Shutterfly earnings report reveals overall printing market trends and challenges

Yesterday, photo-printing industry leader Shutterfly Inc. released its first quarter earnings, which revealed once again the on-going struggles of making a year-round business out the typically seasonal photo-printing business. Shutterfly has invested millions in photo-printing plants with national reach, and then watch much of the equipment sit idle until the fourth quarter.

The challenges faced by Shutterfly, however, are also mirrored by the rest of the photo-printing industry. Plagued by over-capacity by the enormous fleet of high-speed digital color printers on the market, the industry faces the challenge of finding new color-output customers. Like Shutterfly, that can mean pursuing commercial business since. For all practical purposes, the ink-on-paper produced by a digital press isn’t different enough to warrant an “amateur vs. professional” class of product, as their used to be with silver-halide photography. The big difference is in size, in substrates, and in finishing.

We are seeing this in the market with the promotion of commercial business in the independent photo lab sector; in the Independent Photo Imagers buying group, it’s new “Print Refineryretail model stipulates a section of the business be devoted to commercial business. Other independent photo retailers are looking at adding fast-printing franchises, with FastSigns being particularly popular. And, comparatively speaking, professional imaging labs are looking at opening retail stores to support their digital production.

…”a Shutterfly retail presence would serve as a consistent reminder to customers, old and new, that photo printing should be an every-day activity…”

Shutterfly cards on discount in Best Buy clearance rack.

So, Shutterfly’s challenges are certainly not unique. But, in this writer’s opinion, the company is continuing to miss obvious opportunities a well-known brand should be taking advantage of:

  1. Neglecting the brick-and-mortar market. Shutterfly has essentially no physical retail presence, other than a few in-store marketing partnerships with Target and Best Buy. Giving away a photo books for a Best Buy camera sale is basically not a strategy. It’s a promotion. The dominant demographic for Shutterfly is female; the company ought to be exploring pop-up shops and boutiques located with in home-decor and craft outlets like Jo-Ann Fabrics, Michaels, etc. These are natural alliances that would probably garner more reasonable results than giving away $10,000 feel-good checks on “Ellen.”
    Further, without reliable in-store fulfillment, Shutterfly is abdicating the market to Walgreens, CVS and other major retailers who know the value of foot traffic. Even if it were a simple web-based kiosk for placing orders, a Shutterfly retail presence would serve as a consistent reminder to customers, old and new, that photo printing should be an every day activity, not a fourth-quarter chore.
  2. Not making the most of mobile. Shutterfly’s mobile apps are certainly capable, but are not leaders, especially among thought leaders. They are good, serviceable apps, but don’t command the attention of mobile-first applications like Artifact Uprising or Mixbook. Even worse,  even the much-ballyhooed GrooveBook acquisition, following the “Shark Tank” PR coup, hasn’t moved the needle. It’s like Shutterfly knows mobile exists as a destination, but doesn’t know how to get there.
  3. Banking on the cloud solution. Shutterfly has put much emphasis on its home-built photo management solution. When the first iteration of the Shutterfly Cloud was created, after the acquisition of ThisLife, this was indeed a compelling offering. In the meantime, however, Google Photos and Amazon Photos have stepped into the ring with mobile-friendly and world-class photo back up, storage and (presumably soon) printing solutions. Google and Amazon are two household-name services that, from a contemporary tech standpoint, have more cachet than Shutterfly. And, realistically, there’s no need for any photo printing service to actually store photos anymore. Google, etc., provide open access to these photos, and there’s limited value, if any, to trying to monetize photo storage yourself when they give you keys to the kingdom. To again make an analogy to silver-halide, this is like keeping the negatives for a customer. Sure it’s possible, but how many times will they go back and print those images and is it worth the cost of storage?

The challenges facing Shutterfly are the same big-company problems that plagued other public companies. The demands of institutional shareholders and fund managers for quarterly returns and expectations regardless of market positions puts the company at odds with privately held and successful competitors like RPI, District Photo/Snapfish and ColorCentric. A few years ago, Shutterfly management reportedly explored taking the company private; it will be interesting to see if that strategy, if employed today, would be in the best interest of the company.

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