Today’s DSLR Market: New Levels of Opportunity, Confusion

Today’s DSLR Market: New Levels of Opportunity, Confusion

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What's hot and what's not in the digital camera market? Depending on the source, certain categories of the market are galloping off retailer shelves, while others are having trouble getting out the gate.

According to Mette Eriksen, Director, Digital Photography Trends, InfoTrends, the big winners are entry-level DSLRs, also known as ILCs (interchangeable lens cameras), priced under $700. “We expect [ILCs] will continue to be the major selling cameras in the U.S. through the duration of our forecast [2015],” states Eriksen. “Most people want to buy something that's inexpensive, and that's what drives the market. ILCs are also becoming a replacement and/or repeat-buyer's market.”

Eriksen added that shift happened sometime between 2009 and 2010 and added, “In 2009, about 20 percent of people responding to our surveys owned a repeat ILC, and by 2010 that had shifted to 50 percent. That's a massive change in a short space of time, which shows how quickly this market is reaching maturity.”

Hobbyists and males account for the majority of people purchasing ILCs, although females and family memory keepers are 'thinking of buying.' “A shift will probably happen in the market,” admits Eriksen, “but I can't see any day when an ILC is going to be more popular for females/family memory keepers than it is for males, hobbyists and early adopters.”

Wrong Place, Wrong Time?

In terms of sales, notes Eriksen, the Micro Four Thirds (also called compact system cameras, or CSCs) are a tiny proportion of the interchangeable lens market in the U.S. “We think less than 5 percent of the ILCs sold in 2010 will fall into the CSC category.” The firm's May 2010 study showed 1.6 percent of people that owned an ILC said it was a CSC. Later that year, in November, that number increased to 2.2 percent (within margin of error). Although Sony's brand strength helps lift the category a bit, she notes, Canon or Nikon need to enter this market before there is serious movement. “The longer it takes for them to enter the market, the longer it will take for that market to take off.”

According to Nikon, the company is closely monitoring the impact of CSCs here, as well as other parts of the world, in order to best meet the needs of consumers worldwide (but isn't saying “nay” or “yay” at this point).

Canon's statement regarding the CSC market went along similar lines, telling us, “While we do not comment on anything not yet announced, Canon is examining the market carefully and paying close attention to consumer demand and trends.”

Another factor contributing to stagnant CSC sales is low consumer awareness. “It's not just consumers,” adds Eriksen. “I think the channel is also struggling to understand where these cameras actually fit as they haven't been clearly positioned and initially the prices were too high. [Consumers] could get an entry-level DSLR for less than a CSC. And, in the channel's market and the consumer's mind, the CSC is inferior to the DSLR.”

Another issue, says Eriksen, is those interested in CSCs tend to be early adopters interested in technology. Yet manufacturers want to target their cameras to females and people looking for smaller cameras for convenience.

Finding its Niche

Olympus, on the other hand, says it sees momentum in the compact, interchangeable lens camera category, not only in North America, but worldwide. “Of course,” states Sally Smith Clemens Product Manager, Olympus Imaging America Inc., “as with most technology, sales of the compact interchangeable lens-type products have taken off in Asia much more quickly, with about 40 percent of the market share. We're not nearly to that level in terms of unit sales here in North America.” Smith Clemens notes sales are in the high single digits. “But that's a good indication that it's starting to turn here in terms of people understanding these products really are similar to—or the same as—a DSLR in terms of functionality and quality.”

According to Smith Clemens, the company's recently launched E-PL2 and its flagship model, currently the E-P2, are targeted more toward the enthusiast—the individual who probably has more experience in either photography or working with an ILC, or simply in technology in terms of the skills required to work with files and imaging.

“The market often dictates how products are positioned once people start adopting them,” adds Smith Clemens. “When we first launched the PEN line in 2009, individuals that purchased that product first—as a second camera to an existing DSLR—were high-end users [photographers] and high-level enthusiasts of technology.”

According to Darin Pepple, Sr. Product Marketing Manager, LUMIX G Series Compact System Cameras, though sales of traditional DSLR cameras are good, Panasonic is no longer manufacturing them; its primary focus in the DSLR market is the CSC. “The target customer lies within the more than 20 million potential customers looking to have a DSLR-quality experience but find the bulk and complexity of a DSLR a barrier to stepping up from their point-and-shoot camera.” Pepple says the LUMIX Micro Four Thirds models fill that void and offer retailers replacement sales growth opportunities that many seem to have lost in the low-growth point-and-shoot sector.

Pepple also believes that growth for these cameras is slower in the U.S. than Europe and Japan in large part because of education. “In Europe,” states Pepple, “regional marketing and sales efforts are more tightly focused, and they're smaller regions.” Here, he notes, it can be difficult to get many of the big-box dealers to focus energy on the product, but they're improving because they recognize this is where the growth is and they better understand how to sell the cameras.

