He might know when you've been naughty or nice but the only thing all good little resellers have been wishing for from Santa this year is a bumper finish to an otherwise stagnant 2002. Richard Noone investigates how digital still cameras could prove a lucrative lining to some pretty thin stockings.
If you haven't noticed the Christmas decorations in most department stores yet, then you've probably been snowed under a pile of end-of-quarter work. But they're there. Just like last year, and the year before that. Only they seem to arrive a little earlier each year. A bit like an unpaid credit card bill that seems to ring a few more alarm bells every time it makes its way to the top of your "must-do" tray.
But this year promises to be a little different. For hundreds of retailers, mass merchants and independent dealers, there's been a sleeping giant that just might awaken with the sound of distant sleigh bells. The beast is digital still camera (DSC) sales and this Christmas, according to many industry pundits, will be the best yet.
There's no denying sales of DSCs have been growing steadily over the past two or three years. But just how much growth has been difficult to track. International retail analyst the GfK Group has produced some general market indicators of over-the-counter sales. By mid next year the company estimates global sales of DSCs will be worth in excess of $US140 million and by 2006 shipments will grow to around 41 million units per year.
The proliferation of DSCs in the IT channel has prompted channel research company Inform to start tracking the market. Preliminary data from the past two and a half months indicates that the top three performing brands in the mass merchant channel are Kodak, Sony and market leader Canon. Inform research analyst Luke Solyom attributes Canon's performance of more than double Sony or Kodak's unit sales to its well-established relationships with key retailers such as Harvey Norman and Coles Myer. Kodak, with its kiosk style imaging labs in many Kmart stores, has also done well.
The onus on manufacturers, according to Solyom, is to extend their retail channels. It's here that a growing number of resellers have come to the party. From a snapshot of 1,000 resellers across the country, Inform found that 65 to 70 per cent of resellers -- independents, mass merchants and commercial dealers -- stock digital cameras. The reason appears all too obvious, believes Solyom, with DSC sales "going gangbusters" across numerous customer segments; from mums and dads through to corporates, education organisations and SMEs.
"Price really isn't an issue anymore because there's sub-$300 cameras right through to cameras over $2,000. Now there's a camera to suit practically anybody's budget, such as people who are happy with a little two-megapixel camera that takes a pretty decent shot but doesn't have the resolution of a five-megapixel camera that a professional might need."
Overall, Inform splits the customer-facing side of the DSC channel into mass merchant retailers, which account for around 30 per cent of the total market; specialist photographic stores, which make up the bulk of unit sales with around 45-50 per cent of the total market; and a growing opportunity for the traditional IT reseller channel, which accounts for around 10-15 per cent.
The convergence of digital imaging and photography has resulted in a new market for broad-based distributors such as Tech Pacific, which, according to product category manager Joshua Velling, has seen distributors break into the specialist photographic retail channel. He notes the trend as a significant opportunity for distributors to provide not only digital cameras, but also the associated peripherals such as printers, scanners and additional storage devices that traditional photographic stores have been slow in adopting.
"The way we add value here as a distributor is by bringing in the IT component to specialist camera stores. It's absolutely a new channel for us."
Tech Pacific's DSC sales have recorded 140 per cent year-on-year growth. Velling claims the ease of use, and more specifically the ease of storing/sending images in a digital format, has seen a plethora of SMEs adopting digital cameras for their business needs.
"The technology has evolved while the price point has come down, so nowadays a lot of SMEs see [digital] cameras as a real business tool," says Velling.
A widely touted example is real estate agents taking digital pictures of upcoming properties, but according to Ben Smith, Sony’s product manager for digital imaging, it goes much further than that. Smith says it's difficult to determine accurately where digital cameras end up, be it as business tools or at the consumer level, but one thing is for certain: a growing number of businesses are adopting digital cameras for a variety of applications.
Industries such as insurance, government and education have used digital cameras for some time. Now professionals as diverse as architects, panel beaters, and farmers who send images of crops to specialists for diagnosis, have spurred the rapid uptake of the digital image medium.
"At first, some of these [applications] seemed a bit surprising, but using a digital still camera in hindsight makes sense for a lot of these guys," says Smith.
Corporate dealers have certainly noticed the uptake of customer interest in digital cameras. Jenny Tuxford, Apple account manager for Toowoomba, QLD-based dealer Downs MicroSystems, says a large number of corporate and government customers have approached the reseller looking for digital solutions. "I think the fact that [digital cameras] attach themselves to a computer means customers go to a computer-based store rather than a photographic shop for service on how they install and manage them on their network. "And surprisingly it’s not always for the high-end stuff that can produce poster-sized images. More often than not, it’s in the two to three megapixel range."
A boon for Queensland resellers is the fact that DSCs have become mandatory on the curriculum for primary school students. Schools then look to resellers for support. Many high school students are also required to submit digital imaging assignments and have work submitted digitally to third-party grading bodies to compare grading across schools. Tuxford claims Apple has been a winner in this environment with iPhoto and iMovie digital editing software applications coming standard on iMac and eMac machines.
