Gary Pageau of the Dead Pixels Society talks with Fred Lerner, CEO and founder, MailPix, about the photo/imaging business. A meeting in a summer camp darkroom started Lerner on a decades-long career with leading photo industry companies like Berkey Photo and Eastman Kodak Co., as well as his own photofinishing labs, Lerner Photo and Lerner Processing Labs. He was also active in the Australian photofinishing industry at the dawn of one-hour processing. Later, Lerner was part of the startup scene with Ritz Interactive and now MailPix.
In this wide-ranging interview, Lerner talks about the consumer photography business and the enduring power of photography.
Gary Pageau 00:31
Hello again and welcome to the Dead Pixels Society podcast. I'm your host, Gary Pageau, and today we're joined by industry veteran Fred Lerner, CEO and founder of MailPix. Fred is coming to us from Huntington Beach, California. Hello, Fred.
Fred Lerner 00:44
How are you today? Good morning Gary. I'm well How about yourself? Doing great doing great
Gary Pageau 00:50
Now, most people in the industry these days, no of you as, as I mentioned before, the CEO and founder of MailPix, but you've been in the industry a very long time, I would say you are one of the more active veterans of the industry. Can you tell us a little bit about how you started with your love of photography.
Fred Lerner 01:14
I guess I fell in love with photography when I started when I was 13. What my first camera as I was trying to earn the photography merit badge to become an Eagle Scout. And my first paying job was at a as a photography counselor at a summer camp upstate New York called Camp Tranquility. And one of the alums of Camp Tranquility was Ben Berkey. On visiting day, Mr. Berkey came in wanting to visit the darkroom, came and saw the darkroom that I was running and offered me a job. And I worked my way through college and graduate school working at Berkey Photo. And I've been a photofinisher ever since.
Gary Pageau 02:08
So for those who may not be aware, tell us a little bit about Ben Berkey. And the position that Berkey photo held in those times and kind of what was that time period? What were what was the era of photography back then?
Fred Lerner 02:21
Well Berkey Photo was the second largest photographic concern in the United States after Eastman Kodak Company. Berkey Photo owned Keystone camera he owned retail stores will be Peerless. But their primary business or any photofinishing world. They had eight factories around the United States. And I was raised in the New York City factory, their main factory, then spent four years at Berkey Virginia and Berkey, Long Beach, California and stayed there. Berkey Photo became a public corporation ultimately had a patent infringement suit against Kodak and Kodak wound up buying Berkey Photo.
Gary Pageau 03:15
Okay, so that was in the mid to late 80s. As I recall, that happened just prior to when I joined PMA. Because I remember the the the they were there was a lot of concern over the disposition of the various Berkey subsidiaries. Because there were as I recall, a lot of brands they distributed I remember like Slik tripods and and weren't they the Konica distributor.
Fred Lerner 03:37
Konica, Simmon Omega, and others
Gary Pageau 03:41
Yeah, so they were I mean, they were a major concern both in the hardware side of the business and also the finishing side. And also on the you know, on the film distribution side notes, and again, that kind of a shame they're not really remembered these days, but they were really a major, major player back then. At one point you struck out on your own, can you tell us a little bit about starting Lerner Processing
Fred Lerner 04:07
Well, when Berkey Photo started to become too bureaucratic for me. In addition that they wanted me to go back from Long Beach, California to New York City
Gary Pageau 04:20
You were bitten by the sunshine bug
Fred Lerner 04:23
They made the mistake of asking me in December, Sun was out. It was a classic Chamber of Commerce day in Southern California. And I decided to strike out on my own. At that time, I built a factory, my first factory and while they were building it, dear friend of mine from Australia, Neil Cottee, called me up and said, Fred, how long it'll take to build the factory. I said about three months. And he asked me to come over there and I consulted wiith Pacific Film Labs. Ultimately, we sold that company and started Rabbit Photo that was picked that public. That stock was ultimately purchased by Fuji. Then we started Metro Photo. And I used to commute to Australia on a regular basis. And still I'm in touch with many of the family members in Australia. We travel there, they travel here.
