The Giants Fall
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Old 04-06-2013   #1
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Default The Giants Fall

The Great Pixel posted a poll in a separate thread regarding recent events in the portrait business. I've quite a lot to say and did not want to hijack his thread and was on my way to posting this when I came across it. Here goes:

The publicly traded parent company CPI who operated portrait studios in a number of department stores under different names has apparently folded. CPI operated Picture Me Studios in Walmart, the Sears Portrait Studios and Kiddie Kandids in malls across the country. The individual outlets may have appeared to be insignificant kiosks being manned by one to three employees of questionable skill and ability, CPI was a big operation with over 2000 outlets. That company has been reduced to a two paragraph statement on their company website. That statement says pretty much, sorry were out of business and if we owe you products we'll try to get them to you.

Let's look at the collapse of not just a company but of an entire market. In November 2011, Lifetouch acquired the remnants of Olan Mills Portrait Studios. Previously they had bought out the church directory and yearbook divisions of OMS. Olan Mills had been no minor player in the photography business, far from. OMS was the largest portrait studio in the US, born on the heels of the great depression and survived both world wars, at the company's 50th anniversary it was the largest civilian customer of Kodak and the largest developer and processor of photographic film. Olan Mills also withstood the competition of two other major players in the children's and family portrait business, Photo Corporation of America (PCA) and CPI who eventually absorbed it's rival PCA. Last on the heavy hitter list is Lifetouch who's business was primarily the school, yearbook and senior portrait market and who did not have the large presence in the permanent studio business, either hosted or free standing.

Olan Mills' woes were a mixed bag of troubles. After the death of Olan Mills Sr his two sons went on to carry the company. They were plagued by sibling rivalry between themselves and a sister who was not involved with the business but who was an heir to a portion of her father's estate. Olan Mills was a private, family owned business and it also suffered a phenomenon known as third-generation failure. The grand kids did not have the drive to carry on the business. Of course the evolution of digital imagery did not bode well for Olan Mills either. The advances happened fast, faster than the company could react once it became evident that digital photography was for real. To drop film and convert to digital and to do so on such a large and wide-spread scale was simply impossible. Olan Mills simply could not react. Olan Mills never considered themselves to be in the same business as CPI. Both companies made primarily children's portraits but Olan Mills had free standing and full size studios and a different marketing and advertising. Here's another blow, the FCC laid down regulations regarding telemarketing. Olan Mills had relied solely on telephone sales and had run it's own telemarketing almost from the beginning of it's permanent studio business. With business declining, expenses mounting and troubles unseen on the horizon Olan Mills made yet another choice that would eventually come back to haunt them. To reduce overhead expense, Olan Mills on some really poor advice, decided to move into the hosted business model. Just like CPI did with Sears and Walmart. There had been some bad blood between CPI and K-Mart when PCA (who was in K-Mart) was absorbed. Olan Mills decided they could up the game in the hosted studio business by bringing their name recognition and brand into the K-Mart stores, rather than operate like CPI did operating under a licensed name. Two unfortunate things happened. K-Mart foundered and was acquired by (nearly equally ailing) Sears Roebuck & Co. Sears was already aligned with CPI who was operating under a license as Sears Portrait Studio. Olan Mills struggled with the business in the now regional K-Mart chain. The only profitable division of the business, the church directory division was sold off to Lifetouch. And ultimately Lifetouch would buy Olan Mills Studios in sum total. Olan Mills II could sooth his conscience with Lifetouch's flimsy promise to continue the brand and operations, simply under different ownership. That was short lived. Olan Mills Studios is now a memory.

So, now what of the fall of CPI? Well they did not pick up the business that was left in the wake of the Olan Mills collapse. They failed because they operated in a demographic that is no longer profitable. Lifetouch did not run out and pick up leases on host stores either. I don't think we'll see them in department stores, not on the Walmart, Target, K-Mart level. The majority of shoppers in discount stores are there to save money and stretch tight budgets. There are not enough people in the building with expendable discretionary income to support a portrait business.

On the whole, we have discounted the selling price of portraits and reduced the value so that we simply cannot be less expensive without giving them away. At least in the blue light special market place.

