Photos in a Flash : Ubiquitous One-Hour Minilabs Are Snapping Up a Third of Film Processing Business, but Mass Merchandisers’ Interest Has Yet to Develop

So-called minilabs--those bulky machines in one-hour photo stores that take a roll of exposed but undeveloped film at one end and turn out prints at the other within a few minutes--have enjoyed spectacular commercial success during the past eight years while consistently making film processing industry experts look foolish.

Back in 1980, the experts viewed minilabs as a novelty. The dwarf contraptions could be useful for developing odd batches of film that would not justify starting up the building-sized machinery of overnight wholesale film processors, they thought. But how many consumers really needed their photos back in an hour? Kodak, apparently believing that few did, did not even start building or selling minilabs until two years ago.

Yet in the past eight years, minilabs have grabbed a third of the nation’s $4.4-billion film developing market.

By 1983, even industry boosters were declaring the market saturated, especially in Southern California. Roger T. McManus Jr., an industry booster who is executive director of the Greensboro, N.C.-based International Minilab Assn., says he declared the California market saturated in 1983, when about 800 minilabs were in operation.

Now he estimates that the state has roughly 1,400. “They keep selling units out there. I’m always surprised.”

The experts’ latest theme is that mass merchandisers--such as supermarkets, department stores and discounters--are starting to buy minilabs instead of sending film to overnight, wholesale film processors.

Reluctant to Invest

But that does not seem to be happening yet. While K mart, Eckerd drug stores and Wal-Mart have all plunged into the one-hour photo business, Vons and Safeway seem to be leaving it and 7-Eleven, Montgomery Ward, J. C. Penney, and Sears say they are either leasing limited space for minilabs or staying out of the business entirely.

Big retailers are reluctant to invest in minilabs because of worries about reliability and complexity of the equipment, said Robert E. Reed, advertising manager of Gretag Systems, a Seattle-based distributor of Italian and Swiss minilabs. “In the early beginning, the equipment was almost a nightmare. You had to be mechanically adept and know a lot about photo finishing.”

Minilab technology has improved since then, he said, while adding that, “I don’t see mass merchandisers going into the minilabs to a great extent until the equipment gets smaller and simpler to operate.”

Those were the considerations that discouraged Chicago-based Montgomery Ward from entering the one-hour photo business. “It takes really experienced, qualified people to develop film,” and a lot of valuable floor space as well, spokesman Charles H. Thorne said.

Vons has closed a minilab it installed in its Garden Grove Pavilion grocery store. “We found better and more profitable ways to use the space,” spokeswoman Vicky Sanders said.

Alpha Beta has no minilabs and no plans to introduce them, spokesman Bill Wade said. Safeway has tried the machines in several stores around the country, spokesman John Shepherd said, but found that overnight film developing, long offered in many of the chain’s stores, gives the same quality as minilabs at a much lower price. “We’ve had mixed results. . . . There’s not many people that actually spend a full hour in a grocery store.”

Mostly Independents

Some stores are tackling the problem of customers in for only short visits by buying and advertising ever speedier minilabs. H. K. Super, a Los Angeles supermarket at the corner of Western Avenue and First Street that caters to a heavily Korean clientele, recently installed a photo store promising 23-minute service. The best machines made now process film in as little as 18 minutes, McManus said.

But sales figures from minilab manufacturers indicate that few mass merchandisers are following H. K. Super’s course. Mass merchandisers, “only have a couple percent of the placements to date,” said Steven E. Baune, Kodak’s general manager for the U.S. marketing of photo-finishing systems.

Independent operators still buy about 65% of all minilabs sold each year, said Joseph H. Leach, senior vice president for sales and marketing at Buena Park-based Noritsu America, the U.S. distributor of the best-selling brand of minilabs. Small businesses that buy minilabs as a sideline account for an additional 20% or 21% of the market, while mass merchandisers make up the remaining 15%, he said.

If the mass merchandisers replace anybody, they are most likely to drive out the many already struggling small businesses that have installed minilabs as a second business, McManus said. “Those people who put them in their pet stores or liquor stores or exterminators or dime stores are not generally set up with the mentality to promote their photo finishing.”

K mart is widely cited as a pioneer in the introduction of minilabs to mass merchandising. The Troy, Mich.-based discounter started out with two machines in the Detroit area 10 years ago and says it has installed 68 by now.

K mart used the first two photo centers as informal training centers for the managers of each subsequent minilab, said Lee R. Messner, a retired executive who started the company’s quick photo-finishing division and ran it until two years ago. “You can’t put a checkout operator in the (minilab) department unless you train them,” he said.

But concern about leaving the expensive devices idle overnight has led the retailer to try pooling seven or eight in a general lab in Chicago--where they do traditional overnight processing of film sent from other stores, he said.

A K mart spokeswoman said the company is reviewing its one-hour photo processing operations. “We’re checking our numbers on the profits and sales that are coming in,” she said.