Gary Pageau 05:36
So you were also involved wasn't that part of it? The there was also the the central lab component, but also that was the early beginnings of the one hour lab. I mean, that's really kind of where the one hour lab took off. And you were part of that scene, correct?
Fred Lerner 05:49
Yes, Rabbit Photo was the major player in Australia. And cute story, Neil Cottee was visiting one day. And we were talking about opening up one hour photo stores and driving along Pacific Coast Highway and he saw a Volkswagen rabbit. And he pulled over sketched out the logo of Rabbit Photo from a Volkswagen rabbit. It went on to great success.
Gary Pageau 06:26
So it's so you're more of a central lab back then we used to call that wholesale back in the day.
Fred Lerner 06:32
Gary Pageau 06:33
But over in the I mean, in the US you really had your that was your business. But overseas, it was more of the retail
Fred Lerner 06:41
Gary Pageau 06:41
So what that must have been a great experience for you to see both sides.
Fred Lerner 06:48
Not only that, but based upon my experience there. When I we came back to America. We opened up and Spectrum One Hour as a test case in Long Beach, California. My wife ultimately took that over for 23 years and built that up to a million dollar business was across the street from the house. And she was the place in Long Beach, California to go for film processing. By the way, I should mention that my wife, Carol was the daughter of Samuel Simon, Ben Berkey's executive vice president. She's been in the industry longer than all of us put together.
Gary Pageau 07:34
You also took her away from the family to bring her to California.
Fred Lerner 07:42
I remember those days clearly.
Gary Pageau 07:47
So you at one point then sold Lerner Processing Labs.
Fred Lerner 07:54
So the original name is Lerner Photo. I sold it to American Photo Group which flipped it off, under Steve Bostics' time, to Eastman Kodak company, and worked for Kodak free a few years. Ultimately, I bought back that facility, in an asset purchase and restarted the businesses Lerner Processing Labs.
Gary Pageau 08:28
And that was about the time you and I met because I remember I joined PMA in December of 87. And I think I flew out there to visit you in 89 as part of a Photo Marketing magazine article. And you're really one of the first industry people I've ever met. So I didn't know anything. So Roy Pung was kind of thrown me to the wolves there. That was i don't think i think he was trying to see what I was made out of.
Fred Lerner 08:55
Hopefully I wasn't the wolf.
Gary Pageau 08:58
No, you're very kind very kind of generous as always. But it was interesting because I really, because I still have my LPL lapel pins, which are almost as famous as the Dead Pixels Society lapel pins.
Fred Lerner 09:12
If anyone needs one. I have a few.
Gary Pageau 09:15
I'll tell you what, I remember you had you had a new one for every year.
Fred Lerner 09:19
Every year. Yes.
Gary Pageau 09:22
Great marketing as always. And then you sold LPL again, kind of when the whole wholesale consolidation industry was happening again and what were what was the industry like back then because I remember was very exciting because you had literally hundreds of wholesale plants around the country. And there was this big rapid consolidation that was happening. As the overnight business started becoming more and more less viable with the growth of the retail business, but it was still a good business and it really consolidated under Eastman Kodak, Fuji and Konica Were really the three centers of control there. And you sold again to Kodak as I recall.
Fred Lerner 10:08
Yeah, as Lerner Photo, my first business, we had one lab and the Lerner Processing, I expanded that to several labs around the country. And Qualex, on under the leadership of Peter Fitzgerald went on an acquisition kick, and acquired, to the best of my recollection, a total of 143 labs under Qualex brand. And this time when Kodak slash codecs and borrowed my company, they put me on a seven year contract. So I stayed on as president of what became Kodak Processing Labs for seven years. Yeah. According to Peter Fitzgerald. And that, that was a major consolidation, because there's 143 Labs just became several central labs.
Gary Pageau 11:02
Right. Right. And you had a kind of a different focus to back then because I, as I recall, you mostly serviced camera stores with the kind of kind of boutique processing
Fred Lerner 11:12
Correct independent cameras, stores, upscale processing customers.