Don't get excited now and think that CPI and Olan Mills have left you with a huge market potential; they have not. See, the reason CPI failed is because they could not compete with Jr and his DSLR he got for Christmas that takes such pretty pictures. These studios just did not offer a product perceived as higher enough quality than an amateur with entry level glass and entry level skills, not at the price. The customers at that level will not generate a profit, not for CPI, not for Olan Mills, not for Jr and his shiny new DSLR and not for you either. I've said before that there are places where traditionally a photographer could make a good and comfortable living that no longer will support a photographer. The bottom of the barrel is that place. The no-sitting fee $5.99 package special won't work anymore. If a savvy company with stockholders can't figure it out, you won't either. No better than a $5.99 picture can be, a free one from the kid next door will do just fine.

Not to be the Debbie Downer here I won't leave you without some hope. There remains a market where a photographer's work is appreciated and can be well paid for. In a nutshell: Stop looking for customers who shop at Walmart and seek out the kind of client who patronizes Saks or Neiman Marcus. Just be sure you are up to the skill level and have the social graces.

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Old 04-06-2013   #2
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Default Re: The Giants Fall

Steve I have copied this over from the other thread so it is not written as a response to you as it was actually written before i saw this post but to the initial thread

What I see missing in this collapse of a Corporate Giant is the potential windfall to private sector family portrait studios. All those low to middle end clients that had been utilizing the services of CPI owned studios in high traffic retail locations are now being dumped back into the private sector.So in this case whaty is bad for Picture Me and CPI can prove benifical to the local Mom and Pop Studios.

While it is easy to blame Craigslist and Weekend Professionals for the downfall of these large corporate stores and there is no doubt that the explosion of the numbers of semi pro photographers working in any given community has grown exponentially as the digital age has unfolded I suspect they are only a few percentage points of the cause.

Truth is the overhead to run one of these studios in a high traffic corporate owned retail marketplace has to reach $50K per month or more. The rent for such prime retail space as what WalMart offers along the front side of their stores can eclipse the $10 per square foot mark plus triple net that includes not only cost for maintaining common areas including bathrooms, parking lots and the floor space in front of the storefront but also a percentage share of sales. Add to that the cost of employees, taxes, insurance, utilities, marketing, equipment, accounting, legal teams and more and you can see how the cost of maintaining these studios rose well beyond the earning capabilities of the price point they were servicing.

If the average package sale is say $350 it would require a minimum of 143 sales per month or just under 5 sitting per day just to cover the hard costs of doing business. Factor in the costs associated with Executive salaries and benefit packages, shareholder dividends and all the costs at the corporate level that have to be serviced by sales at the local level and you can see how these corporate giants simply drove themselves out of business through escalating cost foundations controlled by other Corporate Giants. In the end I would not be surprised to learn that each location was taxed with overhead that approached 6 figures and that my friends is a lot of overhead to service from a 2,000 sq ft facility
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Old 04-06-2013   #3
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Default Re: The Giants Fall

This was posted in the thread on the Photographers Forum but seems relevant to this thread so I have copied it here along with the post it was in response to


Quote:
Originally Posted by nolanr66 View Post
The digital camera has completely changed photography forever. *The camera stores are mostly gone, there is very little film processing and around here *even photo labs like Target are shutting down and being replaced by a single Kiosk. * Basically a store like Sears or WallMart will not do the portrait thing if the profit is gone. It's a business and it's about profit. *No profit then the service is out of there. *Just like the labs. *Not enough customers then the lab goes away.
I am not so sure that the customers are gone in this instance. I think it is simply a matter of the base price point being unprofitable given the high cost foundation of operating a large corporate entity. I have no doubt they are selling their fair share of portrait sittings the problem is the budget restrictions of the client base does not match the cost equation of operating where they are currently doing so.

I looked into renting space in a mall on Ft. Collins Colorado last year the cost for the space alone was going to be in excess of $11 per sq. ft. by the time I added in the CAM costs of a Triple Net lease. That is $22k a month in rent alone. Even in a high traffic retail location like a mall which has a potential per sale base 10% higher then the WalMart studio the over all CODB is daunting.

