BusinessTN

In the late 1990s, as public demand forced tighter government restrictions on phone solicitations, Olan Mills dropped the telemarketing strategy it pioneered generations earlier and entered the unfamiliar—and often turbulent—waters of mass-market retail. Almost a decade later, the Chattanooga company’s studio portrait division, once its flagship, continues to seek stable footing despite battering changes in the market and in technology.

Almost extinct is the freestanding studio, once numbering 900, which the company operated with little national competition. Correctly anticipating a big drop in sales when it ceased telemarketing (revenue fell 30% between 1997 and 2002), Olan Mills closed most of its traditional sites to open hundreds of in-store studios with new retail partner Kmart—only to watch many close when Kmart filed for bankruptcy in 2002.

Since Kmart reorganized, Olan Mills has reopened selectively and now operates in 477 Kmart stores. An Olan Mills spokesman says the relationship continues to be “successful.”

Industry analyst Tom Crawford of Photo Marketing Association International says it’s hard to imagine that Kmart offers big benefits as a retail partner. “You go into any Kmart now, and there’s nobody there,” Crawford says. “It all has to do with surrounding yourself with a winning program.”

Finding a stable “winning program” may be the real challenge for the company. Though Olan Mills lately has forged partnerships with a diverse array of retailers, operating 101 studios in stores from Proffitts to Geoffrey’s Toys “R” Us, its list of partners is a microcosm of the volatile retail environment. In recent years, almost all have changed ownership, including Kmart, which in 2004 merged with Sears—retail house of Olan Mills competitor CPI. Officials at the privately held company won’t discuss its annual sales, and a spokesman calls Million Dollar Directory’s 2001 estimate of $450 million “sheer speculation,” but Olan Mills clearly has downsized, halving its local headcount since 1996 and selling its UK operations, school portrait division and its newer headquarters building.

The retail waters have been choppy as well for Olan Mills’ competition, says Don Franz, publisher of Photo Imaging News. Wal-Mart’s pricing cuts deeply into the profits of portrait vendor PCA International, he says, and CPI just posted “huge losses” after making the necessary but costly upgrade to digital technology. (Olan Mills is all digital as of 2005.)

Ironically, Franz says, digital may be both the future and the demise of retail studio photography, as more consumers choose to shoot and retouch their own family photos.

Meanwhile, Olan Mills’ 30-year-old church directory division has quietly positioned itself as market leader and the company’s best moneymaker. In the future, as in the past, Olan Mills may find its truest course is above the retail fray.