Almost overnight the mass consumer has developed an insatiable appetite for digital photography.
Still digital cameras are the second-fastest selling non-food consumer item in Australia today behind DVD software and vendors confidently predict the current market growth will continue for at least 12 to 18 months.
According to market analyst, GfK, about 56,000 still digital cameras were sold in Australia in June, up from just 18,000 in June last year. Despite that, June 2003 was a relatively quiet month with sales up just 10 per cent on May.
To put that into perspective another analyst, Inform, reported a 32.9 per cent volume growth in April over March.
With the boom has come a rush of new vendors all wanting to get a piece of the action and industry insiders estimate there are now up to 50 brands competing — many of them with no prior history in the camera market.
Even traditional camera vendors are either going entirely digital or swinging away from their flagship products to embrace the digital revolution. Earlier this year Ricoh announced that it would abandon 35mm cameras from next year and go entirely digital, while Polaroid, which is so synonymous with instant-developing photographs that its name has become part of everyday speech, recently launched its own range of digital still cameras.
However, while consumers now have unprecedented choice they are sticking firmly with the well-established brands and consequently just five account for up to 80 per cent of the market, leaving the remaining 20 per cent to be fought over by 45 vendors.
According to Inform’s May sales figures, the top five vendors are Canon, Kodak, Olympus, Fuji and Sony. While Canon is generally considered the leading vendor, figures show that the release of a new product range or promotional deal can quickly shoot one of their competitors to the top of the charts for the month.
HP — a relative minnow in the still digital camera market — proved the benefits of promotions in March when it increased its market share from 4 per cent to 9.6 per cent by bundling one of its digital cameras with a multi-function printer.
The massive market growth has been good and bad for retailers. The mass merchant and IT channels have been steadily increasing their market share at the expense of the photographic retail sector.
Inform research analyst, Luke Solyom, said the mass merchant channel took 52.2 per cent of the market in April, up 7.9 per cent for the month. By May that had increased to 55.8 per cent and based on current trends it is “highly likely” that the mass merchant market share will reach 60 to 65 per cent by the end of the year.
“With the budget end of the market already largely dominated by the mass merchants, the strategic opportunities now lie in wresting away higher end value driven business, which remains the domain of specialist photographic resellers,” Solyom said. “While the photographic channel remains the dominant player in terms of value; constituting 52.3 per cent of the April 2003 market, further analysis reinforces the detrimental effect mass merchants are having with photo retailer value share down from 57.8 per cent in March, representing an April downturn of 9.5 per cent.”
However, general manager of Kodak Digital, Steve Morley, said it wasn’t all bad for the photographic specialists. Those who had adapted to the market changes were doing very well.
Morley, who was transferred to Australia from the UK eight months ago, said the Australian market was about 12 months behind the UK and Europe.
What was happening here now was similar to what had already happened in the northern hemisphere.
“The consumer interest in digital cameras is markedly different to what it was 12 months ago and the growth has caught people by surprise, but it has come about because we are now starting to dip into what we call the “snap shooter” market,” Morley said.
“The snap shooter is not used to going to photo specialists to buy cameras and is more likely to go to a consumer electrical store or mass merchant. But at the same time the market growth is not being driven by the mass merchants or consumer electrical stores, it is happening because consumers are becoming more educated. They are realising what they can do with a digital camera and products are now coming into their price range.
“Some areas of the photo channel are recognising they are now dealing with a new type of consumer and the strong are getting stronger because they have adapted. While it might look gloomy for the photo specialists some of them are doing very well. While in percentage terms the sector’s market share is diminishing you have to remember it is now a much bigger pie.”
Morley said the shift away from photo specialists was natural with such growth.
“We have had over 200 per cent growth from June to June, so basically the market has increased by 3x in 12 months. The only thing outstripping it is DVD software.”
Morley said Kodak’s figures showed current demand was being driven by female consumers who made up the bulk of first-time buyers.
“All retailers want a slice of the action and manufacturers are struggling to keep up with the demand,” he said. “If manufacturers have the right solution they will do okay, and that means their products have to be easy to use.
“The ground swell across all vendors is to make things easier to use, but digital photography is all about getting a print at the end of it. One way or another people still want a print and there is a big opportunity for resellers to get into consumables that go with digital imaging such as ink cartridges and photo paper.”
Morley said not enough retail space was given to consumables and he’d also like to see digital cameras taken out of glass cabinets.
“If I had a magic wand I would make all of these cabinets disappear,” he said. “Consumers want to get their hands on the product and if they have to wait for someone to come along and take it out of a cabinet for them to have a look they will go elsewhere. They also don’t want to be stood over while they are making a choice.”
Morley said there were plenty of excellent security systems available to combat shoplifting so there was no need for the cabinets.
HP’s market development manager for digital imaging, John Gowland, agreed with Morley about the need for ease of use and the opportunities in the consumables market.
“The reproduction of photos at home is still in its infancy but the quality now available both from cameras and printers is outstanding,” he said. “We are pushing home printing very hard and we are working on category management with key resellers to improve the retail space for consumables.”
Gowland said HP had already proven the benefits of bundling digital cameras with photo quality printers and would continue to do so in the future, including bundling other vendor’s cameras with HP printers.
Like Morley, he expected to see 120 to 150 per cent annual growth in the still digital market continuing for the next 12 to 18 months.
Ricoh is so confident of continued growth in the digital camera market that it is abandoning 35mm cameras to go entirely digital.
National sales manager of Ricoh’s photo division, Stewart Pickersgill, said digital cameras made up 75 per cent of its camera sales.
He said three megapixel (3MP) is now the entry-level consumer camera and that by Christmas most 3MP cameras with an optical zoom would sell for between $400 and $500 “which is consumer affordable”.
Pickersgill said the vendor battle over who offered the most pixels was all but over with most consumers happy with 3MP and few, including professionals, ever needing more than 5MP.
As John Gowland said, 3 megapixels will do justice to an A4 photo print and with 4 megapixels you can print a poster.
There is general consensus that for the immediate future vendors will concentrate on lens technology rather than increasing resolution, although Pickersgill sees younger buyers also looking for add-ons such as integrated MP3 audio players.
Canon’s still digital camera product manager, Shannon Tweedie, is still smiling. June was a big month for the company’s camera range and the future was looking bright both for its cameras and the resultant spin off into its photo printer and consumables range.
Tweedie said resolution was less of a differentiator than previously and the focus was now on output, ease of use, ergonomics and lens technology.
Consumers now understand digital camera technology much better.
“They know more about what they are buying and are getting a lot more educated all the time,” she said.
There were plenty of opportunities for resellers, particularly in the lead up to Christmas.
“About 55 per cent of the market is in the $500 to $1000 range,” Tweedie said. “That’s the sweetspot and I can see that section of the market in particular continuing to grow.”
She said the acceptance of the Canon-backed PictBridge as an industry standard for direct connection of any brand digital camera to any supporting photo printer would also increase interest in digital cameras and home printing.
“There will be opportunities for bundling deals and resellers will have many opportunities, particularly over Christmas, to show consumers what digital imaging and home printing is all about,” Tweedie said.