Photofinishing Laboratories

SIC 7384

Companies in this industry

Industry report:

This industry classification includes establishments primarily engaged in developing film, making photographic prints and enlargements, or retouching photographs for businesses or for the general public.

Industry Snapshot

The photofinishing laboratories industry includes establishments whose core business is developing and printing film (except for commercial motion picture film); duplicating, enlarging, or retouching photographs; developing and processing home movies; and providing transfer and other film photography services related to digital imaging, photo CD, and other forms of electronic photography. Many retail stores, discount stores, drugstores, supermarkets, camera stores, photography studios, and other businesses also offer commercial photofinishing services, whether through onsite ("captive") labs or online.

In the early twenty-first century, the shift to digital photo products and services of all types was a significant factor affecting the photofinishing laboratories industry. Research firm InfoTrends reported a total of 18 billion digital prints produced in 2007 and estimated that the number rose to approximately 19.7 billion in 2008. Over the previous 10 years, many industry players had either left the field or adjusted their services to meet consumers' changing needs. This shift to digital processing caused the industry to shrink and consolidate. According to the U.S. Census Bureau, in 2010 there were 1,375 photofinishing labs with total annual revenues of $1.9 billion.

Photographic services represented the largest sector within this industry category, accounting for almost half of all firms. Photofinish and photofinishing laboratories together represented about 32 percent, followed by film processing and finishing laboratories, film developing and printing, photographic developing and retouching, and film developing services. In terms of revenue generated, photofinish and photofinishing laboratories dominated the industry slightly more than 92 percent of sales, while photographic services accounted for just 3 percent of industry revenues.

Organization and Structure

Mini-labs Outlets.
Photofinishing laboratories featuring onsite mini-labs could be independent or affiliated with photofinishing chains, and physically autonomous or situated within larger businesses. Mini-lab systems, which consisted of compact automated photo-processing equipment, often required less than 1,000 square feet of floor space. Mini-lab outlets specialized in fast photofinishing (with photographs processed in as little as 30 minutes to an hour) and commanded relatively high photo-processing rates. Leading mini-lab chains included Moto Franchise (formerly MotoPhoto) and CPI Corp.

Mail Order Laboratories.
Customers still working with film-based cameras could use mail order laboratories, often with nationwide markets. These businesses generally provided amateur photographer customers with envelopes and instruction forms for mailing in photo-processing orders. They generally relied on repeat orders from established customer bases, often enclosing additional mailing envelopes for customer use when returning photo-processing orders. Although laboratories traditionally distributed mailing envelopes through camera stores or methods like direct mail campaigns and newspaper inserts, with the proliferation of Internet use, these businesses typically established a presence on the Internet, where customers could easily request envelopes. Mail order laboratories generally offered the convenience of sending orders from anywhere to be received at any mailing address at relatively low prices. However, some were premium operations emphasizing customized services and rigorous quality control. Photo-processing through mail order laboratories generally took one to two weeks. By the end of the first decade of the 2000s, many mail order labs had either shut or switched to digital. For example, PhotoWorks, once a leading provider of mail order services, eliminated its film service and dealt only with digital prints. Mail order laboratories remaining in early 2012 included Clark Color Labs, York Photo, Swan Photo Labs, and Dale Laboratories.

Digital Processors.
With the growing dominance of digital cameras in the marketplace, photofinishers either had to evolve or face rapidly dwindling sales. Traditional processing outlets, such as Walgreens and CVS, converted their entire photo departments to handle the rapidly advancing technology. Big-box discounters, such as Wal-Mart and Target, entered the fray, offering both hands-on customer service and in-store stand-alone kiosks that could not only instantly print photos in varying sizes but also make simple edits, including cropping the photo, adjusting light exposure, and removing red eye.

