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The metamorphosis of photo.

NEW YORK -- A revolution in digital imaging, a new generation of in-store processing equipment and the steady growth of high-speed 35mm film all had a pronounced effect on the photography category last year.

Those involved in the segment agree that far-reaching changes in almost every area of photography have redefined the category.

The shifts have also helped drive increases in most parts of the photography business and promise to continue to produce forward momentum throughout the coming year. In 1999 chain drug store photo volume rose 3.7% to $3.27 billion.

At the same time, the changes have prompted many chain drug retailers to rethink the category with an eye toward generating incremental sales by capitalizing on the advances in technology.

Indeed, over the past year significant activity was seen in nearly every aspect of the photography category:

* Film Color 35mm film designed to render high-quality photos even in low-light or fast-action situations experienced a surge in popularity among consumers. The premium-price high-speed film segment helped offset price erosion in the more traditional varieties of 35mm film.

Overall, however, dollar volume growth in the film category was slowed by the increased availability of multipacks and other promotional efforts. In addition, many retailers have employed aggressive pricing on film as a means of driving their processing business and building store traffic.

* Single-use cameras. The ever-increasing variety of single-use cameras has been a key to the success of the photo category over the past year. Aside from encouraging consumers to take more pictures and spurring demand for processing services, the segment is credited with acquainting many consumers with the features of the Advanced Photo System (APS). Single-use cameras have also given drug chains a good opportunity to expand their store brand business in the category.

* Cameras. The downward trend in pricing in conventional 35mm cameras has significantly increased the universe of units likely to be sold at a chain drug store. For their part, manufacturers have incorporated packaging that thoroughly explains the benefits of their products while enabling retailers to merchandise the units on j-pegs.

* Processing. With in-store processing equipment becoming much easier to use and far more versatile, the barriers to installing minilabs are falling fast. Retailers say that aside from building category profits, the availability of in-store processing sends consumers a clear message that a chain is a destination for all their photo needs.

* Reprints. Of all the photo segments that are being fueled by the digital revolution, the "after-market" appears to be gaining the most steam. With the help of self-service kiosks and equipment designed to restore old, tattered photos, consumers are discovering a range of new options.

The segment thus far has enabled chain drug stores to realize incremental revenue for services that were virtually unheard of only a few years ago. For example, many consumers are now willing to pay extra to have their photos transferred to the Internet at the time of processing.

Overall, those involved in the category note, the flurry of activity made 1999 a watershed year in amateur photography, culminating in the highly anticipated countdown to an historic New Year's Eve celebration.

Among the highlights was a promotion by Eastman Kodak Co. that encouraged consumers to store images digitally and have them included in the company's PhotoQuilt of the Millennium. Consumers were also offered free copies of Life magazine's history of the 20th century presented on picture CDs in an effort to fuel interest in the fledgling format.

There is also speculation that the picture-taking activity associated with the arrival of the year 2000 may have represented an all-time peak for the category. In addition, it gave numerous consumers their first taste of digital imaging and many of the other new products and services available.

The challenge now for suppliers and retailers is to maintain that momentum. During the first weeks of this year Kodak announced that it is fully committed to gaining a leadership position in the emerging world of digital photography. During a press conference Kodak president and chief operating officer Dan Carp described digital imaging as a "treasure chest of picture possibilities."

For its part, Fuji Photo Film USA Inc. is aggressively promoting its "total imaging solutions" concept Through its. Aladdin Digital Picture Center and Digital Minilab Frontier the company is attempting to broaden the range of services available at retail.

The initiative is designed to give retailers the flexibility to offer reprints and photofinishing services to consumers regardless of whether their photos are on a regular roll of 35mm film, a floppy disk, a CD-ROM or virtually any other image recording format.

In general, those involved in the category maintain, the new technology-driven products and services that were rolled out over the past year are only the beginning of a revolution that will have a pronounced effect on the photo category.
                             Photography 1999
                   % of total  chain drug
                   photography   sales    % change
Category              sales      (000)    from 1998
TOTAL                100.0%    $3,268,845  + 3.7%
Film                  48.6%     1,588,659  + 4.1%
35mm                  28.5%       932,621  + 4.0%
Single-use cameras     9.9%       323,616  + 5.8%
APS                    5.8%       189,593  + 5.5%
Instant picture        4.4%       143,830  - 0.9%
Processing            40.8%     1,333,689  + 4.4%
Cameras                8.9%       290,927  + 1.4%
Flash                  1.7%        55,570  -11.9%
Source: Racher Press research.
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Publication:Chain Drug Review
Article Type:Brief Article
Geographic Code:1USA
Date:Mar 13, 2000
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