Vendors Excited About Digital Growth, Despite Challenges

By Greg Scoblete -- TWICE, 2/21/2005

Orlando, Fla. — Digital camera manufacturers have deftly balanced the needs of newcomers with the demands of digital veterans and unveiled a 2005 product line that has many camera retailers excited about another year of solid category growth, but worried, too, about what they see as a confusing proliferation of product.

“There is so much cool product,” said Paula Martin, digital camera merchant, Office Depot. “And the price point lets you come back year after year to keep up with new technology.”

“They are definitely building off last year's success,” said Kristen Elder, purchasing director, Ritz Camera Centers. “Camera makers nailed down shutter lag. We're seeing some bridge focal lengths in the 4x, 5x and 6x zoom categories, and these features are really luring those repeat buyers.”

“You see a continuation of trends from last year — longer zooms, bigger LCDs, better battery life and faster start-up times” said Glenn Cunningham, consumer electronics director, Amazon.com

Elder noted that Ritz Camera still sees “lots of new users” coming through its doors and that the cameras have improved to such a degree that the “overall satisfaction rate” is stronger among today's new entrants than in previous years.

Indeed, unlike in the past, consumers “no longer have to compromise when going digital,” said Mark Sasicki, electronics buyer, Apt Electronics.

Diminutive models, cameras small enough for pocket or purse, are also selling briskly.

“A second-time buyer is more prone to buy a model based on its size or its style,” Cunningham said.

Retailer excitement, however, is tempered by the caution that in the rush for share and self space, vendors were flooding the market with too many cameras, sparking precipitous price drops and confusing consumers with an alphabet soup of families and SKUs at overlapping price points. Particularly as digital SLRs begin to exert pressure on fixed lens models above $500, some vendors are trying to cram the same number of cameras into a smaller price band, dealers said.

“When the price band was $1000, you could handle a lot more models. Now, the competition is occurring below $500, and there are too many products out there at overlapping price points,” Elder said. “Certain manufacturers have the right assortment, five to seven models clearly set apart from $100 to $500,” Elder said. Other vendors have been less successful, she said, plowing multiple lines onto store shelves.

“Consumers don't understand channel management. They understand that the camera they saw online is not available in a store when they go to buy it,” Elder said.

Office Depot's Martin noted that the company was responding to the flood by taking “a more focused approach. We're choosing carefully so we can represent a family of products in a streamlined manner.” While the store would devote more shelf space to digital cameras in 2005, it would feature fewer brands.

“The idea is to be able to show the customer one model in a line, and have the sales staff explain the features of the other models in the same line without having it take up room,” said Martin.

The virtues of virtual shopping eliminate those concerns, Cunningham said, noting that thanks to the electronic nature of his channel, and the company's “Web-based education tools,” having a variety of models is “not a huge issue for us.” Nor are persistent issues of product shortages and missed targets.

“Mistakes make closeouts,” he said. “There's always room to work on assortment, but a perfect forecast is not my ideal world.”

Retailers are also absorbing the rapid growth of the digital SLR market, which by all accounts has not only propped up declining ASPs but spurred a universe of accessory sales.

“Anything that you can accessorize is good for business,” Sasicki said.

Another boon has been a strong uptick in photo printer sales. Elder noted that sales of dedicated 4-inch by 6-inch printers have jumped considerably. “Consumers have definitely taken to photo printers. I think the manufacturers got it right in the fourth quarter in their camera and printer promotions and rebates.”

Martin agreed, noting that there were “outstanding” bundles by year's end and the trend toward “hard bundles” was on the rise and would no longer be confined to seasonal promotions.

For more retail views on the Imaging Market, visitwww.TWICE.com.