Strategy Session: HP–Cut the Cord and Grow Your Printing Profits

Strategy Session: HP–Cut the Cord and Grow Your Printing Profits

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Kalle Marsal, WW Director of Marketing and Product, Retail Publishing Solutions, HP, has a lot invested in the success of printing at retail. With the rise in digital sharing, the demise of the 4×6 print and so many new opportunities for people to create exciting end results at retail, I sat down with him to explore how retailers can once again get their customers involved and motivated about printing.

JG:
What do retailers have to do to drive printing profits in today’s “photo-sharing” environment?

Kalle Marsal: In a lot of ways, we must all change our mindset of where profits will be coming from in the future. Across the board, we are seeing the market value of photo prints declining, primarily from the pricing destruction of the 4×6 print all over the world. In places liked Australia, the volume is actually up, but the pricing is down. In the U.S., pricing is steady, but it’s so low that it’s difficult to make money.

The other issue was the rush to promote non-4×6 products. The initial quality of creative products was not that good, and the process was arduous. The products coming out of cheap laser printers were disappointing consumers, so initial early adopters were not turned into repeat purchasers and advocates.

We’re much better now; we have improved in areas such as automation and artificial intelligence that can help photo selection. For example, if you have 300 pictures that you’re choosing from, our software should be able to pick out the 50 best pictures for your choices and group them effectively. And there have also been improvements in the quality of the paper, the vibrancy of the colors, quality of the bindings in books and an expanded selection of themes and designs. So we are closer to where we should be.

So where is the opportunity?

We have to truly accept that the 4×6 print will no longer carry this industry. Most people in the industry subscribe to this notion, but not enough are acting accordingly. The shift is going to have to be to a portfolio of printed products that together will significantly drive volume and profit, and one that isn’t constrained by the investments and operating models focused on driving 4×6 prints.

We have seen significant growth in what we call “photo creative”—photo books, posters, calendars, cards and different kinds of wall art. And the growth is impressive.

We have some retailers who are experiencing from 10% to upward of 40% overall growth, as a chain, in value for their entire photo category. And, there’s evidence of a true shift away from the 4×6; we have retailers who are consistently doing more than 50% of their business in photo creative products.

What are successful retailers doing to move the needle?

I think it’s a combination of a number of things. Where we have seen the greatest shift is with retailers who have made a dramatic and complete shift and truly “cut the cord” from their dependency on the 4×6 print.

And it’s not just the print process itself. Those who are successful have taken the steps to shift over and optimize the design, layout and experience of their stores for the photo creative category. They’ve decided to not stay with their old equipment and just pump out 4×6 prints; instead they’ve set themselves up to really succeed with capabilities that are focused on the new offerings. 

Further, the successful retailers have shifted their marketing dollars and in-store merchandising to focus more prominently on driving awareness and sales of photo creative merchandise.

So really, we’ve seen the greatest success when retailers completely shift their identity from being a photofinisher to being a photo creative publisher.

So you’re urging retailers, in most cases, to shift their entire printing business model?

It’s a big leap. Many photo specialty folks have seen great results. We’re also seeing a lot of promising limited trials at several partners in Germany and the UK; they’ve tried it in five or 10 stores and now the challenge is to scale up to 50 stores. That’s where the risk comes in. As far as HP’s involvement, we’re willing to step in as much as the retailers will let us. 

What are some of the critical changes retailers must undertake?

Retailers need to curtail their dependence on 4×6 price promotions. They’ll have more success, and increase awareness of their new approach, if their marketing and messaging strategy is dominated by the photo creative products.

Also, customers need to understand how easy the process of creating a photo book or wall décor can be. Once they see it, the business will start to grow. Sales associates should be educated on the full portfolio of photo creative products (from photo books to wall décor), be able to identify consumers’ needs with PC products and demonstrate to consumers that the software does in fact provide an easy, intuitive and fun experience.

For example, we rolled out the HP Faux Canvas product in Walmart in November, and the effect it had on the store associates was impressive—not only in the photo department but in other departments as well. We had all of the photo folks make their own, and they were so proud they showed them off to others. And store managers said, “I want to make one, too,” and it created a buzz that carried over when they were talking it up.

How important is training in the equation?

Our research shows that 70% of customers want to create at home and submit online, and 77% want to pick it up in the store the same day. It’s a great opportunity for the local retailer to become a printing hub for customers—even though they are spending the creative time in their homes. But the store associate has to be an integral part of this. 

They need to be trained to suggest photo creative products to everyone who walks into the store, because every store customer is a potential printing customer. The responsibility of hiring and training the right staff and measuring the success of the store staff on their ability to move photo creative products is very important.

So, as a retailer, what’s my first move?

I would really take a step back and ask yourself if you’ve truly shifted your DNA from the mid-1990s photofinisher. Examine how you make your investments, how you hire and train your people and how you see yourself. Have you truly made that shift and really cut the cord? You have to look in the mirror to see if you have.

When people walk into your store or your department, does it feel different? Is it centered on photo creations? And have you made sure you’re offering great experiences end-to-end? Is it truly a new experience, or have you just put a Band-Aid on an old problem? And are your store associates proud that they are delivering an excellent experience, from creation to when the customer receives the product.

If the answer to any of those questions is no, then they should fix it. It can be incremental changes; some require intensive change. They may be sitting with photo kiosks and printing equipment that are first or second generation. They might spit out duplex pages that are cobbled together into a photo book, but that really isn’t an experience to be proud of.

Can they do it without a huge investment?

The baby steps path is very challenging in regard to seeing enough results, which may have been the initial downfall of the category. Things like adding a LaserJet printer or having central creation may not be enough. I understand why people do it, because the equipment may not be depreciated yet, and their consumables prices are low.

They should look at it as a new business opportunity. It’s getting over the inertia of making a firm leap into a new area. 

If they take a holistic approach to changing the way they do business—from equipment to training and their store environment—and most important to the products they now can create and promote, I believe they will soon see a return on their investment that will grow significantly over time. hp.com

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