VIDEO OUT, PHOTO LABS IN AT MACEY'S

STEPHANIE LOUGHRAN

SANDY, Utah -- Macey's recently opened one-hour photo-finishing services in six of its nine stores, using the space that previously housed its video rental departments. The chain made the decision to stop offering video rental almost a year ago due to stiff local competition from the likes of Hollywood Video and Blockbuster, according to a general merchandise manager at the chain.

"Our vendor was slow to react to DVD changing over, and they were dragging their feet," said Michael Nicholas, nonfoods manager at the Logan, Utah, unit. "Hollywood came into our market, Blockbuster has been around and kept taking bigger bites out of business -- we were not as profitable as we'd like."

He said the stores have continued to merchandise video sell-through, however.

The retailer earlier this month had grand openings of the Fuji one-hour photo-finishing system, which includes digital capabilities. The openings were delayed because of problems getting the equipment in the stores, according to Mike Jackson, director of development at Macey's.

He said the three stores that did not open photo-finishing services did not previously offer video rental and did not have room for the new photo departments.

In addition to the actual photo-finishing system, the 1,050-square-foot space also includes 90 feet of shelving dedicated to accessory items for mounting, matting and framing pictures. The retailer also tacked on another 20 feet of space for promotional items such as film, three-ring binders and sheet protectors. The array includes all major brands of film along with the private-label Western Family brand, photo batteries and picture frames.

Macey's also brought in a plethora of upscale and technologically advanced products, like digital discs for storing photos, Fuji 35mm cameras, $199 Fuji digital cameras and items for creating scrapbooks.

"We tied scrapbooking into it because it's become quite big," Nicholas said.

Macey's previously offered two-day send-away photo processing, but he said the switch to in-house processing will prove to be better for the chain in the long run.

"We were looking at the amount of processing we sent out, and if we do it ourselves, we'll come out ahead just from that," Nicholas told SN. "We have 25,000 customers a week, so we think we'll do pretty well."

According to Nicholas, revenue from the new photo-finishing section was already up 13% in the Logan unit where he works, compared to the video rental take-in last year.