Crossing the digital divide

Crossing the digital divide

Remember the good old days of PC sales when margins were in double figures and sales were increasing measurably each month? Times have certainly changed. With PC and peripheral sales flat, most resellers are on the lookout for that killer app - or "must have" peripheral - that will keep the debt collectors at bay.

However, there is a market that continues to buck the downward trend. No matter who you talk to digital camera sales are growing at a staggering rate. As the technology becomes more varied, there are increasing opportunities for the IT reseller channel to get involved in what has traditionally been a fairly specialised market place.

Justin Dallinger represents one of the numerous camera resellers who have already crossed the digital divide. From his family-run camera shop in Albury NSW, Dallinger not only sells digital cameras alongside a range of film-based models, he also provides a range of processing services.

"People come into the shop with a memory card," Dallinger said. "They want to view all their shots and pick which ones they want printed. We either print them up or copy them onto a disk."

By now, many a reseller may be looking over at the CD writer in the company PC and considering a foray into new markets and return customers. Not only does the digital camera market initially involve a high-margin product with growing popularity, but it is also heavily dependent on an ongoing service element.

"This stuff is really a no-brainer," said Paul Connelly, managing director of consumables distributor Daisytek. "Resellers should not sell themselves short by thinking that they need specialist skills to sell cameras. Home, education and business sectors are all buying into this whole imaging gig."

According to Connelly, resellers should be taking advantage of the initial camera sale in order to capture ongoing peripheral and consumable sales.

"If I was a reseller I would set up all the flashy presentation equipment in the store, that way they could let the products speak for themselves," Connelly said. "Resellers have the opportunity to spark up ongoing sales through the consumables, and gain even more through the increased traffic through their stores."

Connelly believes the increasing prevalence of affordable, quality colour printing is driving digital camera sales at the mid-level, as consumers discover they are able to create their own prints at home.

According to Dallinger, many of his customers who bought digital cameras are more likely to come into the store to have their photos processed. He advises resellers that the path to return customers lies in meeting the consumer's initial expectations. Dallinger warns away from stocking some of the lower grade cameras, lest they become the target for frustrated end users whose "high-tech" images turn out to be smaller and not as clear as the film-based variety they are used to.

A developing market

Whether it be through selling consumables or providing processing services, digital cameras offer the tantalising carrot of attractive initial margins and ongoing sales, quickly outsmarting the long replacement cycles normally associated with IT equipment.

However, the commentators are divided when it comes to the opportunities resellers have to get involved in photo printing services.

Nick Buchner, general manager of the Australian distributors for Olympus Camedia, is one of those sceptical about the role of IT resellers moving into the digital-image processing arena.

"There are tremendous opportunities for resellers in the digital camera market," Buchner said. "When digital cameras first came out, some manufacturers sold cheap cameras that gave poor quality results, but there are now some very affordable cameras on the market that provide images of the same quality as other cameras."

While Buchner encourages IT resellers to become involved in selling the cameras themselves, he believes end users are not ready to think of the IT reseller as an image service bureau.

"Consumer behaviour is already well-established. People are used to going to the photo shop to develop their photos," Buchner said. "Most of these shops have installed digital processing equipment, they have already made the change over."

However, others in the industry believe the growing popularity of digital cameras provides a wide range of image-processing opportunities for the IT channel. Stuart Poignand, marketing manager for camera and imaging communication at Canon, believes computer resellers should look quite closely at some of the digital-image processing opportunities available to them.

"There is nothing to stop computer resellers from buying into digital minilabs and providing image-processing services as an ongoing source of revenue," Poignand said. "Resellers have the opportunity to get involved by providing archiving devices for the pictures, or by printing the photos on-site."

According to Poignand, digital camera customers are faced with three main alternatives when it comes to processing their images. Some will buy a good quality colour printer to attach to their PC, others may be looking for a specialist printer specifically for photos, while many will continue to rely on outside help with the printing or processing of their images. Resellers stand to gain from ongoing revenue on print and archiving services or consumable sales, regardless of the consumer's decision.

Nick Coulson, store manager of CCC Camera House in Sydney, believes most customers are reticent about printing their photos at home, and about 40 per cent of customers want their images burnt onto a disk rather than printed.