I can open a retail walking portrait studio in a strip mall surrounding WalMart for a fraction of the cost. Granted you don't get all the foot traffic of being in the front of WalMart but properly positioned and with good singage they will still see you and now the price point the client baser can afford can be serviced.

This collapse of a large corporate entity actually bodes well for the local Mom and Pop studios across the country. Where a Picture Me studio inside a WalMart in a city of 100,000 may have been selling 800 portrait sittings a month The 5 Mom and Pop studios in the same city may have been doing 40 sittings a month. Now those 800 WalMart sittings are going to be dispersed throughout the available photographer base in the city. If the Mom and Pop picks up just 8 sittings (one percent of the WalMart customer base) that will represent a 20% increase in sittings for the Mom and Pop store. that is a dramatic jump and it should be sustainable within each community at least until such time as people start opening nice compact little portrait studios in the stripmalls surrounding the WalMarts and start to erode the dispersal of clientbase by pulling it back into the Retail Shopping center.
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Old 04-06-2013   #4
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Smile Re: The Giants Fall

I hate to do postmortem examinations of businesses; frankly it’s depressing yet is wise to get into theses discussions in order to prevent our own businesses from ending up on a slab in the business morgue. The idea of big corporate concessions in department stores has been around for many years- I remember several in the New York City Metropolitan Area as far back as the fifties. The operated out of major department stores, had vendors selling coupons on the street and door to door and offering cheep rates and working on speculation. Some of the photography was pretty decent but they became known for pressure selling by folks known as “proof passers” who worked strictly on commission. Some had studios and others worked strictly at the customer’s homes. The public opinion about theses operations were that “theses guys do a “come on” giveaway or a loss leader and then take you to the cleaners”. To a degree, this perception was true but SOME people soon discovered that they were better off going to their local neighborhood highly professional studio where they would perhaps pay more for great style and service but really get value for their money. Are we able to start anew and restore to our industry to its former self

Good photographers did not have any reason to buy into some of these franchises because they knew how to set up and market their own studios. Many of the people who did buy into theses franchises were not really into photography but they though they would like photography better than a dry cleaning or convenience store franchise and the photography ones were less costly to get into.

I think that over the years, the quality and service in some theses corporations has deteriorated to the point that they are loosing sakes in a business model that demands a high average sales volume for successful operation. The overhead remains the same white the sales fluctuate. Perhaps this is a good for the better, more artistic and creative photographers who believe that the bottom line (profit) is the only reward in the photography business. This of course applies if all the local quality conscious photographers still exist after being by almost being destroyed the “big” operators.

In order to capture a higher end market, the photographers have to perform better where the difference in quality is apparent to a more discerning clientèle. After all people how can afford it still buy better cars, houses, clothing, décor, wedding services and just about everything and wont’ be found dead in a discount store. Why not photographic services? As the industry fallen to a level where none of it is considered better and a cut above the rest. Do we need to go on some sort of a collective or personal “crusade” in order to re-educate our perspective customers? Why do we, as business people, have to pay dearly for GOOD skilled services and product while we are charging OUR clients pennies? SURVIVAL IS GONNA BE JOB ONE IN THIS BUSINESS ENVIRONMENT.

My approach is NOT to blame the advent of digital photography for any downturn in business. I have been in this business for a very long time and there were always the do-it-yourselfers, wannabe photographers and amateurs jumping into the business with little or no training or experience. Any one with some disposable income can buy pro gear. The army of inapt “professionals” was always there with their (in order of appearance) cameras of the day; Speed Graphics, expensive medium format cameras, high end 35mm cameras and nowadays top-of-the-line digital gear. So what? Potential clients should realize that they should shop for excellent quality and service. The clients who are not willing to pay a fair sum for your good service and the inapt folks who serve them will always be there so you can not successfully compete with them on their level of quality (or lack thereof) and pricing.

That’s my overview of things!

Ed


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Old 04-06-2013   #5
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Default Re: The Giants Fall

I hate autopsies too. It is sad to examine the dead for the cause of it's demise; however, there is a benefit to knowing in preventing untimely death and in establishing a life expectancy.

