Are You Experienced? Fourth-Quarter Camera Buyers Will Be

By Greg Scoblete On Dec 19 2005 - 8:00am

The majority of consumers flooding into retail stores this holiday selling season to buy a digital camera will not be bewildered novices in need of patient hand-holding, but savvy second timers intent on getting more bang for the buck.

While the Romans celebrated their triumvirate of Caesar, Magnus and Crassus, these shoppers will have their eyes on a modern power trinity: resolution, LCD size, and zoom length.

“About 60 percent of our customers are second time or repeat buyers,” said Haig Vartivarian, buyer, 6th Avenue Electronics, a New York-based specialty dealer.

“As growth in household penetration seems to be stabilizing, more and more customers buying cameras today are replacing an existing digital camera,” said Kristen Elder, senior buyer, Circuit City.

The preponderance of experienced users has driven a number of significant enhancements in product design, Elder said.

“Repeat buyers are opting to trade up for ease of use, more zoom, larger LCDs, smaller cameras and, of course, more resolution,” she added.

According to The NPD Group market research firm, there has been a marked shift toward 5-megapixel cameras, which represented 59 percent of the market in unit sales in October 2005 vs. 32 percent October 2004. The fortunes of 3-megapixel cameras have fallen precipitously from 37 percent of unit sales in October 2004 to a mere 6.7 percent in October 2005.

“Customers seem to be responding to longer zoom cameras as well as smaller, more compact models. Style is playing a bigger role in this category. Just like the cellphone, the digital camera is becoming somewhat of a fashion accessory,” Elder said.

Consumers are also snapping up cameras with only LCD screens, no viewfinders, in another sign of a market comfortable with digital technology, said Liz Cutting, NPD's imaging analyst. LCD-only cameras made up 19 percent of the market in October 2005 vs. 5.7 percent last October. Cameras with 2.5-inch screens represented 14.3 percent of total digital camera unit sales through October, Cutting added.

“The camera is a sharing device, and these large screen models have 'pass around' value,” she noted.

There is still room for improvement in the slim form factor models, Vartivarian said. “Image stabilization is important and lens speed can be improved.”

The influx of those looking to upgrade has also driven digital SLR sales. According to Cutting, year-over-year d-SLRs sales are up 70 percent in units, while the overall digital camera market is up 22 percent.

While digital SLRs have grown, they have not replaced the high-end fixed lens models as some may have expected, Cutting said. Through October, models with a 10x optical zoom or higher outsold digital SLRs by 1.4 to 1. Cameras with a 3x zoom or lower represent 67 percent of all digital cameras sold this year, said.

Sub-$900 d-SLRs represented 39 percent of all d-SLR sales vs. almost zero percent a year ago, she said. A full 25 percent of d-SLRs sold in October 2005 cost between $600 and $700.

Despite generous price drops, digital SLRs and ultra-zoom fixed lens models are still separated by a roughly $100 to $200 price gap.

“You have a lot of second-time buyers coming into stores thinking they need a d-SLR when that's really still a hobbyist product,” Cutting said. The ultra-zoom's success has been driven by these repeat buyers, who are talked off the ledge of a d-SLR purchase, Cutting said.

“The market is more open and varied than you might think,” she said.

The fastest growing price segment was the $100 to $200 cameras, up 53 percent from last year to comprise 31 percent of the market through October.

“The value shoppers have jumped in,” Cutting said.

How much longer can the good times last? Cutting thinks digital cameras can enjoy several more years of growth. “Camera buyers are still well above census in terms of household income so the growth is sustainable,” she said.

One thing that is not sustainable, Elder said, is the proliferation of different camera models. “I fear that manufacturers correlate assortment quantity with assortment quality. This is a risky business plan, especially as the growth in digital cameras begins to level off. Customers have different needs, but usually two or three product families can meet most of them.”

“I think the consumer should know what your brand stands for by your assortment,” Elder added.