Western European photo trends with Jeremy Wills, Futuresource

Gary Pageau of the Dead Pixels Society talks with Jeremy Wills, senior market analyst, Pro AV and Imaging, for Futuresource Consulting. Wills covers the Western Europe photo market. In this podcast, Wills talks about the photo personalization market in Europe, the role of photo printing, the booming greeting card market, the behavior of Millennials and Generation Z, and more.

Wills joined Futuresource Consulting in 2001. He holds a degree in French from Kings College, University of London.  Futuresource has been tracking the consumer-ordered photo printing markets for more than 20 years in line with the evolution of digital printing technology and e-commerce innovation. 

If you're interested in the @futuresource Imaging portfolio please visit:

https://www.futuresource-consulting.com/consumer-electronics/imaging-and-print/

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Transcript

Gary Pageau  0:03  
Hello again and welcome to the Dead Pixel Society podcast. I'm your host, Gary Pageau and today we're joined by Jeremy Wills, the senior market analyst from Futuresource based in St. Albans. In the UK, he is the senior market analysts for pro AV pro lighting and imaging. Hello, Jeremy, how are you today?

Jeremy Wills  0:23  
Hi, Gary, how you doing? I'm very good. Thanks, man. This was getting to be rather sort of dusty day here in the UK.

Gary Pageau  0:32  
So for audience who aren't familiar with Futuresource, can you kind of give us a short brief on what the company does in the areas they cover? I know, it's a big company, and you cover a sector of within that company?

Jeremy Wills  0:43  
Sure. I mean, she just sources, we're a tech focused analyst firm. And we've been established about 30 years now completely independent based in the UK, but but we've global coverage and, and within technology, basically what what we focus on is and which is how we start is content, so music, film, TV, photo, gaming, etc, how that content is either delivered to, you know, consumers or business users. So the delivery systems, which you know, gone from physical to digital over many years, but often, you know, still hardware based as well. And then the the equipment which is used to deliver that, that content, as I say, be it consumer or professional to to the end users. And we have two major major analyst teams in the company. One is b2c and consumer electronics. They were quite tied up with them. Doo doo doo doo, I can't think of the name of the tradeshow the Sony Vegas moment. That's the one or the the online version at the moment, and I sit in their b2b side of the business, which includes photo printing, which we've covered as a company for about 20 years now.

Gary Pageau  1:55  
Great. So your primary area of focus is the UK in Western Europe. Can you kind of give us an overview of the size of the market and the areas in which you cover?

Jeremy Wills  2:09  
Sure, I mean, nowadays, we we cover the the top six markets in Western Europe used to have wider coverage than that, but these top six markets in Western Europe, France Benelux, Germany, Italy, Spain, and here the UK, they account for about 80% of Western European fighter output value. So they're the lion's share of the market. I guess that's one of the reasons why we we've consolidated into looking at them. And if you look at the market as in value terms, then then, you know, in 2019 2020, we're looking at about a 3.1 billion euro business. And this is consumer order freddo products, nothing in terms of professional photo or school sweaters purely or products ordered by by consumers, either in our in store or online. From a PC tablet app, whatever it may be. So it's it's not anything significant business at all. And it's, you know, in recent years, you know, started to exhibit a little bit of growth again, as the dynamics in in the overall market change slightly. And you know, the millennials and Gen Zed, I guess digital natives start to show a bit of interest in, in physical media and vinyl. Friday prints, even cassettes I believe, I'm not quite sure about hipsters and typewriters, but certainly a lot of lot of physical things. Yeah.

Gary Pageau  3:34  
Well, I won't be interested in until they bring back the eight track tape. So let's talk a little bit about you said you don't cover the consumer area but or you only cover the consumer area. But I find it interesting from a from a technology standpoint, on the back end, there's a lot of crossover between the commercial market and the consumer market in terms of the equipment being used, the platform's being used the media that is sent to the devices. And I see that as an interesting growth opportunity for for those commercial businesses who want to expand their market into commercial or into consumer. Are you seeing anything any of that over there?

