Amazon: entry into the photobook business unsettles the online print industry

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“Amazon Prints” went online in mid-September and has caused an almighty stir. What’s behind it? Bernd Zipper has taken a closer look.

In addition to online retailing, its cloud service and its streaming services, Amazon has now been involved in the printing of personalized photobooks and photos sourced from its cloud for some two weeks, but so far only in the USA. Amazon Prints is the name of the online giant’s entry ticket to the lucrative photo print market.

The timing of its entry, on September 21, i.e. shortly before the start of the Christmas trade, seems to be a decision that makes sense. If Amazon does get established in the online photo print sector, then several other market players will face the prospect of a significant drop in sales. Below I shall be going into more detail as to what the background to all this is and whether Amazon will be providing a well-thought-out and qualitatively appealing overall package in combination with its previous services, despite comparatively lower prices.

But first let’s kick off with what has happened in the last few days. Amazon has gone online with its photo print service without making a press announcement. The offering is initially restricted to three standard photo formats and two different photobook configurations. Well, that is not yet comparable with what Cewe or Shutterfly has to offer. But it has already made plenty of waves.

The launch of Amazon Prints could herald tough times ahead for online photo print providers; Source: amazon.com
The launch of Amazon Prints could herald tough times ahead for online photo print providers; Source: amazon.com

Shutterfly, currently ranked the biggest producer of photos and photobooks in the USA at sales in 2015 of some 1 billion Euros, is in direct competition with Amazon’s new offering. The advantage that the Internet giant has is, of course, its immense degree of eCommerce market penetration, which is certainly getting this new business activity off to a great start. The Seattle-based provider’s entry into photo print needs to be taken seriously, because on the day of the Amazon Prints launch, the Shutterfly share price nosedived by more than 10%  compared to the previous day – and nothing has changed in the last few days. And Shutterfly is taking the whole thing seriously, because following Amazon’s entry it promptly offered a 40 % price reduction (!) on all items – in fact up to and including October 2. Shutterfly probably wanted to take the wind from Amazon Prints’ sails a little bit and lessen the impact of the noticeable price difference, but more about that later.

If you believe the forecasts, aggregate order volumes for photo products in the USA are likely to come in at around 1.8 billion Euros this year. So that’s a pretty big cake, of which Amazon now wants its slice. What benefits do customers derive, if from now on they order their photos from Amazon instead of from one of the many other providers? Shutterfly, for example, also offers unlimited online memory for photos. At Amazon you have to be a Prime member and pay an annual fee, if you want to be able to use Amazon Drive as cloud memory. Mark you, both enable you to access the memory from mobile devices. The reason for switching from any other photo print provider to Amazon Prints therefore has to lie elsewhere – here I am thinking the quantity of Prime memberships and the convenience of the ordering process. Familiarly simple processes, cheaper than the competition and preferably everything from a single source. Currently more than 60 million Americans are Prime customers and they therefore already use the existing services, which have just been joined by the option of ordering photos online. The principle on which Amazon Prints works is the same as that used by other print providers offering a cloud service – upload photos, select print data, configure your product and then order it. Nothing new – these are familiar processes for most customers, who order their photos from an online print provider.

Since Amazon Prints went straight into battle offering really competitive prices, you can assume that  Amazon is certainly not doing this as a testing exercise, but that it means business in terms of increasing the number of Prime customers and  gaining a key foothold in the online photo print market.

The current and future Amazon Prints offering; Source: amazon.com
The current and future Amazon Prints offering; Source: amazon.com

Here it’s worth making a brief price comparison between the Amazon Prints and Shutterfly offerings, since the latter is synonymous with online photo printing in the USA. Amazon itself promotes its printing service using the keyword “affordable” and offers 10x15cm photo prints at the equivalent of 0.08 Euros, the 13x18cm version at 0.52 Euros and 20x25cm photos at 1.60 Euros. Amazon Prints therefore offers prices for all three currently available sizes and for the cheapest photobook configuration that are respectively at least 40% and 33% below Shutterfly’s prices. At any rate the range of services and the choice of photo products however currently speak in favor of Shutterfly and other established providers. And given the very decent quality that Shutterfly and most of the other online photo print providers in the USA currently offer, Amazon, with its Prints venture and its low prices, will first of all have to demonstrate that it can meet customers’ quality expectations. And that brings us to the question of who actually does the printing for Amazon Prints?

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“Amazon’s entry into the photobook business is ultimately a logical step to take. The company has the infrastructure and needs to provide obvious added value to its (Prime) users. What effect Amazon‘s involvement/commitment will have on the European market is still unclear“ – Bernd Zipper

There are some rumors going around in the industry that Mimeo is acting as print service provider for Amazon’s photo business. With two locations in the USA (Memphis/Tennessee and Newark/New Jersey), a plant in Huntington (UK) as well as the plant in Berlin that was acquired in 2014, Mimeo has operations on two continents. As a specialist in on-demand cloud printing it would seem well-qualified to do this job. If you research into Mimeo’s product portfolio, you barely come across the words `photo´ or `photo print. Its core business is in fact the development and sales of document management software, ordering systems for print products and the production of manuals, presentation folders, brochures, posters, catalogs and postcards. Everything is produced using digital print methods, although Mimeo also maintains a network of printing partners, which enables it to process non-digital-print jobs. These partners also provide sufficient production capacities, because in addition to its own photo print-capable digital printing presses, Mimeo also acquired Hubcast Inc. in the USA at the end of 2015, which has a number of HP Indigo 10000 units that are also suitable for large-format photobook printing at its disposal. However Mimeo has not yet made any statements concerning a partnership with Amazon; we have apparently to be patient until further information is provided. Well, they are rumors – there would be other possible partners as well in the USA. District photo caters to snapfish and others and would be an adequate partner, too.

It does not really matter whether we believe the rumors or not. The issue for us in Europe is what effect will Amazon’s photobook activity have on the market in Germany/Austria/Switzerland? Here Cewe is the clear market leader. In 2015 the Oldenburg-based company generated half a billion Euros in photobooks sales. But what will happen if Amazon Prints is able to get established in the USA and then starts offering its photo products in the European market? As far as Germany is concerned, I can state that Mimeo has already acquired a production site in Germany by taking over Koebcke GmbH in 2014. If this plant is upgraded at some point to handle photobook production, then Amazon would be well-positioned in the market through launching Amazon Prints and partnering with Mimeo Deutschland. And anyway there are 17 million Prime customers in Germany too. Industry top dog, Cewe, has so far declined to comment – I was told that it’s not policy “to comment on partnerships”. That’s also a stance you can take.

But I believe that the tension is slowly rising in Oldenburg and at Cimpress and other photo and merchandising providers. Amazon is making its next foray into the print market with Amazon Custom, a platform for personalized gifts – you could also call it mass customization. I shall be taking a closer look at that in the near future.

My take: all we can do now is wait and see how Amazon Prints fares in the USA. The linkage with Prime membership benefits will certainly enable Amazon to acquire a number of customers for its new business activity, not least because of the really low prices offered compared with other providers. But what we shouldn’t forget is that the choice of photos and the production and editing of photobooks is not only an expedient or commercial decision, it is also time-consuming and to some extent has an emotional background. In other words if Prime customers are already satisfied with other online photo print providers, then Amazon Prints needs to persuade them to switch. And, should Amazon’s concept work, then a launch on the European market will be just around the corner. I believe a sleeping giant has just woken …

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