Repeat Buyers To Buoy Cooling Digicam Market

TWICE: What are the consequences of the category's cooling growth, both in terms of your camera development and retail strategy?

Peck: We need to find ways to give the customer some value or something different after they take the picture. The cameras have come to the point where they're outstanding. The image quality is outstanding. The product design is excellent. Optical quality is outstanding. So now what are customers going to do after they take the picture? I think it's going to come down to what the manufacturers can do to make it simple to be more creative to the end user. And I think the retailers are looking for those same options.

Here's an example.

[He pulls out a paper volcano.]

I got some looks for this when I got out of the car. This is from our Creative Park Web site. It is an entry point for a customer to go in and do really different, fun things with their photos. More than just making a 4 by 6 print. So it's a little creative amusement park for picture taking. I think that the differentiating point to help grow this business is to keep photography fun and give the retailer and end user a little bit more excitement.

Carr: Shame on us if we repeat the film experience. The average consumer took eight to 10 rolls of film a year; and if that's what happens in digital, shame on us. There are so many other opportunities with digital. If beyond the digital camera all you do is get a 4 by 6 print this industry has really shot itself in the foot.

TWICE: Will your product lines continue to be so expansive? I saw an industry statistic that claimed there are 308 camera models on the market today. How much longer can the market sustain this much competition?

Lee: You've already seen some players drop out. I think it's questionable as to when the market will hit the peak, because if there are new technologies that come forward, just like back in the film days when auto focus came or some other technology came, we saw another surge in sales. A lot depends on the manufacturer and the retailer. How much can we drive the interest and the excitement in our industry? If we can keep it exciting, I think we can expect to continue to have great sales. But I think the reality is that some players will drop out.

Campbell: That's right. I think we're looking at the category as a whole and trying to integrate images into consumer's everyday lifestyles — whether it's watching them on their plasma or burning them to DVD. It's all about extending it beyond taking that picture to what to do with it in the future. Where does that image end up ultimately? Yes, we're going to continue to improve from a technological perspective, but it's really around providing those end results, those end solutions.

Lundeen: It's very important that we think about how some of these solutions become available at retail. Part of our print at retail initiative is about packaging some of these creativity ideas and then bringing them to retail without breaking the back of the retailers with additional hardware purchases, printers and whatnot. You really do have to do a translation of product for retail.

For example, some amazing things can be done on some of the scrapbooking Web sites. They give you limitless colors and pallets and so forth. But the reality is the retailers are already strained with 20-minute processing times, and you can't give a consumer all those options at retail. So we're exploring how you translate an online experience to an in-store experience in a way that retailers can commercialize.

Carr: I think this is the year that the retailers really clean house. This Christmas anybody that doesn't have the scale of one of the top leaders is going to be scrambling to get rid of that inventory. They're going to be dropping prices, and it is going to be a war at the bottom of the market. A lot of people are going to drop out. The companies that remain will have had the scope and scale to weather this storm that is going to happen over the next year or two. Then after that the retailer is going to wake up and say, “OK, I've picked my players. Now how do you help me build this business?”

Peck: If you go back just a few years, it was whatever the manufacturer could deliver during the holiday season, put it on the shelf, we can sell it. Then they scream at you when you don't have enough to supply their demand. Now that we see a segmentation in the marketplace — you've got your slim-style design cameras, you've got your long-zoom cameras that go 10- or 12-time optical with image stabilization, you've got your entry-level price points at $149 and $199 — the retailers are now beginning to segment those products rather than say, “OK, here's my digital cameras, $149 to $999.”

They're going to look at those cameras very carefully and start to segment them by their customers rather than put everything on a shelf and hope for the best.

Campbell: I think you are starting to slowly see that today with a couple of lead accounts. They're already making that decision, and you'll start to see the rest of the market follow suit in the next year or two.

Lee: It's happening with the CE accounts because there's 49 posts. So let the battle begin.