Jeremy Wills  4:17  
I mean, if you if you look at the the print service provider landscape that then yes, I mean, it's something that's, that's been going on for a while, and I guess maybe plateaued a little bit, but but there's still an interest for you know, from commercial print companies to, you know, to get into the fray to landscape they see opportunities maybe in in Warwick or in in photocards, which in some Western European markets are, are hugely significant and had a massive spike last year because all of a sudden we'd lock down people couldn't get into a bricks and mortar retailer and buy a card. So whether it's a personalized photo product or just purely a web to print card, all of that was coming into play, but yes, and I think that on the on the PSP side of things is driven by peripheral of digital press as well, you know, because there's a wider landscape of presses available in the market now. And, you know, as you know, there is a bit of a move from the pro and school side of the business as well from silver highlights a digital press, then then sorry, plays into the hands of, you know, existing incumbent players, but also, you know, commercial printing companies that might be looking for other verticals. Even in this, you know, what I would consider to be relatively mature, overall find a market to throw their hat into the ring, I think the, the caveat to that is, you've got to have a really good front end partnership. You know, if you look at, look at the likes of some of the this very successful psps, they've got a multiplicity of, you know, retail etail app partners that are established, you've got to either have your own, in house vertically integrated front end, which is robust, or you've got, I've got to have, you know, you know, as a white label printing provider, you know, the customer base that can, you know, can have the expertise in driving the front end of the business and reaching the consumers, because that's really where it's all at. And that's the battle ground that's being played out now, between the existing etailers, who've been around for 2030 years and sort of ride riding on the.com boom bubble from years ago, and bringing their customers with them the, you know, the photo boxes in our bellies of this world here in Western Europe, similar to Shutterfly near sa, and then the up and coming apps, which are sort of biting at their heels a little bit. Sure. Even if they're not really generating huge volumes, you know, at this stage. You know, you

Gary Pageau  6:35  
touched on a very interesting point, because photo was kind of in its own little world, because the silver halide, it was a very specific type of technology, there was a lot of nuance to it. If you were a big silver halide lab, you had to have, you know, chemists on staff and you know, things like there was paper handling, there was way to deal with, you know, dark rooms, and serving color fastness and all those various things. And as digital came into play, it kind of removed that distinction of the difference in the platform. And as we see, you know, media, from an inkjet standpoint, specifically approaching silver halide in terms of look, feel, and some would say they've already surpassed that. I think that does open up the opportunity for a lot more people to play in the market. Now. Whether the pie is going to grow fast enough to accommodate all those players, I think is another thing. I thought it was an interesting trend. And and no, we saw it here in the us a couple years ago. Shutterfly before they were taking private, they were trying to make a big push into commercial printing, right? Because they were they kind of went up, it went out at the other way. They say, you know, gosh, we've got all these indigos we may as well do some brochures.

Jeremy Wills  7:50  
Yeah. And I think that that's certainly something we've seen, you know, you know, if you look at Europe's largest white label, incredibly successful print service providers Cewe the German company, they've got, you know, a company that they acquired a few years ago called Saxonprint, which is purely a, you know, web to print if you like, PSP, within within the, you know, their overall infrastructure now, so So there has been that kind of, you know, from some players, there has been that, that kind of push back, if you look at you look at vistaprint, and are obviously active in the USA as well, they are hugely successful every year in terms of photo calendars, mugs, that kind of item, but, you know, again, very much balance with being a huge web print provider overall. So, yeah, there's, yeah, there's been a little bit of fluidity in him in both directions. When it comes to that.

Gary Pageau  8:48  
I think it's really though the graphic arts and printing companies that have had more success infiltrating photo then and then the other way around. I Indeed, indeed,

Jeremy Wills  8:59  
definitely, definitely the case. Yeah, I can think of, you know, going back the last 10 years ago, you know, whether it's startups or, you know, it, you know, you can look, you know, if you look at wall deco, it's quite easy to start up with some some large format printers. Obviously, when it gets to digital presses, and that aspect of the business, it becomes a much higher, you know, you know, route to market costs. But, you know, there's been some success stories there, you know, with some of these companies that have added that, that string to their bow, I mean, here in the UK, there's been some new web to bring card companies that have emerged in the last two or three years that I you know, you know, it started with web to print cars got into photo personalized cards, using you know, print service providers, which don't come from the photo background, but have the same digital presses and the same wherewithal to deliver and dispatch that product as the you know, the, the white label printers as well such as, for instance, Harrier here in the UK, you know, Fujifilm, CEWE, are all very injured. As some of these major Western European white label photo labs, print service providers.

