Can Digicams Grab Discretionary Dollars?

By Greg Scoblete On Aug 18 2008 - 6:00am

TWICE's annual Digital Imaging Roundtable brought together eight industry executives for a freewheeling discussion on the state of the category. The session was moderated by contributing editor Greg Scoblete

TWICE: What challenges do you see as critical in the fourth quarter?

Eliott Peck, sales VP and GM, Canon: We have to start with the economy. Consumers are now buying their third- or fourth-generation digital camera and they may be very satisfied with what they have. Perhaps there is no compelling reason to step up.

We see a leveling off in the growth in terms of units in the marketplace, but at the same time we see the dollars flattening out. So we have to sell 12 to 15 percent more units just to make the same dollars.

There is also the fight for discretionary dollars. We see a tremendous boom in high-definition TVs and consumers are still spending a lot of money in that category. Digital cameras are holding their own, but you're fighting for that discretionary dollar in a very tough economic environment.

The retail landscape is also a little bit of a challenge. Consumers are very smart today … and retailers are now facing the issue of how to communicate effectively to the end user.

Phil Lubell, marketing director, Sony: The challenge will really be dollar growth. I think with 70 percent of the business being done under $199, the business above that, with higher technology and features that are software driven is tough for consumers to comprehend based on the exposure under $199.

You have to figure out how to get across technology to consumers [that go beyond] the four points on the price tag and in the circulars.

Jerry Magee, director of future product marketing, Kodak: The market is growing, but what we're trying to do is to bring out new features and benefits that will help capture, organize and share pictures. But explaining those new features is hard. We introduced something called smart capture. It's very difficult to describe how it takes better pictures automatically, without showing it. At retail, it's a new innovation in cameras but very difficult to communicate.

We're trying to introduce new categories to try to keep the retailers interested in our brand and our trade. We had a great experience with picture frames, growing not only the category but the experience of sharing pictures and letting people see the Kodak products as an extension of their lifestyles.

There's also a challenge of all these pictures being captured … We're trying to find ways to release them from PCs or their memory cards. Whether it's being printed, shown on a frame, or printed online or at retail or just e-mailed.

David Lee, senior VP, Nikon: We certainly view the economy as probably the biggest challenge as we head into the fourth quarter. It's very heartening, though, that the photographic industry continues to be more resilient than many other areas in the marketplace. History would tell you that taking pictures, even in a down economy, is something that people still want to do.

Darin Pepple, marketing manager, electronics imaging division, Fujifilm: I started my career in an economic downturn in this industry so I have kind of a unique perspective. I see basically the same thing happening today, but I think it is important to note that margin issues and price erosion are still going to impact us. We cannot ignore that.

Speaking on the printing side of the business, PMA made note that roughly 20 billion photos would be captured this year, and roughly 7.5 billion, some 36 percent, will be printed. I think for a lot of the retailers, this is an opportunity for them. In February, PMA noted that online print prices were about 27 cents a print. The price still remains flat and consistent, which is a good indicator of what I experienced when I first started in this industry, which is that there is some resilience to photography.

Michael Hunter, marketing VP, Olympus: Price erosion and slowing volume growth were factors that were at play even before the recent economic pressures took hold, and I think that means that we each need to give consumers understandable and compelling reasons to buy another digital camera.

One example: Olympus originally targeted its SW cameras, shock-proof and waterproof, as active lifestyle, and we discovered that consumers were buying it for everyday purposes — for their kids who were breaking other cameras, either by dropping it or dunking it in water. What we've heard is that they find it understandable and compelling.

Stewart Henderson, marketing communications director, Samsung: To echo what others have already said, obviously there are a number of different issues at play: the economy, no question; price compression, no question. That raises the question — how do manufacturers continue to drive sales when the sub-$200 cameras are so feature laden? We have to continually innovate — we have to continually educate.

Liz Cutting, imaging analyst, The NPD Group: We do have the double-whammy of a slow economy as well as saturation. We just completed a household penetration study, and we found that 76 percent of households have a digital camera. That comes out to 1.2 cameras per household. How do we find that compelling reason for them to move up?

Frankly our demographics are showing an interesting turn at the beginning of this year — which I don't think will last — but men have come to replace women as the dominant buyers at the first part of this year whereas women had grown to dominance as of last year. We don't think that is going to last, but we do have that challenge of bringing more women — who have been part of that growth — into this market.

But on a positive note, I looked at the top 15 categories in revenue for the latest three months in May. Compact cameras were No. 4 behind LCD TVs, notebooks and desktops. That is huge, and people will continue to make digital imaging a very critical piece of their lives. Although compact digital cameras were down 5 percent in revenue, within the rest of the 14 CE categories, d-SLRs were No. 8, up 24 percent in revenue. And accessories, which includes lenses, flashes, bags, batteries, etc., were up 17 percent in revenue.