GETTING UP TO SPEED

STEPHANIE LOUGHRAN

Supermarkets know a good photo opportunity when they see one. Fueled by consumer demand, the chance to draw repeat business and to further entrench

themselves as one-stop shopping solutions, supermarkets are shifting from overnight processing to one-hour, photo-finishing services in stores.

"You have to have one-hour photo to remain competitive in the business," said Denis Oldani, director of video, Schnucks Markets. The St. Louis-based chain houses photo-finishing labs in 18 of its stores.

Oldani said that providing fast, in-store film-developing helps create an image of the store as a photo destination, which leads to more "overnight" business like photo calendars, coffee mugs, mouse pads and other merchandise.

"If you have an in-store photo lab, the perception from the customers' point of view is that the store knows photo processing, and they trust the location to provide them with photo-processing services," he said. "Customers feel more comfortable leaving their memories at your store."

Giant Food, Landover, Md.; Macey's, Sandy, Utah; and Fry's, a division of Kroger, Cincinnati, are just a few retailers that have recently rolled out or expanded their one-hour, film-developing services.

"It provides another outstanding customer service that enhances our one-stop shopping philosophy," said Barry Scher, spokesman, Giant Food.

One-hour photo finishing is available at two new Giant stores that recently opened in Maryland, he noted, but he declined to comment on further expansion of the offering.

Marc Jampole, spokesman for Penn Traffic, Syracuse, N.Y., which operates Bi-Lo Foods, Big Bear, Quality Markets, Big Bear Plus and P&C Foods, said Big Bear has one-hour photo labs in nine of its stores in the Syracuse and Columbus, Ohio, markets.

"It's our perception that there is urgency for one-hour," he said. "We have a faster society in general, and it has had very good customer acceptance."

Jampole told SN that Penn Traffic plans to open new P&C Markets with one-hour photo services next year, and he said the retailer is looking to add one-hour labs to several existing Penn Traffic stores in Syracuse and Columbus.

While supermarkets are gaining ground as in-store developing providers, the channel lags behind discount stores, warehouse clubs and drug stores, according to Photo Marketing Association International, Jackson, Mich.

According to a PMA September 2001 survey, 22.8% of the photo processing done in supermarkets was "fast-processing" during the preceding 12-month span. That was up 0.8% over the prior-year period. In the discount store channel, which includes chains like Wal-Mart and Kmart, 38.4% of the photo processing was "fast," up from 35% in the previous year.

Bentonville, Ark.-based Wal-Mart alone has become a photo-finishing juggernaut, making one-hour services available in 2,081 out of 2,700 stores, according to spokesman Rob Phillips. Sam's Clubs, the company's warehouse-club format, offers the service in over half of its 492 stores.

The rise in the one-hour share of photo-processing reflects that one-hour facilities are more available due to increased installation of in-store mini-labs, said Bryan Noble, market researcher, PMA.

"It's also a reflection of our fast-paced society, of people looking to save time in any way they can," he said.

Jeff Cole, assistant vice president of one-hour photo, Costco Wholesale, Issaquah, Wash., said the trend also has been driven by the narrowing price differential between one-hour processing and overnight processing and by the fact that one-hour photo equipment has become easier to use.

He said that one-hour photo is "part of the value of membership. Every item at Costco represents the best value in the market, and one-hour photo is no different."

Cole said 270 Costco stores in the United States offer one-hour photo service, and every new store the company builds has one-hour photo.

Mike Nicholas, general merchandise manager at a Macey's supermarket in Logan, Utah, agreed that convenience is the primary driving force in providing one-hour service. "We're competing like everyone else with new Wal-Marts and other bigger stores, and it gives customers less of an excuse to go there," he said.

Six of the nine Macey's stores that offered video rental departments turned the space into one-hour photo labs in September, with mixed success. Nicholas said that some stores are more successful than others, with some units up 10% compared to video rental take-in.

Nicholas cited some technical equipment troubles and staff training difficulties in the company's initial rollout of the program.

"There's a big learning curve," he said.

He said the decision to discontinue video rental and develop a one-hour photo program was a good one, however.

"We'll get all the kinks worked out, and it should continue to grow," he said

It costs about $160,000 to $200,000 to install a one-hour photo lab, according to Richie Halpin, product manager for retail kiosks, Fuji Photo Film U.S.A., Elmsford, N.Y.

One-hour photo labs not only offer customer convenience, but they also serve as a way to bring customers back to the store to pick up the pictures.

"The driving force is to capture that extra trip into the store," said Evelyn Lewinter, vice president of national sales, food channel, Fuji. The company provides digital mini-labs to many supermarket and drug chains throughout the country.

Lewinter said a knowledgeable staff is a catalyst to capturing sales on ancillary items like picture frames, photo albums and film.

"One-hour helps develop a rapport with customers," Lewinter said. "When you're selling pictures, you become more intimate with customers," which also helps cultivate customer loyalty, she added.

Chains like Eckerd and Walgreens devote a lot of space to the photo/film category in their in-store circulars, she said, and supermarkets could improve their sales by doing the same.

John Tatreau, onsite pictures director of marketing and program management, Qualex, a subsidiary of Eastman Kodak, Rochester, N.Y., also said supermarkets had "tremendous potential" to capture business from drug, mass and warehouse club channels. In turn, supermarkets could increase store traffic and bump the average register ring. Kodak supplies and services over 1,000 grocery store sites with leased equipment, fixtures, production supplies, paper and chemistry, according to Tatreau.

One retail source at a Southern-based supermarket chain concurred that retailers must fully commit to one-hour photo departments, which includes dedicated space, funding and a full-time staff.

Despite the obstacles like technical equipment breakdowns, unpredictable volume of film rolls to process each day and stiff, competitive pressure from several retail channels, supermarkets are poised to gain acclaim in the one-hour photo business.

"[One-hour] is a natural because of the number of trips to the grocery store a week," said Lewinter.