Lemons? Make lemonade!

March 31, 2011: In the article from last issue in which we sought opinion about whether across-the-board price discounting a la Harveys and Big W was good for the industry, the input from readers was an invaluable reality check which our industry leaders would do well to take note of.

One of those readers, the ever-rational, always even-handed Stan Kessanis made a real attempt at a direct response to the question when he noted:

‘Discounting can never be considered good for the Photo Industry. It’s just a strategy that’s used to get short-term results. We are now seeing the long-term results of discounting. Diminished margins, less joy in selling.’

Another reader, Domenic Papalia, made the topical connection contrasting the key supplier to the photo discounters, and Fosters actions to protect the value of its brand in the face of loss-leading pricing by the teflon-coated ‘Colesworths’ retailing duopoly.

‘Fosters can refuse to supply outlets that devalue their product by selling it below cost. We should ask the people that supply the outlets that discount below cost what they are going to do.’

– Like your logic, Domenic, and in the original version of the story I wrote, ‘if Fujifilm was Fosters, the photo paper delivery trucks wouldn’t be calling on Harveys this week!’ – But then I had a last-minute case of cold feet and deleted the sentence, along with some observations comparing the pricing strategies of oriental rug retailers to some of our larger (I refuse to say ‘leading’) photo retailers. Hmm…those feet seem to have warmed up again!

Stuart Holmes’ shockingly shameless pitch for his smorgasbord of alternatives – from DNP paper and chemistry to Dakis online photo retailing software – also touched on this issue of brand value: ‘if you are offering the “Supermarket” brand paper [think he means Fujifim here] in the same old print wallets, out of the same old kiosks and software (or online cloud), out of the same machines – then you better be selling your prints at 9 cents!’

Stan Kessanis put his finger on an issue which was concerning a number of retailers – ‘less joy in selling’. What they find particularly galling is providing expertise and customer service to ‘customers who pick your brain and thank you for your excellent service and then buy it from the box movers just to save $10. And then come back in you store to ask, “How do I operate this camera?”‘ – Rob Sheffer.

But if there was one prevailing sentiment, I was a desire to no longer be given selling tips by people who haven’t seen the business side of a photo counter for years (if ever) but seem to think they are retailing experts. If I could capture it in one highly impolite sentence it would be:

– SPARE US THE ‘IF LIFE GIVES YOU LEMONS, MAKE LEMONADE’ NONSENSE!

Chris Bennett, for mine one of the best independent retailers going round, reflected this note of exasperation when he wrote: ‘I, as a successful photo specialist, am exhausted.

‘I`m sick of being patronised about all the opportunities we have to exploit as specialists and that we should just get on with it.

‘Here’s the reality: I have got on with and I have succeeded in maintaining a successful business. Having said that, I wouldn’t wish my intense workload on my enemies, and I have an exit strategy.’

– Hang on in there Chris! We need forthright, passionate retailers like you.

‘The Photo Man’ – non de plume for another of our better independents, agreed with Chris Bennett:

‘The few of us left who don`t have huge hardware businesses or incredible locations or amazing niches are sick of being told that all we need to do is be good to customers and expect them to be loyal. We are working our bums off with too few staff and too few days off. And there is no magic solution!…So let’s give up on the platitudes.’

Jim Schultz has given up on the business, sadly – one of many long-term photo retailing people who over the past two or three years have decided to cut their losses and move on in the face of the ongoing price vandalism.’We stand to lose $162,000. Where do I send the bill?’ He plaintively asks.

– Sorry to lose you, Jim, and to hear of your loss. Every specialist store that closes its doors diminishes us a viable channel. Brad suggested Jim send the bill to Gerry Harvey or Dave Marshall or the md of Big W. ‘So sad you have to close. How many will be left by the end of 2011?’ he asks.

Several readers speculate about the possibility that the majors, having gutted photo retailing of profitability, might lose interest and move on.

‘I expect when they [‘Gerry & Co’] start to have to cut corners to protect the bottom line, photo printing will go; it’s not their core business and loses money. One of their proprietors told me the Labs are very unpopular as they don`t see any net benefit in them,’ noted one of the two Davids contributing to the forum.

‘I say we should all just hang in there for a bit longer, and the market will sort itself out in our favour.’

– I have a sneaking suspicion he’s right – but I wouldn’t be asking Centrebet for the odds!

Stan K saw this possibility in a less positive light: ‘will the larger retailer make a decision to drop the category altogether if it doesn’t prove profitable over a longer term? If that happens, Specialty might win back these customers and experience a lift in trading. However, specialty turnover doesn`t match the large retailer levels, and the wholesaler will then feel the pinch.’

– ‘Serves ’em right,’ might be the response of some retailers, but just as we need strong specialty retailers to be a strong channel, the local suppliers have to turn a buck or we’ll be dealing with head offices in Singapore or Tokyo!

Peter Rose opened his response by noting, correctly, that, ‘Major retailers are expected to use price as a tactic. Always have,always will.’

Fair enough. That’s life in retailing, I guess. But what’s going on right now is like nothing we have experienced before. It’s dysfunctional competition. When he and I worked at Kodak, the lowest price for a 24-exposure roll through a minilab was a rock-bottom $9.99. (Generally courtesy of Richard Uechtritz’s retail group at the time, Kodak Express!) Most minilabs were asking $11.99 or 12.99. Take a very generous $2 off to cover the film processing component, and that leaves $8. Divide that by 24 exposures and it amounts to…33 cents per print! (And Brad, there were photo shops asking and getting $25, though I admit that’s a bit rich!)

Even $7.99 from the pharmacy done at wholesale amounts to 25 cents a print, with the $2 subtracted for film processing. QFL’s totallty rock bottom $5.99 – which ironically had the likes of Woolworths up in arms and demanding meetings with senior Kodak executives – leaves you with a per print price of 17 cents when we subtract $2 for film processing. Even that is almost double 9 cents!

And that was the pricing 10 years ago! It’s not as if the cost of paper, chemistry, rent and labour have fallen in the meantime. And if I recall correctly, there’s been a new impost called the GST introduced as well.

So this is not a ‘business-as-usual, you’ll-always-get-yer-price-cutters’ environment we are in at the moment. If it looks like a duck, etc, etc – then this is predatory pricing.

The glib mantra that ‘organisations who provide well-trained, friendly staff, who are willing to listen, provide customer solutions and become the local “picture place” will be well-supported by the majority of shoppers’ just doesn’t hold water when some of the brightest and best of our specialty retailers don’t even have an asset to sell when, exhausted, they finally throw in the towel.

– I doubt if it would wash with Jim Schultz right now.


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