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Kodak

Kodak at a Crossroad: The Transition from Film-Based to Digital Photography



Traci Dawson-Butcher

1. What are the standout features of the photography equipment industry? How do economic characteristics differ between the film-based and digital segments?
The digital photography industry is fast-paced and crowded, offering razor thin profit margins. The photofinishing and retail camera industry includes about 8,000 locations with combined annual revenue of $7 billion. Ritz Camera Centers operates over 1,300 stores. The industry is concentrated: the 50 largest companies hold more than 60 percent of the market. A typical store has five employees and about $500,000 in annual revenue.
Competitive Landscape - Demand depends on consumer income. Profitability of individual companies is linked to marketing, and, for photofinishers, efficiency of operations. Large companies can have economies of scale in purchasing and operations. Small companies can compete successfully by offering superior service. The industry is fairly labor-intensive: annual revenue per employee is about $100,000.
Major competitors are big box retailers, like Wal-Mart and Target, and electronic superstores, such as Best Buy and Circuit City. Photo kiosks and mini-labs are also found in many major drugstore chains. Digital photography has had a major impact on the industry.
Products, Operations & Technology - Film processing and printing account for about 50 percent of industry revenue and the sales of cameras and film account for about 40 percent. Stores also offer repair services and sell related items like picture frames and albums. Photofinishing labs may provide direct retail services or may process films and images for other retailers.
A typical store occupies about 3,000 to 5,000 square feet and stocks 2,000 to 3,000 items, which are distributed from central warehouses of big companies. Smaller companies buy from distributors or directly from manufacturers. Many camera stores have...