As personal computers first became “digital shoeboxes”, many online providers were confident they were best positioned to receive much of the first wave of print orders. But it was not until broadband Internet access reached a critical mass among digital camera users although, that online printing orders really took off. In 2004, PMA reports approximately 73 percent of U.S. households had access to the Internet and 40 percent had a broadband connection. Today, growth in online printing outpaces the overall market, but it is lower than the growth in retail printing. The number of prints ordered online and mailed to consumers’ homes accounted for more than nine percent of the total prints made in 2005, up from under seven percent the year before.

The share of online businesses in standard printing will face pressure in the future from the increasing availability of cheap printing options at retail especially with mega retailers Wal-Mart and Costco. Recently, not only have retailers been taking print orders in store, they also emulate online firms by offering online ordering of prints. And some retailers aim to improve the consumers’ experience by allowing customers to pick up their prints at a convenient retail location shortly after placing their order online (instead of waiting for prints in the mail). This online-to retail option accounted for as much as six percent of prints in some of the months of 2005.

Many online providers already have responded to the underlying trends by adjusting their business strategies. New partnerships that combine the benefits of online photo services and the advantages of retail stores are becoming more common. For example, prints ordered through Yahoo! Photos now can be picked-up at Target locations. Through its partnership with Snapfish, Walgreens is able to offer a comprehensive online product offering and the convenience of receiving prints by mail or picking up in-store. Several such partnerships have developed in the past year and even more will develop in the near future.

InfoTrends predicts that online photo service vendors’ heavy reliance on photo printing will begin to slow revenue growth during the next five years. U.S. online photo print revenues are expected to increase at a compound annual growth rate of eight percent through 2010.

During the past three years, online photo service vendors have experienced strong year-over-year membership growth and significant increases in digital print revenues. The market also benefited from several high-profile acquisitions during 2004 and 2005. Additionally, vendors have been able to increase the conversion rate of photos uploaded to photos printed, which has improved their bottom lines.

As viewing and sharing photos becomes easier, consumers may find fewer reasons to print. Add to that a maturing digital camera market, the emergence of retail online photo services, and the on-going dilemma of relatively low market awareness regarding online photo services, and you have a market in transition.

Online photo service vendors will need to become less dependent on 4 x 6 inch prints. They will need to look at other new areas like photo and video sharing and storage, while placing a greater focus on lucrative lines of business such as photo merchandising.

Consumers now wait for specific prompts/motivations to make prints, such as requests by family and friends, the need for creating albums, fear of losing their digital files, etc. Both film and digital cameras produced 14 percent fewer prints in 2005 than in 2000. Yet, including prints made at home, the total value of printing was higher in 2005 than in 2000.

As businesses look for digital print growth, one issue they are faced with is people printing only a portion of their images. Some households did not make any prints in the course of 2005. Total digital print growth is occurring because: (1) the number of digital camera owners has continuously grown and (2) because the new owners take slightly more photos, so the total images captured keeps increasing. Growth is not due to each household saving more pictures or printing a larger percentage of saved images. Both of these factors have remained fairly constant over time.

The gap between pictures saved and pictures printed is sometimes viewed as the potential number of pictures businesses could persuade consumers to print. While trying to increase the portion of saved images consumers print, companies also need to encourage consumers to do more with their favorite prints.

On a basic level, this means more copies of the same image and larger-size prints. Beyond that though, it necessitates presenting consumers with creative options for using their images. The value of products such as greeting cards, photo books, canvas prints, calendars, stamps and more has the potential to more than compensate for losses in standard print services. These high-profit areas have the ability to substantially impact businesses offering their customers the products and services that fit their lifestyles.