"There is a fair bit of confusion in the market place. With some printer models end users can print from home for less than it costs to get their images developed professionally," Coulson said. "But it is often difficult to match the colour they see on their screen with the colour that comes out of the printer."

While Coulson uses home printing to assist in his part-time wedding photography business, he admits that most consumers lack the time and the skills to create photo shop quality prints at home.

The DIY alternative

One of the key markets driving digital camera and colour printer sales is the business market, and many industries are attracted to digital technology because of the flexibility provided by high-quality, one-off printing resources.

According to Lexmark consumer products division product manager Paul Mansell, image-processing flexibility is driving a lot of busines into the digital arena.

"Take real estate agents for example. With a combination of a digital camera, some decent image-processing software and a good quality printer, they are able to print up a high-quality window display the very day a house is listed for sale," Mansell said. "It reduces their operating costs and saves them time, so they are buying into digital cameras in a big way."

Even the imaging software companies are becoming interested in the dynamics created by the growing popularity of digital cameras. Imaging software vendor Adobe recently released a cut-down version of Photoshop designed with the home user in mind.

"Photoshop Elements doesn't offer all the production tools you might expect to find a graphic designer using," said Adobe marketing manager for Australia, Jordan Reizes. "What it does have is step-by-step recipes to show home users how to touch up their own photos, so it is designed specifically with digital cameras in mind."

However, just as the digital cameras/PC/colour printer bundle was beginning to look like a match made in heaven, digital camera vendors such as Kodak and Canon have teamed up with printer vendors to produce a scaled down printer which plugs directly into the cameras themselves.

Yet James Hung, IT manager at imaging distributor NaSa Technology, believes that PCs will remain the principal choice for most end users when it comes to viewing and processing their images.

"The PC will always be there, because there will always be a market for people who want to have more control over what they can do with digital images," Hung said. "A lot of the hardware and software associated with digital cameras is already plug and play, but the resellers will have to provide the support to make sure they keep the technical babble to a minimum."

Hung believes the most interesting development in the digital camera market in recent months is the convergence between still photography, digital video and digital sound.

"From a technical point of view, we are getting to the point where customers can create a short video with one compact digital device, download it to their computer and send it to their friends via e-mail," Hung said.

While IT resellers are largely accustomed to the gadget market to which Hung refers, the camera and still image market remains the demesne of the camera reseller. Luckily for computer resellers considering a foray into the digital camera arena, help is at hand.

Digital liaisons

In the early 90s, Photo Marketing Association (PMA) spun off a division charged with focusing on the digital market. The Digital Imaging Marketing Association (DIMA) now has offices in more than a dozen countries around the world, providing members with ongoing marketing and sales support that specifically targets the digital camera market.

According to Les Brener, director of the Australian arm of DIMA, digital camera sales currently represent about 12 per cent of overall camera sales, resulting in the forging of strong links between the IT and imaging markets.

"Companies like Tech Pacific and Intel are becoming involved in the camera industry and are already active participants in our conferences," Brener said. "We are trying to give our members an insight into where the market will be in the future, and a lot of it is going to be digital rather than film-based."

Rather than being concerned about the participation of IT resellers in the camera market, Brener invites any interested parties to become members of DIMA, in order to improve their knowledge of the camera market generally.

"We organise conferences to keep our members informed about market trends. The first thing on the agenda this year was WAP and some of the effects it may have on the development of digital cameras," Brener said. "We also send out a monthly newsletter to keep our members informed."

At this stage DIMA breaks cameras up into three main groups: toy cameras - inexpensive cameras which provide low-resolution images; mid-range cameras - which provide a realistic replacement for film cameras; and high-end or professional cameras. The low end has been experiencing the strongest growth, with many cameras already available through large discount stores such as K-Mart, although the margins are less attractive. The high end has also been experiencing strong growth, but it requires specialist knowledge and photographic skills to keep up with the professional photographer market. However the mid-range for digital cameras may offer some interesting inroads for IT resellers. At this level of the market margins remain high, sales are on the increase, and the opportunities for value adds are the greatest because many of the software and peripheral value-adds are designed for SOHO or home use.

In fact within a few short years, the digital camera may take on standard peripheral status in the same way that scanners snuck their way into many a PC bundle.

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