Now that a few weeks have passed since the announcement of Shutterfly’s acquisition of Lifetouch what have we learned? Is this a potentially transformative acquisition?
Let’s look at what Shutterfly leadership has been saying, first about Shutterfly’s business.
Chris North, the Shutterfly CEO, noted that consumers are increasingly taking, storing and interacting with images on their mobile devices. In response, Shutterfly has been driving consumers to their mobile app – and with good reason. 21% of Shutterfly’s revenues come from mobile devices. Mobile active customers result in a higher ROI than customers acquired on their website and those customers demonstrate higher loyalty year over year.
Digital printing is disrupting the 80 plus billion dollar commercial printing market, and arguably Shutterfly is the country’s largest digital printer. Recently, Shutterfly announced its intent to “unlock” barriers to the launching of new SKUs/form factors faster. That means more new products faster not just the refreshing of existing products.
What is Shutterfly saying about the acquisition and the future? Chris North during an interview with Goldman Sachs stated, “The companies were born to be together…each company helps the other company better serve its customers and therefore accelerate its strategy and accelerate its revenue growth.”
Lifetouch sells the most silver halide prints in the school picture industry. Shutterfly sells the broadest range of ink on paper-personalized products in the industry.
Benefits to Lifetouch and their consumers include a simplified user interface capable of creating products on Shutterfly’s mobile app. Shutterfly’s technology instantly brings e-commerce capability to a company that has struggled to convert from paper-based ordering at the rate that today’s customer is expecting…if not requiring.
Additionally, Shutterfly’s product arsenal and product personalization offers Lifetouch’s customers choice unheard of in the traditional school picture package and online through most school picture company’s websites. Anticipate increased revenue per customer in Lifetouch’s future.
Benefits to Shutterfly include a low cost prequalified customer acquisition channel. Consider the potential of having all of Lifetouch’s images uploaded directly to Shutterfly. These are consumers who are image active and value image-based products.
Cost Saving Synergy
The newly transformed company forecasts 50 million in cost-saving synergies as a result of the acquisition. Both companies are vertically integrated and the acquisition will result in cost savings driven by supply chain, manufacturing and delivery synergies. The addition of Lifetouch almost doubles Shutterfly’s scale providing the means for Shutterfly to renegotiate contracts in the previously mentioned categories.
The acquisition may result in some load leveling/capacity utilization opportunities for the two businesses. Lifetouch operates nine predominately silver halide plants with peak seasonality in September and October and Shutterfly, which historically outsources its silver halide printing, operates three ink on paper plants with peak seasonality in November and December. Even with automation, there is a staffing challenge in a tightening labor market.
Shutterfly shared that they are committed to funding areas in which Lifetouch has underinvested such as online ordering, mobile optimization, plant efficiencies, and the range of product choice.
Shutterfly also expects to extend and monetize their reach to a new low-cost channel of millions of customers. If they do so the result may, in fact, be transformative for both companies…”Shuttertouch”?
What do you think will happen as the result of the acquisition?