Gary Pageau  10:05  
So let's talk a little bit about the photo card market. Because I think in the UK, that's actually one of the more interesting areas because you've got some very interesting kind of vertical players in that market. Can you talk a little bit about the size of the market and where the where that business is coming from, whether it's app or website?

Jeremy Wills  10:26  
Sure, sure. I mean, the the UK we completely the mad and greetings cars in the UK, I think, a little bit mirrored by by Well, you know, captains in the Benelux market, as well. And one or two other countries in the world like Australia, but that's played into the hands of, you know, you know, some of the online web to print and photoprints car players. So we, I mean, here in the UK, we have Moonpig who overall, I would say market leader, but we've got funky pigeon. There's a company called the dogs do das, which is typically separately British humor. And then one or two newer players, you know, like, there's a company called Thoughtful, which has come to the market in the last two, three years that it started with web to print, more recently gone into personalized photo. And then, you know, tangentially you have some of the existing photo players. I mean, Moonpig is part of the overall Photobox group, but you've got the other brands in the photo books group, when it comes to some multipack cards, which are less popular in the UK, but certainly very popular in some European markets, then, then you have the likes of vistaprint, and albelli, and some of the others, the whole sort of planet card Empire from France, which together when the carton and Bali prints in Germany A few years ago, you know, involved in that that part of the market as well. I mean, collectively, in Western Europe, it's cards wise, you're looking at about 220 odd million euros. Sorry, that's the wrong one 230 million euro business in 2019. And it definitely spiked in 2020. Because of the as I said earlier on the the fact that people just couldn't get into bricks and mortar retailers for a while in, in the early months of last year. So we think that's actually given the the the both the web to print and the photocard business a bit of a, a bit of a boost, if you like, because that spike isn't necessarily going to be mirrored in growth in 2021. And beyond, but it's it will carry on with that acceleration that comes off that boost from 2019 to 2020. So, you know, when the market grew by, we're looking at here, probably about seven or 8%, as opposed to one or 2%, a year had been growing at in previous years. And that one or two doesn't sound great. But that's collectively across all six markets, you know, within those individual markets, you've got different dynamics going on in the different different parts of the business.

Gary Pageau  13:12  
COVID-19 has been an anomaly in the industry. How much of the behavior change that has happened with photo behavior with people going more online, more web to print? Do you think it's going to be permanent? Do you think the landscape has permanently changed? Are people you know, never going to use photo kiosks again, or walk into a retail store? Or is there going to be as some people believe actually a sort of resurgence in that because people are dying to get out of their house?

Jeremy Wills  13:41  
I think it I think it's if you like it's it's a double edged sword that there undoubtedly will be some consumers that pivoted a lot of their behavior, including any photo printing behavior online that it will be permanently lost to the retail photo business. And they they discovered that, whilst they can't necessarily have they have an immediate print from a kiosk or mini lab within you know, 24 hours that you know, oh, my goodness, this is cheap. And guess what, it's a silver a light print is pretty good. And they won't come back again. And the same you know, to a lesser extent because obviously photo books are not really an online purchase proposition aside install purchase proposition but you know, maybe to an extent with with cards or some other products as well. So, so yeah, I think there is a fear amongst the retail community that if we look here in Western Europe, they probably took in the h1, they probably took a 30% dip in in revenue because of what was going on in various lockdowns that, that that won't all be recovered in a in the second half of 2020 because we were not entirely sure quite how the the year ended yet and be that they won't necessarily recover all that personally anyway, but but it won't be a total write off you know, there will be some balance again. The Kiosk business in in Germany, Benelux, France, UK is pretty buoyant. When it comes to 3d printing and the fact that assembly, you know, generation Zed and millennial customers will come and you know, make prints from the kiosk, if they just want a handful, and, you know, retain relative agnosticism to price means that, you know, we will see that continuing, I think the bank account and many of our business will will bear the brunt of that is bearing the brunt of the pivot to the online photo world anyway, and before COVID hit us. So we think that's probably where where, you know, production wise that the biggest hits will occur. And certainly we're seeing, you know, for instance, boots here in the UK is completely removed, all of its many labs now is purely a kiosk, back, sort of back end photo lab service. Now, while it's run by CBI, it is now here, it's now now now as as of last year, at some point run by CV. Yeah. So so. So, yes, there will be an impact on retail, it won't be as devastating as the short term, in fact, last year, but with some of those customers won't return. You know, some of the online players were saying to me last year, we've suddenly got an extra 30% customer base, but we won't necessarily keep all of them. And they won't necessarily be repeat customers, but, but our customer base has suddenly spiked massively, and also because there are people that suddenly had time on their hands and decided to do a photo book, order some Wolf of Wall deck or whatever it may be, in the first half of last year, whether or not that transpired, the second half remains to be seen, I'm hearing some noises that maybe some of some of q3 and q4 had a bit of a knock on for that, and the orders weren't quite as great as they normally would have been in the busy season.

