Maxed Out

Maxed Out

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Though it holds all the sex appeal of a frying pan, a terabyte may very well be the most romantic gift you could present to your dearest one this year, a year when many American consumers have finally reached the capacity limits of their home computer hard drives.

Anyone who’s experienced that come-to-Jesus moment when it looks like the old laptop is finally crashing will treasure those 1,000 gigs of back-up memory as a safe resting place for the irreplaceable images and videos they’ve spent years creating and collecting, bit by digital bit.

According to Microsoft market research, the average household has accumulated at least 1,383 photos, 1,364 songs, 1,000 documents and 242 videos, all in digital file formats. Is it any wonder that external storage solutions are proving themselves to be a nearly recession-proof category, with demand growing even in the sluggish first quarter of ‘09?

“I think in spite of the recession, people have increased their awarenesss of their need to back up everything,” says Lisa Walker, president of I3A, the International Image Industry Association. “There’s been a significant change in the last year.”

Why have Americans suddenly got religion on the necessity of storage and archival solutions? And how can specialty imaging retailers take advantage of this growing awareness? Manufacturers and retailers across the nation have a number of ideas about the new demand and how to most profitably satisfy it.

“What’s really the big driver right now is video,” says Scott Rader, senior product marketing manager at Western Digital. “People are collecting large files now, especially since the Flip (www.theflip.com) and even point-and-shoot cameras can capture video in high definition…their PCs don’t have large enough drives for all of it.”

Recession behavior seems to be adding to the demand.

“People are staying at home more, and they’re looking for something to do,” says Randy Queen, president of Verbatim Americas, a removable storage and accessory company, who says storage solutions are also strong because a nation of re-inspired photographers and new video producer/editors are very hesitant to spend a lot of money right now on expensive new laptops with large memory capacities. “We’re hoping that the netbook phenomenon keeps moving forward. It provides an opportunity for us and it’s one of the reasons this category is a growing need.”

Hardware and online storage solution companies are fast generating a slew of new products to meet that need, and to provide perks like remote access to an increasingly mobile customer base. External hard drives, often the least expensive back up and storage option when you break it down to price-per-gig, have evolved to offer consumers remarkable storage capacities.

This spring, Buy.com was selling a Verbatim 1TB external hard drive for just under $100, and that includes shipping. Western Digital has launched its My Book World Edition hard drives with value-added services in tow. Both the $229.99 1TB and the $449.99 2TB versions come with software that allows the owner to remotely access anything on those drives via a password-protected Web site, www.mionet.com.  

Home networking is another emerging trend in backup storage options. The Windows Home Server operating platform, available in products like the HP Media Smart Server series, can be set to not only do nightly backups on every wirelessly connected laptop in the house, but to also provide remote access to material on any hard drive on the network. Iomega has also entered this space with a product dubbed the StorCenter.

Backing up material “in the cloud” (online-based storage) continued to be a growing category as well, despite consumer reticence that resulted from a few online storage companies going out of business over the last two years. Vendors like ScanDigital.com, whose business has grown 250 percent from March ‘08 to March ‘09, have had success offering customers a combination of online storage and hardware.

“We offer online storage for free and try to justify the cost by selling [image] products,” says ScanDigital CEO, Anderson Schoenrock, who reports that requests for transferring video or scanned photos onto hard drives instead of DVDs have gone way up, even in the last six-to-eight months. “It’s a better way to go, the hard drives…they have their digital files accessible right away. We’re selling a 160 gig [Western Digital], USB-powered drive for $100 and other terabyte drives for film and video. We sell the drives at market rate, which is always changing.”
Tell us about it, say retailers across the country, who’ve had a hard time making much money off of storage sales. Lonnie Meissinger, a buyer at Photomark in Phoenix, Ariz., keeps his hard-drive selection pretty limited.

“The thing is there’s such low margin in these devices, and the prices are changing weekly. So we here in a niche market can’t really afford to stock it,” says Meissinger. “We sell the occasional one, but a lot of people will go to a computer store or an office supply place to pick it up. They just don’t turn fast enough yet to be profitable.”

Trevor Anonsen, senior product marketing manager for the Calumet photo store chain (currently operating 10 stores across the United States), agrees that the margins are much slimmer on memory products than most retailers would like, but he still sees potential for the category.

“The key is to turn the inventory very quickly,” he says. “We tell our salespeople that almost every interaction with a customer is an opportunity to ask them, ‘What are you doing to back up your images?’, ‘What kind of storage space do you have?’, or ‘How are you saving all that data?’ The salespeople who do the best incorporate it into any sales presentation.”

I3A’s Walker urges retailers to keep in mind a much higher-margin solution to archiving and back-up sales: the photobook.  

“It’s the saving grace for retailers right now,” she says. “Printing is still the best way to archive because technology is always changing and people will have to put a lot of effort into managing their digital assets over the course of their lifetimes.

"What I’ve been doing personally is at the end of each year, going through and picking out my favorite photos and making a photobook. I pay extra to get something of quality I know is going to last. I think retailers should say, ‘I can do this for you!’ Put some ads on TV! I still see this as an untapped opportunity for retailers.”

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