Disruptive Innovation And The Bankruptcy Of Ritz Camera

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

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Disruptive Innovation And The Bankruptcy Of Ritz Camera

  1. 1. Disruptive Innovation and theBankruptcy of Ritz Cameras
  2. 2. Christian Sandström holds a PhD from ChalmersUniversity of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.
  3. 3. The explosion3025201510 5 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005Number of film and digital cameras sold in the United States
  4. 4. The shift from analogue to digital imaging created huge problems for many camera manufacturers.
  5. 5. Kodak…
  6. 6. … Polaroid…
  7. 7. … Leica…
  8. 8. Konica…
  9. 9. … Agfa…
  10. 10. … Hasselblad..
  11. 11. … But the revolution also put many camera stores in trouble…
  12. 12. In February 2009, Ritz Cameras filed for chapter 11 bankruptcy.
  13. 13. Founded in 1918, Ritz grew into the largest photography chain in theUnited States with more than 1300 stores across the country.
  14. 14. The main competitor, Wolf Camera, had been acquired along with a couple of other chains whichremained under their own names…
  15. 15. … Inkley’s, Kits Cameras, Cameras West and The Camera Shop.
  16. 16. The Ritzchain soldcameras…
  17. 17. … Provided service to their customers…
  18. 18. … And made good money on its photofinishing business.
  19. 19. The shift to digital imaging had twounpleasant consequences for Ritz.
  20. 20. 1. People consumed less and less film andthus, the photofinishing business became very unprofitable.
  21. 21. 2. The margins are much lower on electronic goods and their value diminishes rapidly. Therefore you need huge volumes, you can’tafford inventories and you can’t afford to have a lot of employees providing service.
  22. 22. Cameras are nowadaysmainly sold at large retailers of consumer electronics such asBest Buy…
  23. 23. … or Wal Mart.
  24. 24. These stores can sell the large volumes that are required to make a profit, theyhave a lower overhead count, don’t makemoney on film and are masters of supply chain management.
  25. 25. The economics are simply not in favour of smaller chains like Ritz anymore.
  26. 26. The same thing has happened in other digital shifts.
  27. 27. The big old tube radios used to be soldin special stores, which provided service and reparation.
  28. 28. The Transistor Radios were smaller,cheaper and demanded less energy…
  29. 29. 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.
  30. 30. Sony dealt withdiscount storeslike Woolworth which did not have any service departments.
  31. 31. … And therefore the radio stores died.
  32. 32. In the same way, mechanical calculators were sold in stores together with typewriters and office furniture…
  33. 33. These stores provided service and maintained strongrelationships with their customers.
  34. 34. The cheap and simple electronic pocketcalculator could not be sold in this channel.
  35. 35. They had to be sold in large discount stores, without any service, in huge volumes.
  36. 36. So both the mechanical technology and thesales network were rendered obsolete withthe shift to the electronic pocket calculator.
  37. 37. Therefore, the demise of Ritz should notbe regarded as a management failure or as a consequence of the recession.
  38. 38. Its decline was rather a consequence ofthe economics of digital technology and its highly disruptive nature.
  39. 39. The death of radio stores…
  40. 40. … And of stores for mechanical calculators should beregarded as a confirmation of this.
  41. 41. It was digital technology that put an end to the Ritz business.
  42. 42. Canon USA, Nikon, Fuji and many other creditors are now lining up to get asmuch as possible from what remains of a former 1 Bn USD company.
  43. 43. Find out more about the camera industry: www.christiansandstrom.org

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