Gary Pageau  16:51  
And considering that, customer acquisition is usually among the more expensive activity a business can have, especially online, that's bad actually.

Jeremy Wills  17:06  
I had this conversation, quite a few people asked me and said there's millions and millions of pounds dollars euros worth of marketing is just just happened, you know, without without a cent being spent, basically, you know, in the last few months.

Gary Pageau  17:19  
So one of the theories we've been tossing around is the idea that COVID accelerated some of the activity that the market was already experiencing, like you were talking about, you know, the decline of retail retail was already, you know, many lies are being pulled out of big, big shops, because they weren't justifying the floorspace and things like that any date, and people were moving towards mobile phones and apps anyway. And I would have had and so it accelerated that behavior. Is there any? Do you see any of that over in Europe?

Jeremy Wills  17:59  
Yes, definitely. Is, is nice. I think there's no doubt the the puppy Did, did speed up that that curve. And we I mean, you you were talking about apps, if we look at, look at the apps, there's, I don't want to obviously, you know, push any particular apps as an analyst. But if I take a couple of examples here in Europe, there's the French software company called Claranova, which is behind the free prints apps, which are also available in the US and you know, particularly here in the UK, but in other Western European mark as well, they've been incredibly successful, you know, playing on the free word, there's a delivery charge for an actual charge of the product with prints, then books, then then flat cards, wall tiles, I've got a wall tile and me and my partner, my niece here in my, my room, you know, these kind of things, which are, you know, you know, becoming popular, and then then, you know, that's a volume business, there's no doubt about that. There's certainly this one volume shifting there. And margins come from value add and sell up and, and those kind of things. At the other end, you've got three sort of clever tech focus firms like like pop, sir, was one of the photo book players, it's emerged in recent years, which is using AI to target people through social media, we've already made photo books, again, I guess, relatively competitive prices. And let's say Here you go, here's a photo book from from your social media. And again, you know, whilst the figures may be relatively low compared to the photo boxes, and, and others of this world here in Europe, you know, they're certainly getting some really good traction going and, and they're reaching consumers, particularly, maybe the millennials. Once millennials start having children, then photos become more important, you know, further products in ways the maybe some of the incumbent players are struggling to reach. I remember talking to, you know, an online player in the US few years ago, and they said we're throwing millions of dollars at the Midland So we're just not getting them. And we just don't know how to reach them. And I think that's, that's part of the battle, it's how you reach these, these potential consumers. And if you look at Friday book penetration in Western Europe, it's around 15% of the population, I don't see that, that means that 85% of the market is untapped. And there's going to be a huge explosion in photo books, but it's how you reach, you know, some of the, you know, the sort of Generation X my generation, but also the younger generations that are coming as well. Who will start their journey from a Fujifilm Instax to going through a print kiosk or having a baby and wanting to, you know, you know, have a nice Canvas print on the wall, or a photo book, or the baby and those kind of things.

Gary Pageau  20:44  
Yeah, I kind of wanted to move into the demographic shifts, as you mentioned, when we say Gen Z over there, it's Gen Zed. Yeah, there are so and of course, millennials, there is this idea, there was this idea, you know, not too long ago, that, you know, print was dying print was dead, you know, because it, we can see it on our phones, we can see it on our screens. And now the realization, I think, is that, gosh, we live in the real world, and we like to see things around us that remind us of, of our family, friends experiences, and that doesn't necessarily have to be on a screen. And I think the industry is responded pretty well with coming up with products that are innovative, creative and affordable. You know, in terms of wall decor, and decoration and things like that. So when it comes to reaching the gen zeds and the millennials, is it a marketing issue? Is it a convenience issue? Or is it a price issue? How can we get that 15% for example, photo books up to maybe 20%, I think is probably more realistic.