I hope as business people, particularly those who are portraitists, we can find what happened and turn things to a positive for our own endeavors. If there is a profitable way to operate a portrait business I want to go that way.
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Old 04-06-2013   #6
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Default Re: The Giants Fall

I do not believe that the fall of the big box portrait studios changes anything for the little guy.

The people who purchased their portraits from the national discount chains would rather have no pictures at all than have to pay premium prices for quality photography.

If Kia goes out of business tomorrow, I do not suspect the BMW dealership to see an influx of customers.

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Old 04-06-2013   #7
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Default Re: The Giants Fall

I think it remains to be seen if the departure of the corporate owned studios will impact the independents. What will answer that question is whether there is no market, or if an existing market was being inefficiently serviced.

Those slick shiny outlets with their loss leader promotions made it difficult for a single operator to compete. In reality no one could survive on 40 pictures for $20 and the corporate studios didn't either. Customers didn't connect the dots. Mom went in with little Sally thinking she "could" get out the door with the $20 special and that perception got her. By time she had her $380 wrung out of her wallet, she could have got photos from an independent in a real appointment and not herded through like a cattle call. But that independent could not offer the entry level loss leader. The corporate store had volume on his side, a hand full of those loss leaders would not cripple them. A lower volume independent might not survive even one of those sales.

I heard more often that an independent could not go head-to-head with these operators than I ever did they could not compete with the wanna-bees. I'm not convinced that cheap digital cameras are the death ray. Just as Ed eluded to in his post, DSLRs are just the most recent thorn. When "real" photographers were using medium format cameras, developing and printing in their own darkrooms they were threatened by the new breed of 35mm photographers who used drug store and 1hr labs for proofs and mail order labs for prints. Professional wedding photography didn't die.

I think there may be a plus in the death of these outlets. We don't have the Oz effect to deal with. No glitzy flashy storefront with a corporate name saying, "We're the professional experts" while behind the facade labored away the front line, entry level, poorly trained more poorly supported staff providing inconsistent quality products.
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Old 04-06-2013   #8
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It’s hard to predict exactly what is going to happen. There are so many factors and variants that affect the well being of an industry or a segment of an industry it makes it even harder to make such projections and predictions.

Some of theses corporate studios were so big that they qualified as public corporations and ended up on the stock market. When their stocks take on a down trend and finally collapse some of this bad news gets into the newspapers and TV reports and investors and stockholders become alarmed and you are not gonna see theses investors putting their good money into photographic enterprises of any description any time soon. I don’t, however,
Think that “Joe’s Photo Studio” is gonna be affected all that much providing Joe is well entranced in his community and has a following based on his quality of work and friendly service.

One the others side this question. Are the local folks gonna revert back to patronizing the local neighborhood guy after decades of going to the box store or low priced department store “studios” for their family photography. Old habits die hard and those operations have been around for a long time and, in some communities, the have been the so called places to go for such services. Let’s also realize that the average consumer is not an aficionado of fine photography or any artistic endeavors whatsoever! They want it fast and cheap and there will always be somebody or someplace to accommodate their needs. It is a matter of perception with many folks out there in consumer land. Some will perceive us as artists who they want to patronize and others will perceive us as “store keepers” who rip people off for the “same things” they can get at the bargain store- they will shop for the lowest possible rates and why not? Can you blame them? I don’t- why would anyone spend lots of money for even something that is better if they don’t place any value on it and can’t appreciate it as per their values?

We all have to remember that people are more misinformed about what good quality professional work is all about- possibly more so than many other products or services.

I think the only effective thing we can do as independent photographers is to really initiate an effort do the very best work that we can, constantly seek to improve, do the stuff the hacks can’t or won’t do and educate the public as to this philosophy. Like all small and large business alike, we must vigorously promote ourselves and pay attention to every good public relations issue.

If any of y’all belong to a professional photographer’s association you should urge your executive and your fellow members to initiate some program to boost the public perceptions of professional photographers,

I can not guarantee results in any of my suggestions but I do know that if or when everyone concerned does his or her part toward a common goal; good things can happen and it is significantly more difficult to work for important changes as a single person.

