Shutterfly 2007 Annual Report Download - page 9

Table of Contents
We generally characterize our products as either “personalized products and services” (formerly called “non
print”) or “prints”. Our personalized products and services revenues are derived from sales of greeting cards,
calendars, photobooks, and ancillary products such as scrapbooking accessories and other photo-based merchandise,
and the related shipping revenue from these sales, while our print revenues are derived from sales of photo prints and
the related shipping revenue from these sales. In 2004, 2005 and 2006, our personalized products and services
revenues represented approximately 35%, 42% and 51% of our total net revenues, respectively, and our print
revenues represented approximately 65%, 58% and 49% of our total net revenues, respectively.
The addressable market for our products and services includes every person who enjoys the memories created by
digital photographic devices such as cameras, camera cell phones or camcorders. Although photofinishing products
and services are purchased by a broad consumer base, we believe that women, in particular, play a key role in many
photo-based purchasing decisions. The U.S. Census Bureau reports that there were approximately 42 million women
age 25-44 in 2005, and, according to industry sources during 2002, more than 85% of women 18 years and older
identified themselves as the principal shopper in their household. Securing the loyalty of this core consumer base
represents a sizable market opportunity.
Value for Our Customers
Creating value for our customers is the basis for our success. We offer customers easy, convenient and fun ways
to:
We accomplish this through providing the following benefits to our customers:
Broad offering. We offer a wide variety of premium products to customers, including prints, and photo-
based products that include, but are not limited to, greeting cards, calendars, photo books, mugs, mouse pads,
frames, photo albums and scrapbooking accessories. In addition, we provide a number of valuable tools and
services, such as the ability to upload and edit photos online, share photos with friends and family and store an
unlimited number of photos on our system at no cost. With many creative options from which to choose, we
enable customers to become engaged in the Shutterfly experience and feel a sense of pride in their creations.
Exceptional quality and service. We have built strong relationships with our customers who trust us to
preserve and protect their memories in a central storage repository. We enable customers to enhance, share and
make projects with their photos at their convenience. Our focus on ease of use, image quality, secure photo
storage, high-quality products and first-rate packaging has established Shutterfly as a premium brand. Our
customers have come to expect the best quality and service from us. This trust is maintained by fast, consistent
fulfillment times, responsive customer service and continuous innovation.
Customer-focused approach. The entire Shutterfly customer experience reflects our customer-centered
approach. Membership is free and offers customers the ability to upload, edit, store and share an unlimited
number of photos. Membership is not required to view friends’ and family’s shared pictures, which can be
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Photo prints.
Industry sources estimate that the worldwide market for digital photo prints was approximately
$38 billion in 2005, growing to approximately $107 billion in 2009, and the U.S. market for digital photo
prints was approximately $10 billion in 2005, growing to approximately $30 billion in 2009. In addition,
industry sources predict that in the United States, photos ordered over the Internet for mail delivery will grow
from approximately $424 million in 2005 to approximately $1.9 billion in 2009.
•
Photo
-based merchandise. Photo-based merchandise is a substantial market opportunity that includes any
product that can be customized with the imprint of a digital image. Photo-based merchandise includes, but is
not limited to, mugs, mouse pads, bags, puzzles, playing cards and apparel.
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share and preserve memories for family, friends and themselves;
•
organize all of their photos in a safe and easily accessible location;
• maintain emotional connections with friends and family, despite being time-constrained, through thoughtful
and personal photo
-
based communications and gifts; and
• achieve satisfaction and self-expression through creativity and telling stories via photos and personalized
photo
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based products and services.