Gary Pageau 11:25
And at the time, you are also advancing on to the PMA board is that recall that was about that time period.
Fred Lerner 11:31
Yes, I've always been active in PMA was one of the largest trade associations in the United States. And our conventions, as you may recall, Gary, used to attract over 20,000 people from 80 countries. and it was because of the networking, ama that permitted me to meet people like you and others. And to make acquisitions. Sure, we grow a business by acquisitions. For many, many years.
Gary Pageau 12:10
So after your contract was up with Kodak, you went digital.
Fred Lerner 12:18
We did. Peter Fitzgerald, retired, my contract was over. And photofinishing was still a very, very good business but something was happening in the world of digital. And I approached David Ritz of Ritz Camera. And with the concept of starting Ritzcamera.com.
Gary Pageau 12:40
Right. And this was not one that was necessarily a slam dunk idea
Fred Lerner 12:46
That was in 1999 and that was new. We weren't first to market. I remember David saying, what is the RitzCamera.com. And we partnered and built up a very, very large successful business, selling primarily digital cameras was main focus. Online. I then acquired, wolfcamera.com. Photoalley.com... we expanded outside of our core business into fishing and boating, yeah, or the boatersworld.com. And other companies like that, overall, been responsible for about 28 acquisitions, and various stages of my career.
Gary Pageau 13:44
So just to stand that point for a bit, what appeals to you about acquiring companies
Fred Lerner 13:54
All businesses grow organically, customer by customer day by day. But the fastest way to grow company is by acquiring a business. And instead of a slow, steady growth, you can grow much more rapidly by acquiring right.
Gary Pageau 14:18
So it's a speed it's the speed aspect of it to grow a company you find more appealing,
Fred Lerner 14:25
very much so.
Gary Pageau 14:27
Is that something you learned as you got into LPL and realize that was the best way to grow your business?
Fred Lerner 14:58
I learned how to to make acquisitions by being acquired twice. "Hey, this is a good idea. I like it. I'd like to do more, except, instead of being the acquired, acquiree, I'll be the acquirer.
Gary Pageau 15:18
So what did you learn from being the acquiree? That you're like, well, I can do that better. Right? What did what did you learn from that.
Fred Lerner 15:25
The Economics, the synergy to make acquisitions work. Harvard did a study at one time that showed 85% of all acquisitions were failures. And I studied voraciously all the failures of acquisitions, in order to avoid that, when I was making an acquisition.
Gary Pageau 15:53
So what would be a common denominator of a of a failed acquisition?
Fred Lerner 16:00
Lack of synergy, lack of doing homework. Culture clashes, very big item. When we make acquisitions, we typically closed down the acquired facilities, and we've been to our own facilities to avoid the culture clash.
Gary Pageau 16:23
So what's the hallmark of a successful acquisition?
Fred Lerner 16:28
It's the same thing that's the hallmark of any successful: profit.
Gary Pageau 16:34
The bottom line is always
Fred Lerner 16:35
it's always that's what businesses, businesses is an economic creature.
Gary Pageau 16:41
So then Ritz Interactive had a lifespan in it, it went away. Then you start a MailPix. What was your idea about MailPix that you learned from prior businesses that you brought to MailPix?
Fred Lerner 17:05
In prior companies, I did all the manufacturing, I built labs all around the country had lots of capital requirements, lots of stuff. The MailPix business model is an outsourced model to leverage the strengths of others. Right, they specialize in various aspects of business, so that we can manage many brands we currently do with a manageable staff.
Gary Pageau 17:42
What is the go to market value proposition for for MailPix for the customer? What are they getting out of doing business with you?
Fred Lerner 17:54
Well, again, there's no secret in business. It's faster, better, cheaper. For the customer, we try to offer the customer, lots of options, lots of opportunities that they don't necessarily find elsewhere.
