The basic commodity that kept most U.S. camera stores alive in the 1980s and 1990s was the 3 1/2 x 5 (or 4 x 6)-inch print. At the camera store where I went to work in 1987, we could make one such print in our minilab for about three or four cents in materials cost. We sold them for 36 cents each. Everybody who shot a roll of color negative film bought 24 or 36 of them, or double that if they ordered double prints. (At least customers usually got a discount on the second set). And they bought those 24 or 36 or 48 or 72 prints even if only two pictures on the roll turned out to be any good at all.
Obviously, there was some labor cost to account for (the lab rats and guys like me who took the customer's order), and the cost of the minilab itself (nearly always leased). But a minilab was a potentially viable business at 25–30 rolls a day, a good profit maker if you could get your roll count above 50 a day, and a gold mine if you could get over 100 rolls a day.
Larger operations like Costco or Walmart that were more ruthless about cost reduction (i.e., bought cheaper paper in larger quantities) would have gagged at our 3–4 cent per print cost. They probably paid less than two cents. Even if they cut their selling price to twenty cents a print—roughly $4.99 to develop and print a roll of 24-exposure film—that's still an 80–90% profit margin before labor costs.
This was the fundamental economic fact of the photo industry in the U.S. (and probably elsewhere) in the 1980s and '90s following the invention of the minilab (by Noritsu in 1976, according to Noritsu) and its rapid widespread adoption. It roughly coincided with the widespread advent of heavy retail discounting on hard goods—cameras and lenses—which took root in the 1970s. By the time I was hawking Nikons, Canons, Minoltas, and Yashicas (remember them?) at retail in 1990, our store was selling cameras for about 5–10% more than we paid for them, and we were fairly typical for camera retailers in the U.S.
Used Noritsu minilabs for sale cheap at alibaba.com.
Many people, especially people in the jewelry and clothing businesses, didn't believe that. How, they asked, could you pay employees and keep the phone bill paid on that gross profit margin? Well, those cameras magically caused a subset of our customers to regularly walk in and buy batches of 24 or 36 3x5-inch prints of mostly bad pictures. That's how we sold cameras for essentially no profit and kept the lights on.
Although this basic dynamic was true in varying degrees for most camera stores in the U.S. (not the mail order giants, notably), it was absolutely the foundation of Ritz's business model. This was especially true during Ritz's aggressive expansionist phase in the mid-1990s when they bought out hundreds of local camera stores around the U.S. (One article I read on the Ritz bankruptcy mentions the Inkley's chain of stores, which was for a time my biggest account when I was a Nikon sales rep. Ritz bought them out, and I had to watch several hundred thousand dollars worth of business disappear from my commission statements. I'm not bitter. Really.)
Ritz wasn't buying stores to sell cameras; they were buying locations to operate minilabs.
So this is what Ritz means when it says that digital photography hurt its business so badly. Prints made from digital files on a digital minilab are almost certainly every bit as profitable as prints from negatives were, but they're nowhere near as numerous. Now, photographers might print the two or three shots out of 50 that are good. Or they might print them themselves, at home or the office. Or they might just put them on Flickr, and not print them at all.