While 2002 ended with more of a whimper than a bang, the year as a whole provided encouraging signs that the IT hardware sector is on the move once again. Latest figures from analyst, Inform, show that overall there was 15 per cent growth across all major sectors in 2002.
However, two products in particular outshone most others — digital cameras and multifunction printers. In January the MFP market recorded a strong 29 per cent volume growth over December, however, on a year-on-year basis it was 160 per cent up on January 2002. From a base of just over 9000 units sold that month, monthly sales rose to a record 24,500 units in January 2003.
Digital camera sales have risen in a similar fashion and logic suggests that this should all be bad news for the standalone scanner market. But the market is showing remarkable resilience.
In January, the entire peripherals market, scanners included, rose dramatically for this time of year. However, there was a word of warning from Inform about the figures.
Inform’s chief printing and imaging analyst, Stuart James, said: “If business is buying now, it is because they expect a freeze in expenditure soon and the need to upgrade print and imaging assets may never have been more necessary.”
The war in Iraq could well determine the future of the market in coming months as businesses clamp down on spending until the situation in the Middle East reaches some form of conclusion.
In the consumer space digital cameras are now beginning to seriously challenge scanners as the digital imaging device of choice. Digital camera sales are being driven by falling prices, improving quality and the increasing number of printers that will connect direct to a camera without the need for the computer.
Canon, which leads both the digital camera and scanner markets, remains confident of the scanner market. The company finished 2002 as the leading still digital camera vendor with 19 per cent of the market (Inform) and is the only one of the top five digital camera vendors to also play a major role in the scanner market. Kodak (14.6 per cent), Fuji (12.6 per cent), Olympus (11.6 per cent) and Sony (9.9 per cent) make up the top five.
However, there is strong movement lower down the chain where Ricoh, Nikon and HP are fighting hard to increase their market share. HP is an interesting case in point. It has long been among the top four scanner vendors and its entry into the digital camera market is relatively recent.
Its market share in December was just 1.6 per cent but it had jumped 64 per cent to 2.7 per cent by the end of January and was being further spurred on by the release of its new mid- to high-end 4.0 megapixel c850 which has thrown down the gauntlet to traditional vendors such as Canon and Nikon.
Olympus and Ricoh have also released new models in recent months and increased their respective market shares. BenQ, Acer’s peripherals spin-off, has also joined the market and in recent weeks has launched a 2.1 megapixel model that retails for just $269, less than half the average price of digital camera sold by mass merchants over the Christmas period.
Canon countered in March with the launch of five new digital camera models ranging in price from $499 to $3999. It also released four new scanners and a multi-function peripheral (MFP).
Product manager for Canon’s consumer products imaging group, Shannon Tweedie, said the scanner market was still very strong, although reaching maturity.
“There are still many opportunities for growth in this area, particularly as sophisticated technologies have become more affordable,” Tweedie said. “Consumers are upgrading their first generation scanners for the higher specified, faster and film capable models.
“The growth of the digital still camera market has contributed to an increased interest in photography and imaging in general, and in turn, scanners because they allow consumers to digitise existing film, slides and photos.
“With the increasing popularity of digital still cameras, photo and film scanning has also risen in popularity. Coupled with the ever-increasing availability of affordable, fast and high-resolution film scanners, the opportunities for resellers in the higher-end consumer flatbed film and document scanner market are continually expanding.
“The digital camera market will continue to grow in 2003,” Tweedie said. “This growth is fuelled at the entry-mid level of the market, as digital cameras become more affordable for the ‘average’ consumer.”
Canon also sees the growth of the digital still camera market as a catalyst, boosting the scanner market as consumer familiarity and exposure to digital imaging increases.
“We are seeing more advanced technology available in all scanners, whether they are low-end or high-end models,” she said. “Resolution, speed, portability and software such as OCR, PDF function, multi-scan that improves the functionality of the devices are all key selling points for today’s scanners.
“I expect to see a continuation of the trend that is bringing sophisticated technologies to users at a more affordable price.
“Consumers will continue upgrading their first generation scanners for the higher specified, faster and film capable models.”
HP’s emerging products marketing development manager, John Gowland, said the move to MFPs had been paramount in the erosion of the scanner market, however, digital cameras were also eroding the need for a single function device.
“Digital camera sales are going ahead in leaps and bounds,” he said. “IDC predicts 35 to 40 per cent year-on-year growth for the market while scanner sales are falling.”
While HP is not abandoning the scanner market, it is clear that its major emphasis in coming months will be on MFPs and digital cameras.
Gowland said that resellers were well on top of the market traction with MFPs selling for as little as $299 and HP digital camera range starting at $349.
However, he said that while consumers were driving the market growth in digital cameras there was still a general lack of knowledge about the cameras and their capabilities.
Resellers needed to be educating consumers about how the cameras could be used for digital imaging and how they could be connected directly to printers.
Gowland said the traditional mass merchant had to ‘sell’ cameras harder and there were good opportunities for them to push digital cameras and photo printers as a package.
He said consumers were becoming more educated about digital cameras.
“Currently about 15 per cent to 20 per cent of people buying them actually know something about digital cameras,” Gowland said. “That’s about double what it was 12 months ago and I would expect that within the next six to nine months the figure will rise to 30 per cent to 35 per cent.
“There a strong push for higher megapixel ratings and better quality optical zoom lenses as consumers become more savvy about what is on offer. Digital zoom is a little overrated and the consumer is learning that. However, having said that there will always be a market at the lower end for a set focus digital zoom.”
Gowland said the rapid slide in digital camera prices had been driven by demand and he expected prices in the low- to mid-range to continue to fall, while prices at the higher end of the market would remain fairly static.
The good news for the channel was that despite falling prices he did not expect any squeezing of margins because the lower prices would result from falling manufacturing costs resulting from higher volumes.
Epson has dabbled in the digital camera market in the past but pulled out of it three years ago to concentrate on its printer and scanner business.
It was a case of being in the market too early and Epson executives are not ruling out a return to the sector in the future but in the meantime they remain bullish about the scanner market.
The company has yet to release a multi-function peripheral preferring to concentrate on its high-resolution printers and standalone scanners.
Epson marketing manager, Mark Pleasants, said resellers should not be giving up on the scanner market.
“A lot of people think the scanner market is declining but there is still growth there,” he said. “Last year the market grew by 30 to 35 per cent both in value and volume, which will surprise a lot of people.”
Pleasants said there had been strong growth in document scanning and businesses using them for archiving.
He said Epson had been pushing the idea of photo archiving in the consumer market with some success.
“More mature users who have boxes of treasured photographs and documents such as birth and marriage certificates sitting under the bed and are using scanners to store them on their hard drive or CD.
“There’s no denying there is growth in the digital camera market, but a digital camera in basically just a 3D scanner after all and people are using both. I don’t see digital cameras eating into the scanner market as long as a lot of people still have traditional photographs that they want to archive in a digital format. There is no doubt that the scanner market will decline in the future but I don’t see it happening for a year or two yet,” Pleasants said.
“Epson dropped out of the digital camera market three years ago but we are keeping an eye on it. In the meantime we will continue to push the digital archiving and its natural synergy with scanners. Resellers have to push the idea of archiving to consumers and put the idea in their mind in the first place, otherwise they will just go for a digital camera.”