While retail outlets moved rapidly to accommodate a digital world, online photo processing companies flourished during the 2000s. Sites such as Shutterfly, SmugMug, and Snapfish offered not only digital photo processing but also such value-added services as online photo storage, personal photo albums, on-site photo editing tools, and the ability to easily manipulate digital photos onto a variety of medias such as mouse pads, t-shirts, and coffee mugs.

The primary association related to commercial photofinishing and the photography industry as a whole was the 16,000-member Photo Marketing Association (PMA), which was established in 1924. The PMA, previously known as the Master Photo Dealers' and Finishers' Association, was formed by the merger of the Master Photo Finishers of America (founded in 1924) and the National Photographic Dealers Association (founded in 1933). The PMA sponsors several important industry publications and maintains a photofinishing and photography retailing reference library and hall of fame at its Jackson, Mississippi, headquarters.

Background and Development

According to the Photo Marketing Association's Industry Trends Report 1995-96, photo processing was responsible for the largest share of revenue in the amateur market at 43.1 percent. Within the amateur market, 710 million rolls of film were developed in 1995. Total rolls were down slightly from the 1994 figure of 716 million, but higher than the 1993 total of 694. Sales in the amateur market continued to remain fairly stagnant until 1988 when sales totaled $5 billion, and the value rose $200 million annually until 1991. From 1992 to 1994, sales remained at $5.5 billion every year, dropping slightly to $5.4 million in 1996.

Drug stores continued to lead the photofinishing industry with 23.8 percent of total sales and 24.8 percent of total rolls processed in 1995. Drug store share was down slightly from 24.5 percent in 1994 as discount stores continued to gain more share, but drugstores continued to lead. Stand-alone mini-labs had 22 percent of the photofinishing market in 1995, also down from 1994. However, mini-lab statistics did not include mini-lab equipment used in other stores. Only 40.5 percent of mini-lab equipment was used in stand-alone mini-labs. Almost 21 percent were in discount stores, 17 percent in camera stores, 13 percent in drugstores, and 7 percent in supermarkets. Discount stores held 21.9 percent of the total market in 1995, one of only two retail channels to show growth from 1994 when it had 18.8 percent of photofinishing sales. Supermarkets accounted for 12.6 percent, the only other retail channel to grow from 1994 when it held 11.8 percent. Mail order held 5.4 percent, down slightly from 5.6 in 1994. Other outlets accounted for the remaining 3.2 percent of 1995 photofinishing sales. According to the PMA, in 1997, 65.1 percent of photo processing was done by wholesale, captive, or mail order labs, while the remainder was done by retail labs.

Mini-lab equipment became increasingly common in the photofinishing industry, accounting for 33.5 percent of the amateur market in 1986, 40.3 percent in 1988, 43.4 percent in 1990, 44 percent in 1992, and 44.4 percent in 1995. The estimated number of mini-labs nationwide increased from 5,200 in 1984 to 11,900 in 1986. Following an increase to 15,300 laboratories in 1988, growth leveled off. In 1991 the estimated number of mini-labs nationwide was 17,200, increasing only about 150 per year to 17,500 in 1993. However, in 1994 mini-labs began to grow quickly again, increasing to 18,900 in that year and 20,500 in 1995.

Within the various film formats, 35mm film increasingly dominated the market, accounting for 57 percent of exposures in 1984, 65 percent of exposures in 1986, 75.4 percent of exposures in 1988, 83.1 percent of exposures in 1990, and 88 percent of exposures in 1992. With the introduction of the disposable camera, 35mm dropped slightly to 80.5 percent of exposures in 1995, with disposable cameras accounting for 6.9 percent of exposures. Conversely, 110/126 film accounted for 18 percent of exposures in 1984, 17.6 percent of exposures in 1986, 15.1 percent of exposures in 1988, 12.3 percent of exposures in 1990, 9.6 percent of exposures in 1992, and only 6.5 percent of exposures in 1995. Disc camera film dropped off quickly as the novelty and excitement for the product declined. Disc film accounted for 22 percent of exposures in 1984, 14.5 percent of exposures in 1986, 7.4 percent of exposures in 1988, 3.8 percent of exposures in 1990, only 1.6 percent of exposures in 1992, and nearly disappeared in 1995 with only 0.8 percent of exposures. Instant film was responsible for the remaining exposures in 1995 with 2.7 percent, and slide film accounted for 2.6 percent of exposures.

