Olan Mills, Inc. Business Information, Profile, and History

Company Perspectives:

Olan Mills knows the key to a great portrait is making sure you and your family feel comfortable and look natural.

History of Olan Mills, Inc.

Olan Mills, Inc. is one of the largest portrait photography operations in the United States and also operates in the United Kingdom. The Chattanooga, Tennessee-based, privately owned company divides its business into two divisions: Studio Portraits and Church Directories. At one time, Olan Mills operated 1,000 free-standing studios, but in recent years, to keep pace with the competition, it has opted instead to place studios in Kmart stores. Kmart's bankruptcy has complicated this shift in strategy, as Olan Mills has been forced to close studios in many Kmart locations. It continues to operate 125 free-standing studios in the United States and Puerto Rico and another 100 in the United Kingdom. The company is now starting to open studios in the stores of other retailers, such as Meijer's, Value City, and Toys 'R' Us. Olan Mills is owned by its chairman, Olan Mills II, the son of the company's founder.

Business Founded in 1932

Olan Mills, Sr., a former real estate salesman, and his wife Mary launched their business in Selma, Alabama, in 1932. Working out of an old woodshed they had converted into a darkroom, they started out in the photo restoration business. However, the couple had more ambitious plans--to make studio-quality photographic portraits available to the average person. At first, they took the studio to the customers, with the processing done at a bankrupt studio in Tuscaloosa, Alabama, they were able to pick up. Both went door-to-door, selling their concept throughout the South, with Olan Mills also serving as the photographer. Mary Mills, an artist in her own right, divided her time between selling and work in Tuscaloosa, where she added color and other distinctive touches to give a more refined look to their black and white photographs. She would later be the driving force in the training of the artists that would come to work for the studios. By 1935, the Mills had settled on a look that would become forever associated with the photographs produced by Olan Mills Studios and portraits in general from this period: a black and white bust vignette set against an airbrushed background. A hand-signed logo on each picture helped to build the Olan Mills brand name. Despite the depression of the 1930s, Olan Mills was able to land enough business so that in 1938 the company opened its first permanent studio, located in Pine Bluff, Arkansas. It was soon followed by another operation in Terre Haute, Indiana. By the end of the decade, Olan Mills studios and its growing stable of photographers would be serving 29 states.

During the 1940s, the company grew on a number of fronts. In 1940, it opened its first plant in Springfield, Ohio. It also began to change its marketing approach, supplementing its door-to-door efforts with a bond program mailing. A more significant shift in the way the company reached new customers would follow later in the decade, but in the meantime Olan Mills had to contend with the difficulties of doing business during World War II. With the military commandeering so many raw materials, the company's salespeople were hard put to find enough gasoline, not to mention tires and auto repair parts, in order to travel their routes. Film and chemicals for development were also in short supply. In fact, film became so scarce during this time that Olan Mills was forced to innovate. A new film was developed, four-way sliding backs, which allowed one piece of 5 x 7 film to accommodate four separate shots. In this way, a photographer could shoot a complete sitting of four poses on a single piece of film. Olan Mills also took advantage of the war to open studios near the military bases that were established across the country, filling the vast need for photographs for service men and their loved ones, who were often separated for extended periods of time. The company also built up a trained staff, hiring a number of military wives, who would then be needed during the postwar growth years as the Baby Boom generation began to have their lives chronicled on film.

In 1948, Olan Mills became involved in telemarketing--essentially by chance. One of the company's salesmen overheard someone pitching their product over the telephone and decided on his own to give selling photographs by phone a try. It worked: his weekly sales improved by an impressive 400 percent. Olan Mills, Sr. seized on the idea and had additional telephone lines installed and hired telephone solicitors. The method proved effective and was further refined over the years. In order to maintain the personal touch, key to making sales, each Olan Mills studio would be limited to contacting potential customers in their area. Moreover, the telemarketers were also local, selling to people who lived in their own community. While competitors would eventually attempt to emulate Olan Mills' success with phone sales, none possessed the same level of commitment to telemarketing in spite of its high employee turnover rate and other drawbacks.

Although telemarketing was a great help in growing the business, Olan Mills still faced a problem of seasonality. Customers were eager to have photographs taken during the holiday season in December, but business was slow at other times of the year, and even if the company laid off people during slack periods, it still had to pay for the fixed costs such as rent. To address this cash flow problem, Olan Mills, Sr. conceived of an innovative solution in 1952. Telemarketers began to sell a package deal, what would become known as a Club Plan. For three dollars, customers received three sittings that could be taken at any time during a 12-month period (40 years later the price for the plan would be just $15). Because most customers would order more pictures after their second or third sittings, Olan Mills was able to generate cash flow throughout the year. The 1950s also saw the company adopt some significant technical advances, such as the Battie camera and speed lights. Other equipment helped the company deal with the large volume of pictures its photographers were now taking. Centrifugal film dryers, for instance, were a vast improvement over the days of using clothes pins to hang film from a wire stretched across the darkroom. To generate large numbers of prints in a short period of time, equipment that was used to make blue prints was converted to fill the needs of the Olan Mills studios.

More technical advances followed in the 1960s, in particular the switch to all-color photographic work. The company took the old four-way sliding back approach of the 1940s and applied it to a new two-way camera, which could use a 70-millimeter film magazine split between black and white and color film. The results were proofs in both black and white and color. However, the color results from the camera proved to be so outstanding that the company chose to the drop black and white and devote itself entirely to color photography.

