoint. We can also advise them on the right time to aggressively promote and move dated product to help avoid stale inventory.

Argraph:

Mark Roth, President

1 – Three words: ACCESSORIES! ACCESSORIES! ACCESSORIES! The tremendous growth of Digital SLRs offers re tailers multiple profit op portunities through add-on accessory sales. Every digital camera you sell should include accesso ries. Start with the usual suspects such as filters—especially the new Digital High Grade Filters and macro lenses made specifically for digital cameras. Then add the digital-specific needs: extra memory cards, a card reader, rechargeable batteries, power grip and charger. Sell “digital darkroom” products such as inkjet printers, ink and paper to customers who want to print their own images. And finally, sell new accessories designed specifically for digital photography.

For example, the Zigview Digital Angle Viewfinder – winner of the DIMA Innovative Digital Product Award – makes low angle and overhead photography easy with its unique rotating live-view LCD monitor. The Zigview also provides interval and motion sensor firing, and other unique functions that enable photographers to take pictures with their Digital SLRs that they could never take before.

Color-calibration tools such as QP cards and Pantone hueys, simplify correct color balance. Infrared Remote Releases such as the Twin1, vastly extend the creative range of DSLR users. Argraph introduced many of these high-profit accessories in just the last 3-5 years. We have many more coming in the next year, and even more that we can’t even predict in the next 5 years.

2- While the majority of digital images are not printed, the printed image continues to be important as a lasting record of an event. Retail printing is still the easiest, best quality-for-price option for people with lots of pictures from events, vacations, etc. As memory card prices continue to drop, they become true digital film that can serve as permanent storage.

3 – We will continue to be the one-stop source for the high-profit, high-volume products retailers need to prosper. Now, more than ever, dealers rely on distributors like Argraph to be their warehouse with fast, complete shipping that minimizes their inventory and maximizes their cash flow. We will continue our 55-year tradition of introducing new products while continuing to offer the “old reliables”. Our sales team, both in-house and on the street, are ready to alert retailers to new trends, take care of their needs, and demonstrate new products.

International Supplies:

MDoug Pirc, Gher

1 – Specialization and innovation will be very important for imaging retailers in the next 3 5 years. While the mass merchants introduce the latest and greatest from the manufacturers, it will be increasingly important for the imaging retailers to distinguish themselves as experts and to offer the many accessories that the mass merchants fail to offer. It will be necessary for many of the retailers to specialize, rather than try to be all things to all customers. There will always be opportunities for retailers that remain nimble and stay ahead of the rest. Unfortunately, many independent retailers simply wait for customers to find them. The successful ones will innovate and go out seeking new customers while taking very good care of existing ones. The one thing that is certain is that technologies will change. Retailers need to change as well.

2 – The printed image will always have a strong presence, as people are visual and the printed image is lasting, while inexpensive digital forms of delivery are not. There is certainly a place for inexpensive, fast images, particularly in the areas of news and surveillance, etc. However, people will always prefer a quality printed image. Printed images are perceived as permanent, while the rest are fleeting.

3 – The distributor will play an ever-increasing role in serving the imaging retailer. As manufacturers downsize and/or streamline their processes of going to market, they will rely increasingly on distributors to get the products to the retailers. Some distributors, serving primarily as logistics firms, will assume more of the responsibility of delivering products for the largest manufacturers. Other distributors will focus on delivering value added products that allow imaging retailers to compete with the mass merchants. These distributors will increasingly strive to find new innovative products and services to offer the imaging retailers, while the retailers concentrate on running their businesses. The role of the distribu- tor will become ever more important to the manufacturer and the customer.

DBL Distributing:

Tim Coakley, Senior Vice President of Merchandising

1 – Digital SLRs will be a tremendous profi t opportunity for photo retailers over the next few years. With the addition of accessories, retailers have a chance to multiply the sale, resulting in a large profit opportunity. Retailers will be able to sell all the high margin acces- sories like lenses, cases, media, cleaning supplies and other high margin products. Additionally, digital photo frames have evolved into a large profi t opportunity. With the second-generation product emerging, the frames boast a clearer picture and are offered in various large screen sizes.

2 – The future of the print imaging business will decrease over time with the introduction of digital frames. Digital frames have become a very popular method of image sharing with all generations of consumers. Other popular modes of image sharing are through smart phones, iPods and HDTVs. These digital delivery systems will put increased pressure on the downtrending printed image business. While consumers will still want to print those “special photos,” the demand will be less and less over time.

3 -The distributor will play a critical role in the future of photo imaging retailing. Distributors offer unique services to photo retailers, which help maximize their profi ts. For example, DBL offers one-stop shopping – we will have everything in stock for immediate delivery, eliminating the need for too much retail inventory. Photo retailers can utilize DBL as their own personal warehouse – they can purchase just enough stock and replenish later.

We are also known for carrying the most in- novative and new technology before anyone else. With our extensive list of quality photo imaging manufacturers, we always carry the newest tech- nology from the most compelling manufacturers. We believe our large assortment of products pro- vides our customers with ample choices to react to their customer’s special needs. In addition, retailers can also take advantage of purchasing the right products in this quickly changing marketplace.

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