Amazon threatens photo printing services from Shutterfly, CVS, Walgreens, Walmart and Snapfish (NASDAQ:AMZN)

Amazon (NASDAQ: AMZN) introduced another exclusive service to satisfy its Prime members. Recently launched photo printing service Amazon Prints caused Shutterfly (SFLY) stock to fall more than 12% yesterday. Amazon Prints is another exclusive service for Prime and Amazon Drive customers.

I have a photography-related business, so I understand the long-term impact of Amazon’s low prices for its online photo printing services. Shutterfly’s double-digit annual revenue growth rate is threatened by this latest move by Amazon. Shutterfly faces a headwind from Amazon’s cheaper photo printing services.

Amazon Prints will only charge Prime or Drive customers $0.09 for 4R (4″x6″), $0.58 for 5R (5″x7″), and $1.79 for 8R (8″x10″).

(Source: Amazon)

Shutterfly’s current price list is below. Amazon photo printing costs are over 55% cheaper than Shutterfly. Unless Shutterfly matches Amazon Prints’ fees, it could lose many of its current customers. Amazon is even giving away 50 first 4R prints free (with free shipping) to its Prime subscribers.

Shutter

(Source: Shutterfly)

The substantial price disparity will encourage professional photographers to shift their business to Amazon Prints. The $2.20 difference in 8″ x 10″ photo printing between Amazon Prints and Shutterfly is just too big to resist. For example, I have 329 DepED ALS high school graduation photos that need to be printed in 8R (8″x10″) size. I could save $723.80 if I used Amazon Prints instead of Shutterfly.

Amazon Prints will also compete with other online photo printing services from CVS (CVS) Photo, snapfish.com, mpix.com, AdoramaPix, Walgreens and Walmart (WMT) Photo. Amazon saw an opportunity in the multi-billion dollar digital photography industry. Amazon’s vast customer base and fast distribution network will make it a leader in the photo printing industry.

why is it important

I said very clearly two weeks ago that Amazon’s incredible growth story is heavily influenced by how well he can keep his Prime members happy and faithful. Amazon can drive more business from its 63 million Prime members by enticing them with more affordable photo printing services.

If we estimate that 10% of the current Prime member population spends an average of $10 each per month on photo printing, Amazon could generate $756 million in new annual revenue.

6.3 million Prime members x $10 x 12 months = $756

The price of Amazon Prints is reasonable. Here in the Philippines, I’m only charged 35 pesos ($0.76) for volume orders on 8R prints and 4.50 pesos ($0.10) for 4R prints. I’m confident that Amazon has found a cost-effective solution to not subsidizing every photo printed through Amazon Prints. Free standard shipping for printed photos is valid for a limited time only. Like Shutterfly, Amazon Prints will eventually charge customers shipping, especially for large numbers of prints.

Cheap photo printing from Amazon Prints is also an incentive for people to sign up for Amazon Prime. We all know that Prime members spend much more than non-members in Amazon Marketplace. The more people who are incentivized to join Prime, the better it is for Amazon’s revenue growth.

An Amazon Prime member in America spends an average of $1,200 each year on Amazon. That’s more than double the average $500 spend of a non-Prime U.S. Amazon shopper.

Amazon’s move to compete with online photo printing services is a smart one. Some of those 63 million Prime subscribers are likely among the people Deloitte predicts will download 2.5 trillion photos this year. A small percentage of those 2.5 trillion uploaded photos might end up on Amazon Prints.

(Source: Deloitte)

Conclusion

The best way to protect photographs captured by smartphones, tablets and digital cameras is to print them. Unlike online photo storages, printed copies cannot be hacked or deleted due to server death/malfunctions.

Special occasions such as weddings, debuts, birthdays and graduations always inspire people to print photos that are worth framing and displaying on photo books/albums and office/residential walls.

Ever-improving phone cameras could also encourage more people to print the photos they’ve captured with their Android or iOS smartphones. Amazon Prints will probably be the cheapest way to print their smartphone photos in bulk.

Inkjet photo printing remains expensive and very slow. My fastest retail inkjet photo printer, the Canon (CAJ) G100 prints 8R (8″x10″) in 2 minutes 30 seconds on standard quality glossy photo paper. If I set the settings to Photo Print, Best Quality, it takes over 9 minutes. The cost per piece of 8R printing on special fade and water resistant inkjet photo paper is also over $2.00.

The InfoTrends chart below from a 2015 survey once revealed that 27% of phone owners have tried printing photos from their smartphones. I’m sure as smartphones get better at photography, more and more people will be tempted to have some of their photos taken over the phone printed online.

What I mean is that Snapfish and Shutterfly succeed because people still find online photo printing services more affordable. These companies probably still use very economical silver halide based minilab photo printers made by Fuji Film (OTCPK: FUJIY), Mitsubishi, Noritsu or Konica-Minolta.

I endorse AMZN as a strong buy. Bezos is smart again in challenging Shutterfly’s photo printing services. In my view, Amazon can quickly diminish the growth potential of companies dependent on online photo printing like Shutterfly and Snapfish.

Elaine F. Brim