Ed











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Old 04-06-2013   #9
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Quote:
Originally Posted by Ed Shapiro View Post
It’s hard to predict exactly what is going to happen. There are so many factors and variants that affect the well being of an industry or a segment of an industry it makes it even harder to make such projections and predictions.One the others side this question. Are the local folks gonna revert back to patronizing the local neighborhood guy after decades of going to the box store or low priced department store “studios” for their family photography.
There you've hit upon the largest question. Were the local folks using the department store studios for their family photography? Obviously not in the numbers and with the sales dollars to keep them viable. Could a single independent operator replace the Sears Portrait Studio or the Picture Me in his home town? If indeed the family portrait business will not support a corporation and return dividends to the stockholders, will one support a single household and maybe offer a part-timer some income?
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Old 04-08-2013   #10
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Good question Steve! I would guess in some smaller cities and towns the ONLY photography services ARE the department store and mall studios. They had it going and wrapped up for a long time! In bigger towns and major cities there are probably more to choose from in terms of both price and quality.

I am OLD so I can remember a time when some of the best photographers in town had satellite studios in leading department stores that had many-in-store services as well as booking offices for wedding and in-home family portrait services service. The better stores only accepted photographers with already established ties to the community and were know for outstanding quality and service. Over the years, unfortunately enough; the entire department store/studio relationship is now based on how much money the photography concession is gonna bring and a source of loss leader come-ons to bring customers into the store at no initial profit for the photographer- he or she is on their own as to whether the live or die as a business entity. The photography company is working on speculation and the income and revenues fluctuate to a dangerous degree during off seasons. If there is no major action except for graduation and Christmas times the needed volume to achieve a good average sale will go down and that is the fast road to the bankruptcy court

Sometimes, people remain with their traditional family photographer for decades but it is rare in that customer loyalty is oftentimes a thing of the past. Even rich folks with lots of disposable income will go to the cheapest photographer in town because they are not looking for art- the just want clear, clear centered pictures of the kids.

In many areas there are somewhat well-to-do folks in impressive homes. Perhaps the parents are hard working professional folks who have little time to spend even with their own kids. The will opt for a better studio that make exact appointments and offer better work. The have no time to sit and a waiting room for hours with screaming babies or hyper kids who are hyper, oftentimes vomiting or acting out due to bedim. Theses studios are located next to the baby clothing and toy department where parents are apt to but replacement clothing when the first outfit becomes soiled or found to be not flattering. A nice new toy may help in bribing a kid into cooperation. Don't worry... those stores know their strategies. If you will notice the men's clothing department is located near an entrance/exit door because most guys don't care to shop all day. They want to get in, buy what the need, pay for it and get out.

So far all I have done to try and answer theses important question is to add more questions based on what I have observed over the years.

When I was studying in Rochester there was a satellite in and 5 and dime store. I was looking for weekend wedding assignments to cover some of my living expenses as a student. The display prints were outstanding, to say the least. I remember them to this day. The in store “studio” was hardily the size of a decent walk-in closet but just about adequate for the big wooden portrait camera and a set of lights. His big studio was at this residence in the suburbs. So…here we have a talented master photographer in a five and dime store- sound crazy? He told me that he generates lots of business in this high traffic location, takes in passport and ID work, a truck load of restoration jobs, sold picture frames and booked all kinds of wedding work.

I relate this story to y’all because if the big corporate folks are gone from your neighborhood you might approach the department stores and encourage them to let you set up as a highly qualified and established local photography. To do this your work hast to be top notch and consistent. That is because you will have to accept store policies regarding money back guarantees and customer satisfaction issues. If you show great work, you can raise you prices to a level above the previous corporate studio but you will have to promote vigorously. Once you are in the store you can network with the cosmetics and various fashion departments as to promotions.

Department stores offer many high quality services- there are very good make up and beauty services, decent restaurants, tools with lifetime guarantees, nice furnishings, home improvement services and much more. So why not excellent photography services- FOR A CHANGE! I AM AND OPTOMIST! In order to pull of such a deal you really have to be the “early bird” and get on it right away. At the very least you gotta get going on some market research in your area. Make appointments, speak to department store managers or district or head office people. Do some surveys of your own and get an idea of what your public is thinking. Those department store are not giving away their other goods and services- why should you?!

Ed


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