Camera stores and stand-alone mini-labs had strong commercial sales increases in 1995, especially from commercial sources, such as graphic arts and advertising. With the first slight drop in share for 35mm, large format film types from these commercial sources helped fill in the gap along with disposable cameras. Advanced Photo film, which was introduced in April 1996, took on more of the market with an estimated 7 to 8 percent of the share in 1997 and was expected to take some of the 35mm share.

While roll volume decreased slightly less than 1 percent, total exposures fell 3 percent. The total number of exposures per roll sold decreased in 1995, resulting in a decline in total exposures. Enlargement volume as a percentage of total photofinishing sales also continued to fall, reaching 5.4 percent, down from a high of 7.5 percent in 1991. Although volume sales increased, mostly through online ordering services by labs, price competition kept the total percentage of revenues low.

PMA's Printing Survey, based on results from April 2004 through May 2005, concluded that traditional film processing continued to drop, falling 14.5 percent. Discount stores continued to lead the photofinishing market with 39.6 percent of overall processing, up slightly from 38.9 percent. Drug stores represented 26.5 percent, up from 25.8 percent, while warehouse clubs accounted for 10.3 percent, down from 11 percent. Supermarkets had 10.6 percent of the market, down slightly from 10.7 percent, and mail order processing represented 5.7 percent, down from 6.1 percent. One-hour labs processed 1.2 percent, down from 1.4 percent, while camera stores had 3.1 percent, and other processing accounted for 3 percent.

In order to keep up with the changing times, retailers had to transform their business climate to accommodate the rapid growth in digital printing. For example, they promoted an array of digital services, including the creation of screensavers and calendars. The trend of digital prints made at home declined from 70.5 percent to 50.4 percent over a 12 months. Digital printing began to outpace traditional roll film, a trend that would increase each year.

According to the PMA, digital printing rose 65 percent in 2004, with 19 percent of prints made away from home at kiosks. Online ordering of digital prints accounted for 11 percent of the market, while mini-labs accounted for 17 percent. An estimated 7.7 billion, or 40 percent, of digital prints were printed at retail stores in 2005, and 47 percent one year later in 2006, up from 31 percent in 2004. Although digital printing was rapidly expanding, reaching 12 billion digital prints in 2006, traditional film processing continued to hold a major percentage of the market. Total spending in the photo category was $11 billion in 2006, according to PMA Marketing Research.

By the end of the first decade of the 2000s, digital technology had a firm hold on the photography industry. Film cameras could still be purchased, ranging from disposal cameras that sold for just a few dollars to high-end professional quality single-lens cameras. Consequently, most traditional retail photo processors continued to develop film. For an additional price, consumers could receive a CD of prints, which effectively turned their roll film into digital photos they could upload to the Internet.

For online processors of digital photos, competition was fierce at the end of the first decade of the 2000s. Many traditional film processors worked quickly to establish a presence on the Web, including CVS, Walgreens, and Kodak, as did big-box discounters, such as Target and Walmart. Many offered free in-store delivery. For their part, some online-only firms, such as Shutterfly and Snapfish, established wide name recognition and a substantial customer base, although they competed with a rapidly growing number of upstarts. As a result, pricing for online photo development dropped during the second half of the first decade of the 2000s. For example, PC World reported that the average cost of a 4-by-6 inch print was between 12 cents and 15 cents in 2005. By 2008 the same print could be purchased for under 10 cents. Snapfish charged its customers 9 cents per print, down from 12 cents in 2006. Similarly, SmugMug dropped its price on an 8-by-10 inch print from $2.99 in 2006 to $1.99 in 2008.

