Analysts: Tough First-Quarter Camera Sales Should Improve

By Greg Tarr On May 8 2012 - 4:01am

NEW YORK – Like so many other consumer electronics sectors, the digital camera business continued to stride a slippery slope during the first quarter of 2012, according to findings from two leading imaging market analysts.

Continued buffeting by the global economic storm, mass adoption of camera-equipped smartphones/tablets, and limited supply from the hangover of last year’s factory flooding hindered revenue growth for the overall digital camera market in North America over the first three months of the calendar year.

“Compared to full year 2010 when we saw the market go from a 3 percent revenue increase, 2011 dragged to an 8 percent decline. First-quarter 2012 showed us more of the same downward slide, from a 2 percent decline to a 13 percent decline in dollars,” observed Liz Cutting, The NPD Group consumer technology imaging analysis executive director. “Certainly the supply limitations of interchangeablelens cameras [ILCs] exacerbated the problem. But while interchangeable-lens cameras and related accessories continue to grow, sales of compact system cameras continue to dwindle, and it is strictly an issue of lack of consumer demand. Both saturation and smartphones have severely dampened run-ofthe- mill compact cameras.”

According to market analyst International Data Corp. (IDC), the U.S. digital camera market is expected to see another 10 percent drop in unit sales to 28 million, following a disappointing 2011 that saw a 15 percent decline to 31 million units, said Chris Chute, IDC global imaging practice manager. “The bulk of the market remains in the low-, mid- to high-end point-andshoot segment.”

Fortunately, as spring advances into summer, trends are indicating increased purchases of better-featured, higher-margined products, especially ILCs. The sector is helped this year both by a flood of new DSLR and mirrorless compact system cameras, and by the recovery from the flood that swept through the Thailand factories of a number of the largest camera brands last year.

Chute listed some of the hottest overall camera segments as models with long-zoom lenses, built-in Wi-Fi connectivity and mirrorless compact system cameras.

NPD’s Cutting agreed: “The march is increasingly towards cameras with advanced features. Easiest to see is the migration toward higher optical zoom cameras. But while 10x and greater optical zooms used to represent healthy double digit-growth, now it is larger form factor bridge cameras with 20x or greater zoom which are driving the growth, as well as the niche $400-and-up high-performance but lower-zoom compact cameras.”

“Certainly, overall, 10x and longer zoom cameras were a mainstay in the first quarter of 2012, reaching 26 percent of all point-and-shoot digital camera units and 40 percent of dollars, compared to just 10 percent and 17 percent, respectively, three years ago,” she continued.

Cutting added that zoom cameras with larger form factors and more advanced feature sets grew 40 percent in the first quarter of 2012 in units and 25 percent in dollars, and represented 18 percent of all dollars in the point-and-shoot marketplace, up from 4 percent in the first quarter of 2009.

According to IDC, the ILC segment is forecasted to see a doubling in percentage point growth this year to 21 percent, from 11 percent in 2011.

“Canon, Nikon and Sony are running away with the market in the U.S.,” said Chute. “It’s all about ILCs at this point, and if you don’t have a model – like Casio and Kodak – then you don’t have a viable future here, especially since profits are tied up with ILCs.”

Cutting said NPD has already monitored a “pick up of detachable-lens cameras in March. Both lower-end Nikon models as well as new entrants in the $2,000- plus space are jazzing up the market,” she said. “Despite any shortage of these prosumer models, we are seeing a positive reflection in just a few weeks of sellthrough availability.”

The leading camera makers, especially Canon and Nikon, have aggressive advertising plans for the months ahead, which will help to jack up interest and awareness in new camera models, she added.

“Advertising spends have already shown some muscle – the Nikon One campaign and concurrent promotions drove the J1 up to the top ranks during the holiday season,” Cutting said.

One of the newest features on the scene this year will be integrated Wi-Fi connectivity in some advanced point-and-shoot camera models, giving the sector an answer to shoot-and-send convenience of smartphones and Wi-Fi/3G and 4G tablets.

“Wi-Fi direct and being able to interact with tablets and phones is critical to the long-term viability of the camera market,” said Chute. “While there are finally some Wi-Fi direct models coming to market, the industry will have to heavily promote the feature directly to consumers. I don’t necessarily see that they understand that need.”

Cutting said sell-through data on newly announced Wi-Fi models have not yet registered in NPD’s tracking reports, but “certainly there’s a groundswell of consumers who desire wireless transmission in their cameras. In NPD’s latest “Imaging Confluence” study, over one-third reported that Wi-Fi capability would be very or extremely important in their next digital camera.”

“Consumers do need to be shown that it’s easy and convenient both to transmit images to other devices as well as uploading directly to the Internet, especially to social networking sites,” she continued. “Their smartphones have trained them to expect this.”

Brand performance continued to keep most of the major players in the customary pecking order, with Canon, Nikon, Sony, Olympus, Pentax, Fujifilm and Panasonic ranking as the top global leaders.

Among some of the biggest changes ahead, Chute cited the impact of Kodak’s exit from the consumer camera business, which “will give Nikon, Fujifilm or Samsung a boost in the short-term as these companies play in the Kodak-end of the market,” he said.

As for changes in consumer camera shopping patterns, more and more purchases of better-featured cameras are moving online, where customers can shop for the best price, as big-box electronics chain Best Buy has found out.

“The higher the price band, and the more savvy the consumer, the more likely the propensity to buy online from Amazon, affiliates, B&H, etc., and since the market is trending away from low-priced cameras, [brickand- mortar] retailers will have a difficult time addressing this,” Chute predicted.

NPD’s consumer data showed that 25 percent of all revenue in the camera market went through the ecommerce channel in 2011, up two points from 2010.

“So the shift to online is not as dramatic as one might think,” she offered. “A significant portion of that online revenue can be attributed to retailer dot-coms. The average price of an online camera purchase was $229, over 20 percent higher than an average brickand- mortar purchase.”

“Not surprisingly,” she continued, “consumers buying online do more research than those buying in brick-andmortar locations. Traditional retailers need to provide the online resources — how-to’s, ratings and consumer reviews, and a great navigational experience that help draw and retain consumers both for the camera purchase as well as accessories and future aftermarket items.”