The market’s being half-inched!

April 7, 2011: ‘I read Photo Counter’s ‘Lemons – Make Lemonade’ article with interest, having experienced some challenges in maintaining our grip on the market as one of NZ’s largest independent wholesale fulfillers (‘Digital Memories’) and online brands www.frogprints.co.nz‘, writes Ryder Senior…

While the Big W’s, Harveys and D Marshalls of this world continue to utilise loss-leader mentality as a way of attracting customers through their doors with giveaway-priced photos, and if the current best independent retailer businesses haven’t had enough of that, then they soon will, with the arrival of yet another virus to our market. Welcome to the margin-slashing, profit-gobbling, one-day-sales jockeys.

NZ, and I’m guessing its the same for Aussie, has been infected with a plethora of One-Day-Sale sites, all operating in a similar vein to the bulk retailers, only these are attacking us at the central nervous system.

If the profit on prints (certainly the smaller sizes of 6×4 & 5×7) has been eroded over the past five years and you’ve been relying on the margin products in your range, (eg, canvas and photo books) to pull you through each month, then expect the next wave of business closures. Canvas and gifts, (certainly some of our more profitable lines) are on the attack from this new ‘channel’.

The ironic part about this is, most of the companies providing access to these sort of ‘deals’ are the players themselves: Go figure – it’s like gnawing your arm off!

Sixty to eighty percent discount on a product is commercial suicide; there was never that level of fat to begin with.

One of New Zealand’s leading canvas print makers went out on a ‘Deal’ site last month offering canvas at well below cost, generating a whopping 4500 orders. Something similar happened on GrabOne in Australia not so long ago, with similar results.

What was this I asked myself: a loss-leader strategy; a customer acquisition strategy; a desperate measure to generate working capital? Surely not.

So it’s not only our photo prints being attacked now. If you are looking to create a quality online brand with customer loyalty (as is FrogPrints) then take a lesson out of my book: Stick to a point of difference other than price. It has a tendency to spit you out in the long term.

I find myself asking ‘Is a bargain hunter a prospective customer?’… Not in my books, and that’s something Harvey’s is now suffering from.

Going back to photo prints, I have never seen our two largest-selling sizes – being 6×4.5-inch and 4 x5.33-inch – sold cheaply at Big W or Harvey’s, ‘Why not?’, you may ask. Because they are not perceived as a commodity – yet.

Keep up your splendid , frank and honest overview of our industry.

– Ryder Senior
managing director,
www.frogprints.co.nz

COMMENT: We followed up with Ryder Senior on the demand for uncropped (6×4.5-inch rather than the standard and, when you think of it, sub-standard 6×4-inch size) and he confirmed that, ‘we print a great deal more of the digital sizes’ (ie, 6×4.5-inch and 5.3 x 4-inch).

‘The feedback was that customers simply didn’t want their images cropped to 6×4 (certainly if they didn’t have the ability to select the crop themselves). ‘Fit-In’ which is the other option, leaves white space on the sides of the image, which again looks unprofessional.’

– Could it be that that half-inch of extra print, marketed well, could be adopted as a ‘Unique Selling Proposition’ for independent retailers? Is it worth a try?