However, just as the industry was adjusting to digital processing in its various forms, photo processors faced another looming challenge. More consumers were choosing to keep their photos in a digital form and never actually purchase prints as digital picture frames commonly replaced the traditional family album on the coffee table. Popular photo sharing sites like Flickr.com and Facebook, provided consumers with easily accessible and free ways to upload and share photos. By June 2009, more than 1 billion photos had been uploaded to Facebook alone. So pervasive was online photo sharing that some photography companies that took student photos in schools offered parents the ability to purchase a CD of digital images rather than a package of prints. David Haueter, InfoTrends Associate Director of Photo Printing, warned in 2008, "The digital photo printing industry only has about two to three years to gain back customers who are moving away from printing toward online storage and sharing."

Current Conditions

The increased availability of online sharing options for photos caused the photofinishing industry to continue on a downward trend in the early 2010s. According to a 2012 report by IBISWorld, "By all measures, the development or printing of photographed images is in drastic decline." Fewer and fewer consumers sent their photos to the lab to get prints. They could view, manipulate, and share photos on their computers, phones, and other handheld devices, as well as print them on relatively inexpensive printers at home. The demand for traditional photo prints from labs, therefore, experienced a dramatic drop. IBISWorld predicted that industry value added would drop an average of 9.6 percent annually through 2017.

Others in the industry predicted an optimistic future while acknowledging that changes would be necessary to stay viable. Steve Giodano stated in PMA magazine, "The future of imaging is bright, but different" and noted that photofinishing companies will need to broaden their scope of operations and focus on "the whole social imaging package."

Another report suggested that only 20 percent of all pictures taken on digital cameras and camera phones will be printed according to figures from the PhotoImaging Manufacturers and Distributors Association. However, Chain Drug Review reported that "even with only a fifth of the pictures taken being printed, billions of prints will be made at kiosks over the next several years." InfoTrends and Frost & Sullivan indicated that consumers were using photo kiosks (such as those at drug stores) more often to create photo gifts like personalized mugs and custom calendars, a trend that was expected to result in a 20 percent increase in the sale of prints through 2014.

Industry Leaders

Ritz Camera Centers was the largest photographic chain in the United States in 2008, but the firm filed for bankruptcy in 2009, succumbing to the shift to digital cameras. Ritz Camera & Image (RCI) purchased the company. RCI also operated under the Wolf, Kits, Inkley's, and Camera Shop names. In 2012 the firm had 300 stores in 35 states that offered photographic services, cameras, and optical supplies, in addition to other electronic devices, such as televisions, laptops, and cell phones.

By the early 2010s, more than 50 percent of photo processing was done at drug stores such as CVS and Walgreens. Other retailers with in-store photofinishing centers, such as Target and Walmart, also held a significant share of the market.

Online photo processing remained highly fragmented. For example, Picasa, Google's photo managing program, offered users more than 15 online options for photo processing. Some offerings were online extensions of brick and mortar operations, such as Walgreens and Walmart, while others offered unique online services, such as creating stamps (PhotoStamps.com); tote bags (snaptotes.com); and apparel, greeting cards, and gifts (zazzle.com). Nonetheless, several sites held a significant edge in name recognition, and members who subscribed to their online services and purchased photo prints from digital files uploaded to their site.

Shutterfly (shutterfly.com), located in Redwood City, California, was a publicly held company with $473.2 million in sales in 2011, up from $213.5 million in 2008. In 2012 Shutterfly had plans to expand by buying rival Kodak Gallery, which in 2008 had 70 million users. Snapfish (shapfish.com) of San Francisco, California, was a division of Hewlett Packard and operated within the HP Imaging and Printing Group, boasting some 100 million users in 20 countries.

