Disruptive Innovation
and the Bankruptcy of
Ritz Camera

The explosion
30
25
20
15
10
5
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Number of film and digital cameras
sold in the United States

The shift from analogue to
digital imaging created
huge problems for many
camera manufacturers.

Kodak…

… Polaroid…

… Leica…

Konica…

… Agfa…

… Hasselblad..

… But the revolution also put many
camera stores in trouble…

In February 2009, Ritz Cameras filed
for chapter 11 bankruptcy.

Founded in 1918, Ritz grew into the
largest photography chain in the
United States with more than 1300
stores across the country.

The main competitor, Wolf Camera,
had been acquired along with a
couple of other chains which
remained under their own names…

… Inkley’s, Kits Cameras, Cameras West
and The Camera Shop.

The Ritz
chain sold
cameras…

… Provided service to their customers…

… And made good money on its
photofinishing business.

The shift to digital imaging had two
unpleasant consequences for Ritz.

1. People consumed less and less film and
thus, the photofinishing business became
very unprofitable.

2. The margins are much lower on electronic
goods and their value diminishes rapidly.
Therefore you need huge volumes, you can’t
afford inventories and you can’t afford to have
a lot of employees providing service.

Cameras are
nowadays
mainly sold
at large
retailers of
consumer
electronics
such as
Best Buy…

… or Wal Mart.

These stores can sell the large volumes
that are required to make a profit, they
have a lower overhead count, don’t make
money on film and are masters of supply
chain management.

The economics are simply not in favour
of smaller chains like Ritz anymore.

The same thing has
happened in other
digital shifts.

The big old tube radios used to be sold
in special stores, which provided service
and reparation.

The Transistor Radios were smaller,
cheaper and demanded less energy…

In order to sell transistor radios, Sony
had to create a new channel. The
Radio stores made money on
repairing furniture radios and were
therefore not interested in selling
small, cheap transistor radios which
did not generate service revenues.

Sony dealt with
discount stores
like Woolworth
which did not
have any
service
departments.

… And therefore the radio stores died.

In the same way, mechanical calculators
were sold in stores together with
typewriters and office furniture…

These stores
provided
service and
maintained
strong
relationships
with their
customers.

The cheap and simple electronic pocket
calculator could not be sold in this channel.

They had to be sold in large discount stores,
without any service, in huge volumes.

So both the mechanical technology and the
sales network were rendered obsolete with
the shift to the electronic pocket calculator.

Therefore, the demise of Ritz should not
be regarded as a management failure or
as a consequence of the recession.

Its decline was rather a consequence of
the economics of digital technology and
its highly disruptive nature.

The death of radio stores…

… And of
stores for
mechanical
calculators
should be
regarded as a
confirmation
of this.

It was digital technology that put an
end to the Ritz business.

Canon USA, Nikon, Fuji and many other
creditors are now lining up to get as
much as possible from what remains of
a former 1 Bn USD company.

Image attributions
Thanks!

Christian Sandström