Jeremy Wills  21:57  
I think it's if that's the case depends on all three of those factors without me sitting on the fence too much. But it's also it's also the product itself. And as I say they they'll start their journey by by, you know, going to a print kiosk, which are much more a significant part of the the photo business here in, in Western Europe. And they are in the US where you know, a lot of the retailers tend to sort of do one hour mini lab prints not so much the case here. So they'll start their journey with a few kiosk prints and then they may move forward from there, they're not necessarily going to be afraid about consumer in their late teens. It's a journey they take but but you know, you see pictures of you know, student dorms where they will got lots of, you know, in stacks and Polaroid Starfighter prints hanging up on a piece of string with pegs, they'll they'll change them regularly. They're agnostic to, you know, 78 euro cents 760 70 pF, or kiosk print here in this country. And that's that's the journey they begin not to be sort of erases consumers of Friday products, but certainly to, to value. Now some of these physical products, the the tangible and, you know, things that have some meaning, you know, we take 70 pictures now with our smartphones, you know, looking at my Christmas pictures, including the fact some reason I got a picture of my, my lunch on Christmas Day, which is completely inconsequential, but, but amongst those pictures, there's a picture of me and my partner walking, you know, on a Sunday with my niece, and they're the ones that you want to printer, they're the ones that hold some value. And I guess the same for that generation.

Gary Pageau  23:34  
So a lot of people like you mentioned pops on some other companies are trying to use AI to drive that transaction. What is your perception of where AI is in the market?

Jeremy Wills  23:47  
This, there's a lot of talk about it, and I'm not belittling it at all. But when you talk to the vendors, I think I think AI can work very well for a small fee to fit operator, or smaller, I should say without belittling them, like prop server or some of their peers or you know, for instance, re snap, which is now part of our belly because, you know, that's what they do. And they're not they don't have to worry about operations and production and everything else that's that's what they're doing. They're they're very much at the front end of the market. When it comes to some of the more incumbent credit players that are I guess slightly larger slightly, you have slightly slower turning circles then then the cost of AI and optimizing everything across every single platform and becomes a bit more of an issue. So so it's a good thing, but it's not something that sort of one size fits all it really depends upon the upon the vendor, if you like all the tighter the that's involved in it, if that makes sense. Sure. Yeah.

Gary Pageau  24:52  
Well, one of the things I think that I've come to grips with with the market is that Unlike the early days of photo, right or on digital photo, like like the days of Snapfish and Shutterfly, when they first started out, you could be vertically integrated. Right? You could you could do your own website, you could do your own production, you could do your own marketing. Nowadays, it seems like it's almost divided into, like different segments, and that players have to decide what segment they're going to play in, are they going to be more of a marketing company? And their technology and their production? Are they going to be a technology company and outsource their marketing? And their production? Yeah. Are they going to be a production company and outsource the marketing? And the technology?

Jeremy Wills  25:38  
Yeah, I think so. I mean, if you look, if you look here in Europe, you've got some admittedly hugely successful, vertically integrated players that I guess would say that there are, there are a front end company that happens to be good at printing. You know, but, you know, the the success stories in recent years, and again, I'm talking about relative growth, because, you know, none of them yet are with the exception of reprints, which you know, is the largest photo prints reseller in the UK, they've come a long way, in six years or so. They're not necessarily biting in the heels of the major players, but but the success stories are these, these smaller fleet of foot, often app bass players who might start at base and then go online as well, that, you know, don't, as you say, don't have all those overheads, they don't even know that they will, you know, use a third party to acts as a buffer between them and the print service provider even say that they can focus their energies on on trying to capture that customer base. Rather than then having, you know, a miscellany of staff and roles and within the company. So, so there's no clear direction, I can't say, the future is going to be tied to the app based and print service provider base. But if, if I look at our figures, and I look at the percentage of the market, that the the white label, you know, printing companies hold, and that's growing, that's where the growth is in the business. And that's because, you know, of cannibalization of retail orders. And also, you know, some of that organic growth has come from some of these apps, it's the, it's the white label companies, it's the Harriers and surveys and Fuji labs, Phipps, I think they're now called all those and ad cops and all the others of this, well, that, you know, provide those, you know, that print service that as for be exhibiting, you know, more growth than than the rest of the market.

