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Shutterfly’s Strategy: A Conversation with CEO Jeff Housenbold (Part 4)

Posted on Sunday, Mar 23rd 2008

SM: Your vision was to move beyond the traditional print model, and rather be the center of a lifestyle.

JH: I also saw us as building a personal publishing platform. Yes, we have consumers doing all the beautiful cards, books and calendars, but we also have lots of small businesses, charities, schools, non-profits, jewelry manufacturers, real estate agents, cosmetic dentists, Rock Stars sending books to fan clubs, and former Presidents who are using it for their charities. It truly is a personal publishing platform.

SM: How big are these orders? What kind of ASP and volume?

JH: Books range from $30 to $200, a typical consumer might order between one and five. One of the famous Grammy winning rock stars just sent 8,000 to her fan club. 8,000 times $30 is a nice order. It is a nascent, organically growing part of our business.

It is a lot like when I was at eBay, people started selling cars in the die cast collectible category. We could not figure out who would buy a car without kicking the tires, but we watched and six months later eBay Motors was created which did billions of dollars in gross merchandise sales this year.

We are watching and starting to incubate. We are trying to help personal publishing. We have struck deals in the scrapbooking arena where people are moving away from physical scrapbooking and moving into digital scrapbooking, where they can start and stop easily, they can work collaboratively, they can create and edit, they can have multiple copies, so there are a lot of benefits. That is a vertical we are going after.

We have children’s authors who do not need to get an agent and go to New York. We have poets who are doing poetry books. The use cases our community is coming up with have inspired us.

SM: The self-publishing aspect is comparable to what Blurb is doing.

JH: Yes, Lulu and Blurb are in that space. When I think about our stack of core competencies, our real point of differentiation is that we have built a great web front-end user experience and we have built a great backend manufacturing experience. Our competitors do not own manufacturing. We have an incredible just-in-time variable print on demand capability.

In between those two, we are gluing it together with our brand, and we want to be the premium brand. For example, SnapFish has come out and said, “we want to be the WalMart of the industry, we are all about price.” We have said we want to be the Nordstrom, where we have higher service level, and we do not offer every product under the sun but have a great capability to help our customers select their designs. We have higher white-glove service and customer care, and better quality.

Kodak is stuck in the middle as Macy’s … some departments are nice where others are more value oriented. They are trying to span a broader target demographic where we have just said that we want to go after the profitable 40-60% of the market and to my knowledge Kodak and SnapFish have never been profitable.

By taking that stack of front end / back end brand we are now addressing multiple markets in ways where you can go after each one separately. You had to have the different brand, manufacturing approach, different customer service and a different sales force to do that.

SM: With your brand you are going to be able to target horizontally across a wide range of lucrative verticals.

JH: Exactly. We are going after the $31B digital photo industry, the $7.5B greeting card industry, the $7 to $8B stationery market where you do wedding invitations and baby announcements. We are going after the $6-$7B calendar business as there are 500 million calendars sold in America each year. We are going after the photo based merchandise business which includes mugs and mouse pads, which is $.5 to $1B this year.

We are taking our assets and we are able to go horizontally across those in a much more efficient way. We are incubating more businesses. Some of these businesses and institutions – preschools and private schools – do not have a huge staff to build traditional year books. They are using us to do their yearbooks.

Youth sports and youth activities are another big vertical. At the end of the soccer season, they are making a year book and giving as a gift to the coach. And Moms and Dads are giving them to grandma.

I get asked a lot, “How do you compete against the Flickr’s and the Facebook’s?” The answer is that we are not trying to! We think there are a set of concentric circles and your interactivity and sphere of influence and targeted relationships can be viewed in that model. It starts with yourself, expands to immediate family and closest friends, and then a broader group of associates and then it goes to shared memories.

If our children both play on the same soccer team and you are taking picture of my kids because they are playing on the same field as yours, then we can have interactive, shared memories.

The next step is shared interest, which consists of the moms and dads of all kids who play soccer in America and beyond that group are all the people on the internet. The last two groups are ones we are not really trying to address.

This segment is part 4 in the series : Shutterfly's Strategy: A Conversation with CEO Jeff Housenbold
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