Workforce

In 1982 there were approximately 71,700 photofinishing laboratory employees nationwide. This number had declined steadily from the 1980s through the first decade of the 2000s. According to the U.S. Census Bureau, in 2010 only 13,583 people were employed in this industry earning a combined annual payroll of almost $450 million.

Research and Technology

The emergence of computer-based digital imaging technology and photo CDs demonstration that they were particularly suited for media, publishing, and other commercial uses that relied on fast electronic processing, transmission, and reproduction. Local environmental regulations, which were often the strictest, sometimes were enforced through the processing of annual permits for photofinishing laboratories. Other trends included efforts to recycle chemical drums, toner cartridges, single-use cameras, film cartridges, film canisters, and film spools. Photofinishing research sought ways to reduce the use of toxic chemicals, such as photoreceptors, recover the silver used in photo processing, and reduce or capture waste effluent.

According to the PMA, by 2010 Americans were making almost 14 billion digital prints a year, and 81 percent of U.S. households owned a digital camera. The most significant trend in technology, however, regarded the increased use of touch screen smart phones and tablets. A 2010 PMA report predicted that "Growth in digital photo printing revenue is now driven by photo cards whose future success is rooted in the transition of stationery, greetings, and expressions products to on-demand platforms, already under way."

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News and information about Photofinishing Laboratories

Most frequently cited OSHA standards.(photofinishing laboratories and portrait studios)(Brief Article)
Environs; March 1, 2003; 402 words
During the time period of October 2001 through January 2003, OSHA cited photofinishing laboratories (SIC code 7384) and portrait studios (SIC code 7221) for OSHA violations in the following areas: lack of hazard communication...
Kodak quits UK photofinishing.(Brief Article)
Chemist & Druggist; November 27, 2004; 381 words
...The company is closing its five UK wholesale photofinishing laboratories and its associated photofinishing head office...worldwide. This round of closures will affect photofinishing laboratories in Glasgow, Walsall, Wimbledon, Portishead...
Chain drug stocks in step with overall market.(Business)
Chain Drug Review; December 19, 2005; 700+ words
...scanning and an inventory-management system to improve efficiency. It has also installed in store digital photofinishing laboratories in about 80% of its outlets, catering to increasing consumer demand for such services. Walgreens is a long...
Windy City welcome: Hilton Chicago will host PMA Fall Show.
PMA Magazine - Connecting the Imaging Communities; September 1, 2004; 700+ words
...adjoining areas. Photo retail stores accounted for 2,366 attendees that year, while 1,457 were operating photofinishing laboratories; 519 operated portrait or commercial studios. Department stores, drugstores, jewelry stores, sporting...
Hazard Communication program.
Environs; July 1, 2003; 700+ words
A quick review of the last several OSHA inspections for photofinishing laboratories (SIC code 7384/NAICS code 81292) indicated that, for nearly every laboratory inspected, OSHA identified deficiencies in the...
MORNING BRIEFING.(Business)(Morning Briefing Column)
St Louis Post-Dispatch (MO); May 1, 1998; 700+ words
...products in digital imaging and update Kodak's photofinishing laboratories with Intel-based products, a broad patent...three years. By upgrading Kodak's Qualex photofinishing laboratories with Intel technology and new scanning equipment...
FUJI WINS WAL-MART PHOTO BUSINESS
The Buffalo News (Buffalo, NY); July 9, 1996; 391 words
...one-hour photofinishing labs located inside its stores. "We have been building a network of wholesale photofinishing laboratories throughout the country," said Tom Shay, a spokesman at Fuji's U.S. headquarters in Elmsford, N...
Downsizing aids service work. (miscellaneous business services)(Print Target Markets)
Graphic Arts Monthly; June 1, 1992; 580 words
...were less fortunate; ad agency revenues were up only 3.5%, and both detective agencies (-0.7%) and photofinishing laboratories (-2.4%) showed declines for the period. Each article in this year-long series also contains news...

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