Gary Pageau 18:11
So an example of that maybe would be the like the On Hour Photo app, which is one of your portfolio
Fred Lerner 18:18
are big business is divided into two major branches, our web business, which is our original MailPix, and some of the companies we acquired Winkflash.com RitzPix.com, MyPics2.com and the printing division of Photobucket, printshoplab.com. Then we opened up a One Hour Photo app. And we have it a suite of apps connected to 20,000 retail locations, right through a one hour photo app at CVS Drug, Walgreens and Walmart and Duane Reade out of New York City. Right. So you can take a photo on your phone and pick it up anywhere in the United States in one hour.
Gary Pageau 19:15
And not only just photos, but also now photo gifts to some extent more and more
Fred Lerner 19:20
Yes, the retailers are expanding into a lot of giftware. So if you open up the one hour photo app and go to CVS, for example, we'll see about a dozen different products, photo cubes and then bamboo.
Gary Pageau 19:39
Yeah. it's amazing the selection of products you can get produced in store now through a mass retailer. I mean, I would expect some of this, those products from a from a specialty store. But from a mass retail you're seeing a greater array of products being made available.
Fred Lerner 19:57
Gary Pageau 20:01
So what are the synergies between the One Hour Photo customers and the MailPix and his portfolio companies customers? Are there's a lot of crossover there, or is it two different segments?
Fred Lerner 20:15
There is crossover. If people want the convenience of mail to home, we have that. But they have to pay for shipping. If someone needs a product in a hurry, right? It costs a little bit more at the retail location. But they can get it in an hour. And they save the money on shipping. Right? there. So there are customers who want convenience, some want speed, someone price, and many customers want both.
Gary Pageau 20:53
So as you look at companies that might be a fit for a future MailPix portfolio company or acquisition what are you looking for as the acquirer
Fred Lerner 21:08
We're looking for a companies that can fit into our business model, whether it be a web-based business, or an app-based business.
Gary Pageau 21:21
Okay. So no labs, no infrastructure.
Fred Lerner 21:26
No, no, we are rather agnostic. We're opportunists. We look for opportunities. And we've done both we bought labs and standalone app-based or web-based businesses.
Gary Pageau 21:45
So looking back, you ran into Ben Berkey in a dark room, and it turned into this long career, which I mean, clearly you've had a lot of you have some great business acumen. You're a student of the industry, student of business. What's kept you in the photo industry, when clearly I'm sure you could have done many other things, what's kept you in this business?
Fred Lerner 22:12
I love the fact that people treasure memories, we treasure their memories all their lives. This is a classic story about when people have their houses on fire. One thing they grip first other photo albums right? photos are important. And they're important to everybody. Right?
Gary Pageau 22:46
Yeah, I mean, I agree. I mean, that's one of the things I think, you know, people in this industry, like, you know, it's not that big anymore. But it isn't just people centered around that this is an important, social good that this industry provides. It's an amazing if you think about it, it's amazing technology that can provide you with long lasting physical memory in the form of a print for basically pennies. It's astounding, if you think about it.
Fred Lerner 23:17
I love the tagline. Memories are forever.
Gary Pageau 23:22
So looking forward to 2021 what are you looking forward to in terms of, you know, the business climate, the economy, what's happening in the industry, what do you see as a as going forward as what's driving 2021
Fred Lerner 23:39
I see the end of COVID is light at the end of the tunnel, country's opening up, travels opening up stores are opening up. And there'll be a lot of picture-taking opportunities. And there's a lot of pent-up demand for social activities and travel activities. So I see the photo industry participating very strongly in that regard.
Gary Pageau 24:09
And that's one of things I've heard is I've heard is the fourth quarter of last year was actually from an industry standpoint was actually okay, because wasn't as bad as it could have been because there was no travel. There was no family visits, but people were creating home decor. They were creating some gifts, they were doing some things. And now as 2021 opens up, and we we hope people will begin traveling and vacationing and meeting friends and family and having reunions and whatnot that will create more opportunities for everyone.
Fred Lerner 24:43
Gary Pageau 24:45
So you're optimistic
Fred Lerner 24:47
Gary Pageau 24:48
As always, you're one of the most optimistic people I've ever met. Well, thank you Fred for your time and wishing you the best. For continued growth and success.
Fred Lerner 25:02
Thanks, Gary. was a lot of fun being with you again.