Archiver's files for bankruptcy protection, plans to retool business

A tough economy and the growing use of digital technology has so deeply challenged Archiver's, the scrapbooking retail chain, that the Golden Valley-based firm filed for Chapter 11 bankruptcy protection on Monday.

Archiver's, which has about 40 stores nationwide, including seven in Minnesota, will use the temporary respite from creditors to retool its retail strategy and reorganize its business.

Founded in 1999 by Twin Cities entrepreneur Bruce Thomson, Archiver's grew rapidly as the scrapbooking craze took off. The superstore, which dubs itself "the ultimate creative haven," offers a variety of products used to preserve, organize and display photographs and other mementos, such as invitations, greeting cards and important life announcements.

"When we started in the scrapbooking business, it wasn't even recognized as a retail category," said Archiver's CEO Jann Olsten, who was also Thomson's business partner in the venture.

When Archiver's opened its first store in Apple Valley, the nascent scrapbooking industry generated just $250,000 annually. Within seven years, the industry ballooned to $2.5 billion before going through a painful retrenchment in recent years. (Archiver's, which is privately held, doesn't release annual revenue figures.)

When the recession hit, Archiver's core customers pulled back on spending, particularly on discretionary items. Plus, an activity like compiling a family photo album "is an easy thing to put off," Olsten said in an interview Tuesday.

The company's top 20 unsecured creditors are owed about $2.6 million, according to a filing in U.S. Bankruptcy Court. The filing estimates the company has more than 200 creditors who are owed up to $10 million. The company also listed between $10 million and $50 million in assets.

But the real bugaboo for Archiver's was the relatively quick way consumers embraced digital technology for scrapbooking, particularly photographs taken with mobile phones and tablets that can be printed from home.

As Archiver's struggled, it let go about a third of the corporate headquarters staff, which now numbers about 25 employees.

Recognizing the digital trend, Archiver's has outfitted its stores with Memory Labs, which enable customers to print and scan photos from any format (including old-fashioned negatives and slides), to create albums or other gifts. Archiver's employees are on hand to help the befuddled harness their creativity, Olsten said. Photos can also be ordered from home computers, and picked up in different formats.

The irony, Olsten notes, is that the Memory Lab concept is close to the Proex photo-processing business that Thomson started in the 1990s (with Olsten as his business partner). Proex was sold in 1992 to a national competitor for $24 million. (Ritz Camera and Proex stores were shuttered in 2011 after the parent company, in bankruptcy, was unable to find a buyer. )

Bankruptcy reorganization will help Archiver's renegotiate leases at its stores nationwide at more favorable terms, Olsten said.

In the digital realm, Archiver's competes with companies like Shutterfly Inc., a California-based manufacturer and digital retailer of personalized products and services. In 2012, Shutterfly's revenue surged by 35 percent to $641 million.

Zacks Investment Research noted in a recent report that "the increasing use of digital cameras, largely driven by price decreases, has led to heightened demand for online photo printing services, which leaves ample scope for Shutterfly's expansion. The company also remains committed toward launching services like one-to-one greeting card service, thus beefing up its mobile-related offerings."