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Home >> Vendors: DigiCam Shortages Possible
TWICE:Last holiday season, digital cameras sold well, so well that there were product shortages. What are the chances we'll see that for this year? What did you learn from Q4 2001?
ELLIOT PECK (Canon): With the explosion of digital cameras, the industry is projecting about eight million units to be sold this year. I think that everybody is challenged with the issues of getting enough chips and parts to be able to keep up with that demand. Whether it's a big CE channel or a mass merchandiser, or a specialty store, they want to make sure that they are able to bring that consumer to their store. So they may not be carrying as many SKUs as they did in the past — you know two years ago they just picked up every digital SKU they could get — today they're being more selective because their plan-o-grams won't allow it.
But I think that retailers are very concerned that the manufacturers will be able to keep up with whatever the demand is going to be without having to give rain checks or not have those products in stock. So the concern is, will everybody be able to supply those SKUs that we're going to be putting in to the store so they don't lose their customers to somebody else.
JON SIENKIEWICZ (Minolta): It'll happen before Christmas. Absolutely, there's no question about it.
PECK: We've seen a couple of things develop in the fourth quarter of last year. One was that we didn't expect that if you make even a slight adjustment at a price point, your sales can dramatically jump to the point where you can't supply that product. So I think one lesson we've learned is to plan and be very careful where you promote and how you promote and at what price point you're going to put your products in. And if you do that, be able to supply those products in the market place, because we can't instantly turn our factory on and say let's produce two times or three times as many products.
The second thing that we've seen from our side is that customers are willing to spend a lot of money for a digital camera if the quality is right and the specifications are right, products being sold over seven or eight hundred dollars don't scare the consumer. So, what we've seen is rather than a push down is a push up in price points and features and quality of the products. So we have to be able to plan ahead to be able to meet not only the low end demand for $199 cameras, but also from the higher end, three million and four million and five million pixel cameras with various features.
STEWART MULLER (Olympus): With life cycles being what they are, you can't react to a product shortage, it's already too late. So you've got to plan at the beginning, get your number right, and if you miss it, you've missed it because by the time you try to change your production it's already too late and you're on to the next product.
TWICE:How about for this Christmas?
MULLER: The numbers are locked for Christmas now. So what they are, they are.
SIENKIEWICZ: If you just analyze this logically, and say okay, the life cycle is very, very short, shorter than it is with traditional products. The planning cycle is still relatively the same. The production cycle is still very long. And these darn retailers buy too many at one time. So it's not a matter of making another extra couple thousand cameras or a ten thousand cameras, you have to build large quantities. So it's unquestionable there'll be shortages because the market is expanding so rapidly. It's a cost thing.
NANCY CARR (Kodak): It really comes down to communicating with your retail partners as to what you anticipate, here's our line for the year and they're putting their orders in now. We know what we're selling.
MULLER: Because getting a three month forecast is almost irrelevant. Maybe you use that for allocation purposes, but nine months out is when you need to know what the quantities are going to be to be able to affect production.
PECK: That creates a problem, if you're short, well that's a problem that you can't fix right away. If you overproduce in a product, the life cycles are so short from the manufacturer's point of view, well what do you do with twenty or thirty or forty or fifty thousand units that you purchased at price point or manufactured at price points that the customer or the retailer doesn't want to pay anymore?
MULLER: And we all have a level of responsibility there because when you have a glut of inventory, the natural reaction is you drive the price down. The problem is you drive it down, you never drive it back up.
PECK: So it puts pressures on the manufacturers that you've got to be right. You don't want to be short because you get all kinds of problems from your retailers. And if you're heavy on the other side, as we just heard, that simply just drives the price point down unnecessarily.
RUSTY OSTERSTOCK (Panasonic): So if you're looking at this year is there going to be a part shortages in CCD technology, LCD screens, glass manufacturing? Currently digital cameras are not the only products that incorporate those components, so there's always the possibility that those businesses in other categories, which are unrelated to ours, will have spikes in their business. Those forecasts go up, but there's still a limited number of components out there to support the entire consumer electronics industry and the photo industry.
So it's not just product specific. It's also parts procurement specific to the entire consumer electronics business. So, is there going to be a shortage? I think there is obviously the possibility. If the other businesses expand beyond what their forecasts are, there is always a roll over effect.
ED MINNOCK (HP): That highlights an important point and that is the degree to which you can work better with the accounts. Provide more, frequent and better information out there because it's a very dynamic market, it's rapidly expanding. It's a crap-shoot in terms of trying to figure out which products are going to be the hit and which ones aren't. Work with retailers closely and try to reach alignment. Sometimes we think that we know more and sometimes, they know more.
Let's put together a plan and then execute on it. And then from my side, maximize our flexibility so that you can move from one SKU to the other SKU very quickly because the demand is going to move fast.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.