A second generation of the Mills family--brothers Olan Mills II and Charles George Mills--began to assume greater control of the business in the 1960s. The elder son, Olan Mills II, was born in 1930 and went to work for the family business after graduating from Princeton University in 1952. Charles was born seven years later, graduated from Auburn University, and served in the military before joining his brother at Olan Mills, Inc. They assumed complete control of the business in 1972. Ownership would be split between the two, with Olan Mills II controlling 51 percent and his brother 49 percent. By this point, Olan Mills was generating an estimated $20 million a year, but with a new generation in charge the company was poised for even greater growth.

Olan Mills moved its headquarters to Chattanooga, and new studios sprouted up across the country, virtually one or two every week. They were situated in major cities as well as such small towns as Opelika, Alabama; Puyallup, Washington; and Xenia, Ohio. In addition, new plants were opened and the service departments were upgraded. As had been the case throughout its history, Olan Mills embraced new technology, adding computers and laser scanners to its operations. Second generation ownership also targeted new markets. While the company got its start by focusing on baby pictures, it faced increased competition in the family segment and as a result branched into new areas. It became involved in the school and yearbook business, the lucrative church directory business, and later moved into glamour photography, an upper-end product for people who wanted a more glossy magazine look for themselves. In 1981, Olan Mills expanded overseas, establishing a business in the United Kingdom, transferring the same techniques that proved so successful in the United States. The company's national competition focused on the pre-school market, a segment which now accounted for less than 30 percent of Olan Mills' business. Where Olan Mills prospered was in the follow-up business as customers grew up. In the adult portrait market, no rival could match Olan Mill's name recognition, and the company held numerous advantages over the local mom-and-pop studios that served as its competition in this segment. Having given up on copying Olan Mill's telemarketing program, larger competitors elected to open small studios in retailers like Sears, JC Penney, and Wal-Mart.

Some 20 years after the Mills brothers took charge of the business, Olan Mills was generating approximately $475 million in annual sales, controlling about 10 percent of the $5 billion portrait photography business. Its closest competitor, CPI Corporation, had just half as much market share. However, starting in the mid-1990s, the conservatively run Olan Mills began to lose its grip on the market as the dynamics of the industry changed and the affiliation between studios and big box retailers became a key factor. Olan Mills' top three rivals had such deals: CPI Corporation with Sears, Lifetouch with JC Penney and Target stores, and PCA International Inc. with Kmart and Wal-Mart. With business falling off from more than 30 percent in revenues from its record year, Olan Mills shut down a Waco, Texas, plant and closed some 300 freestanding studios around the country. Then, in August 1998, the company took the plunge and signed a deal with Kmart to start opening studios in some of the retailer's stores, replacing the more downscale PCA operation. For Kmart, adding Olan Mills was part of a strategy to revitalize its business in the wake of the tremendous growth of Wal-Mart. Research indicated that Kmart was attracting customers with much less income than those who shopped at Wal-Mart, on average $10,000 to $20,000 less. To attract customers with more disposable income, Kmart decided to incorporate signature product lines, such as Martha Stewart, Disney, and Sesame Street. The Olan Mills' name was in keeping with this strategy.

The year 1998 was also a time of change for Olan Mills on another front. In January of that year, Charles Mills died, leaving his older brother in charge, although the chief executive responsibilities had been handled by a non-family member since 1990, with Olan Mills II serving as chairman. None of the children of the two brothers were actively engaged in the company's business with their involvement essentially limited to a "cousin's council," which received regular briefings on the state of the business from senior management.

Changes at Olan Mills continued in the final years of the 1990s. Wholly owned subsidiary Olan Mills School Portraits, Inc. was sold in early 1999 to Lifetouch National School Studios. Olan Mills had been involved in this segment since the 1960s but now management decided it would be wiser to focus its attention and resources on the more lucrative church directory business and its Kmart initiative. In addition, Olan Mills eliminated its telemarketing promotions and closed scores of freestanding studios to concentrate on its Kmart studios, leaving just 125 freestanding operations. According to the press, Olan Mills suffered through a poor year in 2001, although business rebounded in 2002.

When Kmart filed for bankruptcy early in 2002, Olan Mills was quick to assert that its portrait business would not be adversely impacted. While Kmart planned on closing several hundred of its more than 2,100 stores, most of these units were performing poorly, and Olan Mills had establishments located primarily in the more successful Big K superstores and other high-volume locations. All told, Olan Mills operated about 850 studios in the Kmart chain. Although losses were generally offset by the opening of new studios in surviving Kmart locations, problems at the giant retailer continued to worsen, and by early 2003 Olan Mills had lost close to 250 Kmart studios. To make up for this loss in business, Olan Mills began opening studios in Meijer's, Value City, and Toy 'R' Us locations. It also made other changes, including the elimination of a Springfield, Ohio, processing plant, the operations of which were consolidated with the main Chattanooga facility. With no third generation of the Mills family willing or ready to take over, and Olan Mills II well into his 70s, the future of the company faced a number of challenges.

Principal Divisions: Church Directories; Studio Portraits.

Principal Competitors: CPI Corporation; Lifetouch Inc.; PCA International, Inc.

Chronology

• Key Dates:
• 1932: The company is founded.
• 1938: The company's first permanent studio is opened.
• 1948: Telemarketing operations begin.
• 1972: A second generation assumes leadership of company.
• 1981: A UK operation is launched.
• 1998: Olan Mills studios open in Kmart stores.
• 1999: The company's school portrait business is sold.