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Who pays for below-cost prints?

It’s probably mere co-incidence, but following two weeks of punishment on the stock exchange, in which its market capitalisation has dropped by around $700 million, Harvey Norman has dug one of its hoary old 5 cent Fujifilm print promotions out of the crypt.Fujifilm’s photo specialist customers will be disappointed that the Australian photo print market continues to be trashed by one of Fujifilm’s favoured customers even following the departure of Dave Marshall as COO.

The offer is available on both the Harvey Norman and Domayne websites (for which copyright is claimed by Fujifilm Australia) as well as in store. But how does it all work? Do Fujifilm customers indirectly assist the retailing efforts of the Harvey Nornam property/retailing conglomerate they compete against when they pay their paper and chemistry bills? For instance, how much does it cost Fujifilm to develop and run these large and complex e-websites for Harvey Norman (and Domayne, and Big W)? If it didn’t support the mass merchants to this extent, maybe Fujifilm Australia could afford to bring in some premium paper stock for specialists and labs, as enjoyed by Fujifilm customers in other markets.

– So what’s the real cost of a 4×6 print from a wetlab? Independent photo specialist supplier iPhoto has put some thoughts and figures together and come up with the following factors influencing wet lab print costs:
– Labour;
– Power costs;
– Wastage – print & chemistry (returned orders, paper waste, chemical and maintenance issues estimated at 10 – 20 percent of materials costs;
– Time used for daily print calibration, batch changes, magazine loading, QC Issues, Control Strips etc;
– Maintenance and Spare Parts (estimated at $2K PA);
– Air-conditioning / Heating or cooling costs (up to $3K and rising);
– Trade waste agreements/ Silver recovery/ spent chemistry removal costs.

‘Including all of the above could add approximately 50 percent to the actual paper and  chemistry material only costs,’ said iPhoto managing director, Stuart Homes. (Note that we haven’t even added the significant factor of leasing costs to this list.)

He said that if the silver halide paper and chem was sourced at a ‘very sharp’ price, the materials alone work out to 7.6 cents per print.  Yet Harvey Norman’s pre-GST retail price is around 4.5 cents per print.

Factoring in the hidden costs above he said the real cost is more like 12 cents a print. Add GST to that and the retail price would have to be over 13.2 cents per print.

So let’s take Harvey Norman’s 180 stores and make a very conservative educated guess that over the 8 days of the promotion, the average sale per store was a modest 12,000 prints. Then assume the loss that someone made on the 5 cent price was, going on Stuart’s figures above, an equally modest 8 cents. That would be 2,160,000 prints x $0.08, which equals a loss of $172,800. How sad and stupid.

‘So,’ asked Stuart, ‘Who is paying for the “Real” Costs of this Lost Leader Promotion?’

– Well if it’s not Harvey Norman, and it’s not Fujifilm, I wonder who else it could be?
– Keith Shipton

6 Comments

  1. Mark Cumming Mark Cumming 09/03/2018

    Fuji Sucks, one has to wonder how long Fuji and Harvey Norman will stay in business, i pray in a market correction it takes both of them to the cleaners and the WASTE TIP! Never to be seen again!

  2. Rod Lawson Kerr Rod Lawson Kerr 09/03/2018

    Having worked in both retail and wholesale management roles in photographs over the past forty years, out of it now, I have seen this sort of practice become very common. I well remember that favourable pricing Kodak used to offer the mass merchants, so much so that I could buy my Super 8 stock cheaper from a mass merchant than from the Big K and still make a decent margin without inflating my retail price.
    Obviously we as small retailers paid a higher price so that the manufacturer could balance out their profit margins, so I make the same assumption in the Harvey Norman case. The dedicated photo retailer will be paying for the cut price strategy that appears to be part of Fuji’s business plan. There is no way HN will show a loss on the promotion, and you can bet your bottom dollar Fuji won’t be offering such a sweetheart deal to the photo industry any time soon. Gosh, did someone say I was being a cynic? Never!

  3. sad thing is that in the 40 years I have either been in or associated with the industry the value proposition has been manipulated and then destroyed by those that supposedly championed the industry.
    now we have cheaper prints than ever, quality never mentioned, predatory pricing and a diminished industry.
    its all pretty sad.
    Shame on Kodak and Fuji.

  4. alan alan 12/03/2018

    We can’t blame “Dave” any more, so it must be a company decision to support HN.
    I’ve heard the usual rumors that it only happens when the paper sales drop, so they drop the sell price to get paper sales back up, and Gerry gets his rebates.
    Who knows what is true, but Gerry is no fool, and does not give money away, so it is either Fujifilm or the franchisee’s who are doing it.
    And Kodak are not immune, although they are a little less visible with only K Mart supporting them

  5. No More Mr Gerry No More Mr Gerry 13/03/2018

    I like how “Gerry” bitches and moans about Amazon, while he screws over other hard working labs as well as screwing his franchises. I will be glad to here when HN goes under, as they are too expensive anyway (apart from 5 cent prints!). Glad to see “Your too old” from Fuji go as well.

  6. robbo robbo 14/03/2018

    5 cent prints is coles and woolworths $1 liter milk. nothing more nothing less a foot traffic generator,to sell all the other stuff he make over 400%+ on so if he looses say $5 on a print order and sell 1 lounge suite at $1500 hes $695 profit in front ..as the mercat says simples

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