CPI Corporation CASE FOR ANALYSIS They are the most treasured possessions; they

CPI Corporation CASE FOR ANALYSIS
They are the most treasured possessions; they line mantels and living room walls; they are the first items frantically sought by family members following fires or natural disasters. They are family photographs.Considering the popularity and demand for belovedphotographs, it seems logical that the market leader in the portrait studio industry, with a 60-year history of success and the convenience of store locations within retail giants Walmart, Sears, and BabiesRUs, would have the confidenceof a secure and bright future. That was the apparent situation for CPI Corporation, the store-within-a-store por-trait studios. With over 1,500 locations, the studios offered consumers the convenience of inexpensive family portrait packages, combined with one-stop shopping for family and household needs. Then abruptly, in April 2013, CPI announced closure of all of the company’s U.S. locations. That announcement and immediate slamming of the doors caught everyone,Chapter 4: The External Environment 177including employees and customers, by surprise. As families scrambled to locate and retrieve their photographs, employees absorbed the blow of a sudden loss of salary and benefits, including health insurance. But in recent years, there had been voices of concern and questions about the direction of CPI. At a board meeting a few years earlier in St. Louis, then-CEO Paul Rasmussen expressed concerns with the need for improvement of the customer in-store experience and his own awareness of the lengthy wait times for photo sessions, even when customers had an appointment, followed by additional lengthy wait times (up to six weeks) for delivery of the photos from a central printing location. Rasmussen pro-posed changes to the in-studio process, but the board of directors was not interested. The board was not listening to the consumer.The abruptness of the closures may have been the only real surprise to many competitors who continued to thrive and who expressed amazement that the industry leader failed to blaze the way with cutting-edge technology. “There’s no reason why CPI didn’t invent Instagram (photo sharing),” said Mitch Goldstone, CEO of ScanMy-Photos.com. “CPI had the greatest opportunity. They had a huge customer base nationwide that they let disappear overnight.” Aware of its corporate strengths, CPI increasingly failed to read and respond to the changing environment in which it conducted business. A glance through its recent history reveals potential problem areas for the company. Rasmussen’s 2006 urging to board members to shorten in-store wait times and to modernize backdrops and traditional posing styles was ignored in favor of finding ways to attract additional customers into the studio, where they would experience the same slow process. Consumer expectations were changing toward the immediate gratification enabled by the iPhone age with digital photography and instant access/sharing capabilities for their photographs. CPI, however, remained committed to centralization of printing and avoided the cost of updating stores with digital technology. Meanwhile, competitors discovered innovative ways to build technology into their services and products. Companies such as Picture Perfect offered one-hour digital printing. ScanMyPhotos.com provided the convenience of online photo services. And Lifetouch, whose store-within-a-store photo studios are located in JCPenney and Target stores, expanded their market into providing school pictures. As technological trends, consumer behaviors, and attitudes changed, CPI continued holding on to its own success model. In April 2013, with loan obligations of $98.5 million that it could not pay, CPI closed all U.S. locations. By June, competitor Lifetouch Portrait Studios, Inc. had entered a “stalking horse” agreement to purchase all CPI assets and awaited competing offers. Photography and digital technology continue to evolve at an unimaginable pace, and consumers feel empowered in their abilities to now go beyond taking, sharing, and printing photographs to explore the design and manipulation and animation of photographs.