Digital Cameras Change Focus of Photo Industry

March 28, 2005 — -- Bruno Cos, who owns the 45-year-old business Photozip in Westport, Conn., has seen lots of changes in the photo industry throughout his career.

Notably, when big retailers started offering film processing at a discount in the mid-'90s, some of his business took a hit. Then the terrorist attacks of Sept. 11, 2001, changed the vacation habits of his customers, who previously traveled -- and took lots of pictures that needed developing -- about five times a year.

But nothing was quite as drastic as the popularity of digital photography. "We got hit basically as soon as digital came out," Cos said. Though his existing equipment was less than two years old, he opted to replace it with digital machinery to offer new services.

"People now want instant satisfaction," he said. "They want to come in and leave with pictures."

With new equipment costing about $150,000, many other small business owners faced with similar choices opt to close rather than make such a big investment, said Dimitrios Delis, director of marketing research with the trade group Photo Marketing Association International.

"For the mom-and-pop store, that was a big decision they had to make, and many decided to close down and forget about it," he said.

According to a report by PMAI, 2,400 specialty "mini-labs" closed between 1999 and 2003, and many other facets of the photography industry have been altered as well. In 2004, retailers handled 32 percent of the prints made from digital cameras, up from 16 percent the year before, according to a PMAI report. The group projects that in 2005 the figure will rise to 39 percent, though the majority of prints are still made at home.

Photo labs used to have a few main business categories -- film processing, selling cameras and accessories, and selling consumables such as film, Delios said. Processing typically comprised 40 percent to 50 percent of their sales, he said, but digital cameras have drastically cut the demand.

Combined with increased competition from large retailers like Wal-Mart and Walgreens, the advent of digital cameras and their continued improving quality and falling prices have posed a new challenge. Digital camera sales grew 40 percent in 2004 to 18.2 million units, the PMAI report found. For 2005, that number is expected to grow to 20.5 million, accounting for 82 percent of all camera sales, up from 73 percent in 2004.