Gary Pageau  27:40  
I'm old enough to remember film and things like that, and it was always a challenge to get people to carry a camera, use a camera and process the raw film, right. And, you know, over in the US the average household process, like three rolls of film a year, in fact, where there was some there was the big joke where you'd have a Christmas tree on each end of the roll, right? Cuz we've got one ROI here and wow, you know, and so the household spend on photography was actually an average fairly low. Because you know, three rolls of film a year Yes, there were heavy users and everything else. But in many, you know, there's only like 85% of households even had a camera. Many households did not. And nowadays, those limitations are pretty much disappeared. Everyone has a camera, everyone's constantly using it. And we and actually also I believe, and I don't know what your numbers are show but I would say the household spend on photography is actually fairly high. For print active households. In other words, people who actually print are spending more than they were say 20 years ago when it was analog.

Jeremy Wills  28:48  
I think I think that's the case i think you know, if you look at I don't I don't have any direct statistics on this button. The sense I have very much for the industries if you look at the basket size that is growing, I mean the the the upsell is a push a particular push from from the retailers and the print service providers. But you know, when we if we look at photo books, you know, more pages there lay flat silver highlight, high quality, digital print, you know, more more sophisticated bindings and coverings and that's that's all pushing the value up more than the volume in the sector. I think you could argue that technological evolution will do the same with you know with with all deck or with even with with cards as you know, digital presses have more options for for more sophisticated print and embossing everything else and even even when it comes to to good old photo prints. Again, you know the the fact that it's not necessarily a four by six anymore that it can be an Instax Polaroid, whatever it might be style or just a different size or it might be a box of 50 prints in a you know, in their own little cardboard box that people would pay more money for that. So So we're definitely adding value. And I think, you know, pushing up that you know that that basket size, year on year, I mean, the prints volume is, is flat. So prints volume is declining value is flat. I mean that that's that says already out and then extent and the same way we find ebooks that we've continued to see a definite definitive growth in the value, but but the volume is kind of plateauing a little bit.

Gary Pageau  30:29  
So moving forward, I think we should look at this is actually a positive trend.

Jeremy Wills  30:36  
Right. It is, it is. Yeah.

Gary Pageau  30:39  
Because,

Jeremy Wills  30:41  
Oh, I'm sorry. Well, you know, I mean, our outlook, you know, between 2019 and 2020, for about 10% value growth in the market. You know, we we see, you know, these these new consumers, you know, taking that journey and potentially expanding from from prints to, to higher value Friday products as they as they have families and their own homes. And this is a forecast forecast was difficult to, you know, to be totally solid about, but, you know, there's a lot of untapped potential. It only takes, you know, a print service provider to innovate something you know, we've, we've seen, you know, a bit of a spike in recent years with you know, there's a good evergreen products in favour merchandise like mugs, but phone covers came along and everybody went mad about those. Last year, everybody's been getting mad about jigsaws, photo blankets, which are hugely popular in the US seem to be penetrating some of the Western European markets. Now, it just takes it a killer product for a little while. And you can, you know, have a huge and sustained spike in in the sector. So, so now, our forecasts are, I wouldn't say conservative, but but you know, it's very hard to say what's coming along, but but they could be, you know, so much more potential than this in the future, as well. And from the point of view of the print service providers, if they homogenize their operation workflow around a completely digital proposition in the future as well, then, then that could also drive, I guess, cost benefits and sort of trickle down in into the marketplace as well. So there's a lot of positivity out there. Good to see, as I say, you know, double digit outlook over the next few years and overall in terms of where the value is heading in the business.

Gary Pageau  32:42  
Well, that's great. Well, thank you, Jeremy, for your time. I look forward to connecting with you again later in the year. Hope we get an update, and hope you have a great early first part of the year.

Jeremy Wills  32:52  
You too. Thanks very much. Lovely to speak with you.