With the completion of Noritsu America’s acquisition of Lucidiom in December 2009, the combined entity of Noritsu’s back-end solutions and Lucidiom’s APM kiosks and software offers many new opportunities for photo dealers and labs. I sat with Steve L’Heureux, chief operating officer of Noritsu America, and Lucidiom’s president, Steve Giordano, Jr., to talk about how the deal happened, and what the good news is for the future of photo processing.
JG: How did the merger discussions between Noritsu and Lucidiom get started?
SG: Mr. Chayama was new on the job at Noritsu, and when we met at photokina, he asked to stop by our corporate offices in Vienna, Virginia. At our meeting, he spoke with my father, Steve Giordano, Sr., and me about how we saw the future. Our vision resonated very clearly with him and was very consistent with his. Chayama-san asked if we were interested in further dialogue, and we agreed. It was obvious to both executives within the first conversations that this would be a good fit.
Was part of your motivation the fact that your competitors have more complete solutions and the marriage would make you more competitive on both fronts?
SL: From Noritsu’s perspective, competition wasn’t really what drove this marriage; it was the common vision of both senior executives. Then there were the goals of our customers. The industry is changing, and our customers are looking for a “best of breed” solution. They are asking if we can help; they needed easier, more cost-effective solutions, with better margins. In order to do that, there needs to be tighter integration of all of the pieces that make up the photofinishing solution. So, what drove this partnership was the ability to more tightly integrate the R&D and the workflow, from the online and kiosk environment that Lucidiom owns and the printer environment that we own.
By doing that, we will meet these important customer needs, and more.
SG: Also, we believed we had taken Lucidiom as far as we could. A start-up company has to make the change from start-up to grown-up at some point. We knew we could take the next step on very solid ground with Noritsu’s strong base beneath us, by partnering with a dominant player who has impeccable relationships with their customers.
So, will there be exclusivity, whereby Lucidiom will only be tied to Noritsu back-end products?
SL: Good question. That’s another thing that makes this marriage a good one. Philosophically, both companies are committed to open architecture and standard-based technologies, so there will be no emphasis on making the product line proprietary. Both Lucidiom and Noritsu will continue to market their products as a bundled solution, tightly integrated, and as stand-alone solutions, with open interfaces so we can best serve the marketplace.
I’m assuming there’ll be advantages for dealers to do business with this combined entity.
SG: For Lucidiom customers, Noritsu will be able to bring them their service capabilities almost immediately. Also, we will have better products for the industry.
SL: The two companies complement each other very well. If you look at the strengths of each of our customers, and map them on a board, the synergies match up very well. If I were a dealer, what would make me really excited is that we’re committed to a “white label” strategy, whereby we want the dealer to “brand” our solution with their store name. We’re not asking them to promote another kiosk brand, as our competitors do. We want them to promote their own brand, which we believe will allow them to differentiate themselves within their markets, by promoting their own proprietary offerings.
What revenue streams will dealers be able to derive from this marriage?
SG: Our goal is to use existing capital product to release new creativity for dealers and customers. We have some announcements at PMA, and we encourage your readers to stop by our booth. For example, what we’re working on right now with a dealer is how to take Noritsu equipment, like the 703 or the 502, and connect it to an APM system, whether a kiosk or on the Web, and make new products that have never before been created on these machines.
We’re creating hybrid book models that allow them to produce the best quality photo books in one hour. For example, the 703 can create a beautiful lay-flat book that the market hasn’t seen yet.
Photo book offerings haven’t really taken off. Maybe it’s a training issue; maybe consumers are just not comfortable with it yet. Are there things you’ll do as a joint entity to grow that market?
SG: Photo books are experiencing great growth globally; if you look at the people committed to creating them, they’re doing extremely well. They’re experiencing the kind of exponential growth we would expect. The challenge is that the industry has labeled it the “photo book” business, which is really a misnomer. Photo books are only one type of the creative business. What dealers need to do is have all types of creative products available at all times—calendars, folded cards, photo books. What we have to focus on is storytelling—to focus on the future of imaging, not just about printing photo books or cards, or posters, but expressing stories.
The industry has gone from the analog age to the digital age and now to the “age of expression.” Everyone wants to tell their story; they want others to go to Facebook or YouTube or MySpace and see the “story of me.” In our stores, people want to come in and make a scrapbook, a photo book, a poster. Together, Noritsu and Lucidiom have the flexibility to create new kinds of products that help people tell their stories, so retailers can deliver whatever customers need.
SL: As an industry we have not done a great job meeting that requirement. The focus has been on delivering a photo book, but the book didn’t meet the needs of the consumer on two fronts. One, it was very hard to do and very frustrating for consumers. We wanted a partner who would “complete our solution set,” and Lucidiom’s product is extremely easy to use. The second obstacle is that it’s not about the book; it’s about the social expression. And the books most of these systems generate are not that good. You’ll see the combination of Lucidiom’s ease of use with the high-quality image capabilities of Noritsu printers, and we see a perfect marriage. So, we’ll address the two major obstacles that confront the market—ease of use and a product that lives up to consumers’ expectations.
Is the objective to have the dealer complete the entire process in-store?
SG: We prefer to have dealers do it in-store, but if they don’t have the capital or resources, we will give them fulfillment capability through a wholesale solution. Lucidiom already has that through their EQ Gifting brand, which Noritsu can now offer their clients. However, we’re committed to one-hour photo delivery. And we have statistics and data that show the slope of growth changes dramatically if you produce these products in-house. Dealers will do 300% more volume if they offer one-hour delivery of photo books versus overnight or three-day solutions. We believe that dealers have to be able to add their brand, and their expertise, and then customers will come back for that experience.
Do you see the business going a little more online, with delivery in-store?
SG: We do see there’s going to be a lot of online delivery to store, which is the most common use of online. But I don’t think online and in-store kiosks are mutually exclusive; they are different shopping visits at different times, and often the same consumer with a different vision for what they want to do at the time. They are completely complementary, and the more ways you can deliver online, and give the consumer more touch points for your brand, the more you can drive your business.
Are you going to be combining sales teams, marketing teams . . .?
SL: The Giordanos will continue to operate Lucidiom. We’re operating the business as a majority owned subsidiary, but Noritsu and Lucidiom salespeople are working seamlessly together. If you’re comfortable with your Noritsu salesperson, he or she can now help you with Lucidiom, and vice versa. It will be completely seamless from a sales perspective, and I’d encourage all of your readers to speak with whomever they prefer, and both parties will make sure the right solution is found.
Is there anything else you’d like to say to your dealers?
SL: The most important message is that this is tangible evidence of Noritsu’s commitment to the marketplace. This is the only business we’re in; we’re in the photofinishing business, and we’re all in. This acquisition should speak volumes to our commitment and our excitement about the profit and revenue growth opportunities in this marketplace.
SG: We’re looking forward to our customers coming to us and to showing them new opportunities this marriage gives them. I’ve spoken to lots of photofinishing dealers who are having their best years in the past six or seven years. So the opportunities are there, and we encourage dealers to stop by the Noritsu booth, 3140, at PMA and talk about how we can help make them successful.
