Disruptive Innovation And The Bankruptcy Of Ritz Camera

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

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Disruptive Innovation And The Bankruptcy Of Ritz Camera

by Chris Sandström on Mar 10, 2009

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Disruptive Innovation And The Bankruptcy Of Ritz Camera — Presentation Transcript