F22 U S Retail Output Review 12.11

U.S. Retail Photo Output 2010-2015

Confidential Property of [F/22] Consulting, Inc. - 2010

Situation Analysis

• Conventional print volume (film + digital) and category revenue continues to fall and that fall has accelerated in 2011.

• Walmart Stores, which enjoyed share dominance for numerous years, has slipped from the top position, with promotional drug chains Walgreens and CVS gaining share.

• Personalized printed output continues to be the on-demand print category growth engine for retailers and photo merchandise delivered to store or home continue to show substantial growth potential.

• Kiosk prints as a % of total prints will grow as retailers increasingly turn to lower-cost, lower-touch print solutions even as consumers opt for instant gratification.

2 PAGE 2 Confidential Property of [F/22] Consulting, Inc. - 2010 Retail Photo Output – 2009-2014

Situation Analysis - 2

• Seasonal demand spikes are a significant and increasing challenge for retailers as demand shifts from everyday conventional print demand to personalized products, with primary demand concentrated from mid-November through late-December.

• With an increasing number of retailers (especially regional chains) abandoning or likely to abandon in-store printing services the smaller pie of revenue will be shared by a few committed retailers (esp. CVS and Walgreens).

• There are significant barriers to growth of photo output revenue for retailers. These include: a) alternative output options such as strong B2C online photo retailers such as Shutterfly, Snapfish, Kodak Gallery, Picaboo, MyPublisher, Blurb, and even Apple, b) significant purchase friction at different points of contact such as poor architecture of online and kiosk create and order experiences, c) rapidly changing consumer imaging behavior…especially the adoption of Facebook as the primary photo sharing choice and the adoption of mobile devices as primary image capture devices for many households (can an will be an advantage if addressed successfully).


What’s Dragging Revenue Down?

Consumer Adaptation

Institutional Failure


•From Selective Printing to “no printing” •From Email & Photo Sites to Social Media (esp. Facebook , Flickr, Picasa Web Albums, Smugmug, etc.) •From DSC to Cameraphones, Smartphones and Tablets. •From Still Images to Short-Form Video

• DSC’s that provide complexities and no connected solutions.

• Unnecessarily “bloated” image file size.

• Retailer retreat (capital, labor, space, advertising)

• No vendor partners driving awareness and demand for the category

• Far too many unnecessary friction points for consumers to navigate from capture to retail output services.

• Far too little effort to develop and deliver suites of meaningful new output products.


Total On-Site Photo Print Output 2010-2015

($B)

The growth of personalized printed output is not yet on a trend to compensate fully for the loss of conventional print consumption but it will drive overall category growth revenue beginning in 2013.

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

2010 2011 2012 2013 2014 2015

Conventional Print $ Personalized Print $ Total $


Retail Digital Print Unit Projections (B 4x6 eq. units)

•Demand for Conventional prints has and will continue to fall off steeply. •Demand for personalized printed output has and will continue to grow as awareness, access, and new products continue to accelerate.

0.00

5.00

10.00

15.00

20.00

2010 2011 2012 2013 2014 2015

Conventional Film & Digital Prints

Personalized Prints

Total Prints


Self-Service Prints vs. Minilab Prints (Conventional 4x6 Equiv. Prints - B)

•There are forces at work that advance the need for minilab printing (especially web-2-store printing, and demand for new personalized products). •There are, simultaneously, forces at work that limit the investment interest in minilabs (especially labor costs, operational complexities, and declining revenues). •Other trigger events which could radically alter share of prints would include demnd for printed output from mobile devices and Social Networks such as Facebook and Google+.

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

2010 2011 2012 2013 2014 2015

Kiosk (Self-Serve) Prints

"Minilab" (supported) prints

Seasonality of Print Revenue 2014


•Current personalized printed products are dominated by products with demand primarily from mid-November through late-December. •As the share of output from personalized printed output grows this trend threatens to shift even more volume to a narrow holiday window. •The popularity of photo merchandise, which is currently dominated by holiday gift giving increases the challenges of equipping and staffing this changing category.

Personalized Photo Prints Share of Revenue - 2010



Threats & Opportunities

•Threats •Opportunities

•Accelerated non-printing behavior by consumers (e.g. Facebook, Twitter sharing as beginning and end of most post-capture activity).

•Facebook members are now 1-Click away from quality retail printing

•Accelerated category retreat by major retailers (reduced capital investment, reduced labor commitment, reduction of footprint or relocation to service clusters, reduced promotion and advertising)

•Rapid development and effective merchandising of streams of critical new personalized printed output (especially products with year-round appeal).

•Widespread adoption of camera phones as primary household capture device (devices and apps on smartphones provide the ease and immediacy consumers want….plus the best camera is the one you have with you!)

•Content becomes a powerful economic engine and drives demand for boundless new personalized output opportunities at retail.

•Failure to develop and effectively merchandize and promote critical year-round high-volume personalized printed products.

•Major retailers in combination with industry partners aggressively pursue and support awareness campaigns.

•Output from mobile devices

•New generations of capture devices that are always connected to easy retail product solutions.

Engines of Growth


Meeting consumers where they love to be with simple, meaningful, affordable solutions (e.g. easy print from Facebook , Google+, Mobile Devices and pick-up at retail)

Personalized Event Celebration Products or Bundles Home Décor Commercial Image-Rich Printed Output Retail Products with Output Components Licensed Content for Consumer and Commercial Output Focus on a select number of new high-demand products with

year-long demand

PAGE 12

Confidential Property of [F/22] Consulting, Inc. - 2009

FRANK BAILLARGEON Thank You

12 Retail Photo Output Projections Update

Documents

F22 U S Retail Output Review 12.11