Obviously the corporate sector doesn't follow the buying pattern of Joe Public when it comes to Christmas buying, although Tuxford says Downs MicroSystems nevertheless finds the back to school and January periods to be quite strong for corporate sales. "I don't really know why, but I think a lot of people [and corporates] think about what they need over that period and decide to go ahead with purchases at the beginning of the following year."
So just how do resellers, retailers and independent dealers capitalise on the market potential in the lead-up to Christmas? Well, according to Tech Pacific's Velling, the same way distributors have entered the specialist photographic retail market -- through bundling additional technology such as printers, photo-quality paper and extra storage with standalone cameras.
"It's about being close to the customer, finding what their technology needs are and fitting the right technology to suit."
Tech Pacific has for example extended a promotion in which resellers receive a free Targus Camera Case with every purchase of a Sony DSC or Handycam.
Inform's Solyom is a true advocate of the bundling approach. "I anticipate [bundles] will be a really big seller." But bundling is an option that has to be driven from the top down, according to Solyom. With retailers battling it out over razor-thin margins, it is up to the distributors, and more specifically the manufacturers, to drive bundled offers.
"Bundles generally start higher up the tree than the reseller level, and then it tends to be a good way of clearing older stock. The big mass merchants can draw on their buying power to offer [bundles] but independents can't match them on price. The only way for independents to match the big players is on service, but there's generally not a lot of service surrounding digital cameras because they're so simple."
David Finn, managing director of Kyocera Mita Australia, expects the IT channel, and particularly the mass merchant channel, to grow the total DSC market by at least 50 per cent in the coming year. While some in the sector would describe this as a conservative estimate, the reality, according to Finn, is that resellers need to have a practical working knowledge of digital cameras, including the accessories and software supplied with the cameras.
"Resellers have a great opportunity to up-sell, focusing on complementary products -- similar to the printer industry -- such as linking digital cameras with colour laser printers, photo-quality paper and blank CD sales. They have a great opportunity to sell things like scanners, and high-quality printers, along with digital camera sales," says Finn.
Kyocera has a reseller incentive program called the Kyoclub designed to motivate and reward sales staff with prizes. Similar to many points-based sales incentive programs, resellers earn points for every Kyocera Mita product sold. Resellers can then trade these points for prizes including Kyocera's range of digital cameras. Finn claims this is one way resellers can either provide an incentive for their sales staff or pass on the prizes as part of a bundled solution for customers.
HP, in line with its marketing push to be seen as a holistic document and imaging platform -- spanning both the capture of images through to their storage and distribution -- has released a bundle around its low to mid-range Photosmart c320 camera. The Special Christmas Bundle sees HP combine its 2.1-megapixel c320 camera, a HP PS130 (4x6 photo) printer, an additional 16MB Secure Digital memory card, a HP colourfast 4x6 photo paper pack, and a carry case.
The bundle, priced at $864, is being offered through HP’s direct retailers such as Harvey Norman and Dick Smith Electronics as well as through distribution to HP’s indirect retail and commercial reseller channel. Based on recommended retail pricing, the bundle represents a saving of $265.
The deal is designed to address the "mixed messages" surrounding what the average consumer can do with digital imaging, according to John Gowland, marketing development manager for emerging categories at HP. He says the bundle enables customers to control the printing and storing of photos without having to go down to their local processing store to have them printed out.
This empowerment is said to be a major driver in the uptake of digital photography. That said, Gowland claims the higher end of the market, cameras ranging from $800-$1000, is where the market and HP are finding the most growth. "The high-end and medium [market] is the growth area, that’s where there’s a huge potential going forward."
GfK analyst Gwenno Hopkin says the increase in average retail prices for DSCs in March 2002 is a reflection of the take-up of 4+megapixel cameras earlier in the year. At that time, they were still commanding a much higher premium but the price has declined rapidly since as more brands have jumped into the 4+megapixel sector and as the market prepares for the ultra-high-megapixel models expected late this year and early 2003.
Sony is currently bundling extra 16MB, 32MB and 64MB memory sticks with its low, mid-range and high-end cameras, respectively. The promotion began in the last week of October and will run until December 15. Sony's Smith says the national advertising campaign should help drive customers through the doors of Sony's retail partners.
Smith claims that a few years ago the biggest problem mass merchant channels had in breaking into the DSC market was letting customers know they stocked the products. Instead, a disproportionate amount of sales went through specialist photographic stores. These days, the same could be said of small and independent dealers across the country. "They need to let consumers know they sell these products," he says.
While some resellers are in the position to advertise in local papers, Smith encourages others to print catalogues for letter box drops. Anything really to get the message across to a sometimes unaware public. But it’s once inside the store that Smith says resellers can really demystify digital photography for the average punter.
"In-store displays are a great idea. I tell [resellers] to have a computer set up with a printer and a camera all laid out so customers can actually see how it works all together. Taking it down to its simplest form. Once a customer that's a bit techno-phobic sees it's quite straightforward, they're more likely to go ahead with a purchase."