A Cautious Approach

Pentax has received a lot of queries about the micro four thirds category, but has yet to join in. “Pentax has always been a very cautious, conservative company,” states John Carlson, Pentax Imaging Company's Senior Manager of Sales and Marketing. “But right now we're just looking at the market. In Japan, it's a very successful category, but that same success hasn't translated quite as well in the U.S. and Europe.”

Carlson believes point-and-shoots are on the wane because people know its limitations. “They know they're only going to get a certain quality of image from those cameras. Technically speaking, they don't really know why they're not getting a great picture, they just know they've seen better pictures and they've seen them made with DSLR cameras.”

Then there's the cool technology, he notes, that makes it easier to take a picture such as auto modes, image stabilization, creative effects and video capture, which all help contribute to that growth. Pentax is targeting the entry-level market with its Kx and Kr models for consumers stepping up from point-and-shoots that like the compact size and ease-of-use. The bright colors are meant to attract both females and a younger demographic that want a DSLR, but not necessarily one that looks like everyone else's.

“I think we'll probably continue on that trend because that's where the big chunk of users are. People buying the Kr now, in three, four or five years are more than likely going to move up to a higher-end camera,” predicts Carlson. “So if we concentrate on those areas, I think that's going to be successful for us.”

Meanwhile, Nikon's entire line of DSLR cameras continues to sell well in the market. Bo Kajiwara, Director of Marketing, Nikon Inc., says Nikon offers a DSLR product for everyone from an entry level D3000 for the amateur photographer to the high-end professional D3x. On the consumer side, the Nikon D3100 and the Nikon D7000, both introduced in the past year, have become very popular. “These cameras,” explains Kajiwara, “along with the new Nikon D5100 were each designed to meet the varying needs of consumers, at a variety of price points. Whether a consumer is looking for a compact body with easy-to-use features and controls or a high-performance enthusiast DSLR, these cameras compliment the type of photography and expression users are pursuing.”

Retailers Weigh In

Because the economy is still struggling, notes Olympus' Smith Clemens, retailers have to be mindful in terms of the inventory they stock. “It helps when there is a lot of interest out in the communities for the product,” she states. Interest or not, some retailers have given up altogether thanks to low profit margins. Pat Tracz of The Photography Center in Malvern, Pa., stopped selling digital cameras about two years ago. “The product changed too quickly and with the low mark-up, I ended up losing money most of the time. When comparing prices online and with the big box stores,” states Tracz, “I was paying the same as what they were selling them for.”

According to Anne Cahill, Professional Markets Director at Adorama, sales are better than last year and better than expected—especially among the DSLRs and Micro Four Thirds formats. “The smaller sensor formats will more than likely continue to grow in popularity because consumers are looking for great image quality, but in a smaller package. Convenience [easy-to-use/carry] and price point are also important in the decision-making process,” states Cahill, who says it's exciting to see more compact camera options with “pro” features (buttons/dials on the outside of the camera, compatibility with hot-shoe flashes, high ISO capability, HD movie-making, and lens options).

“Many pros are looking for DSLRs with video capability because the market place is dictating the need for a product to be delivered in both still and video format—an expansion of story-telling in many cases. For many though, finding the time to do proper research about a new medium (and time to figure out how to use it) can be a little overwhelming,” states Cahill. In response, Adorama has a new section, Adorama Pro Imaging, that is dedicated to professionals and helping them find the right solutions.

Nikon's Kajiwara also sees an increased interest in video. “Video is an important feature to consumers who are looking for devices that incorporate multiple technologies for convenience and capability; people want devices that do more. In fact, video has become an important factor within the consumer's purchasing process.”

Cautious Optimism

According to Kajiwara, Nikon has seen a significant trend of consumers adopting a new love for photography, either as an enthusiastic hobby or as a novice who is interested in expressing themselves creatively and appreciates image quality when recording memories.

“Every day, more people are graduating from the point-and-shoot to a DSLR or stepping up to more advanced DSLR models because they understand the improved image quality as well as the opportunity to discover more with interchangeable lenses and other accessories.”

As the DSLR market continues to grow each year, Kajiwara expects that pattern to remain for the foreseeable future as consumers continue to realize the benefits of DSLR photography.

Optimism for future growth in the category is a major part of Canon's vision moving forward as well.

“The DSLR market has seen record-breaking years as of late, and we believe the market will continue to flourish as users continue to grow with their photography acquiring more advanced cameras and accessories. The saturation and familiarity with digital photography has brought about a population of hobbyists looking to take their passion for great images to the next level. The use of DSLR cameras is the inevitable next step with great image quality and a range of creative lenses and accessories,” Canon's statement concluded.

About That Confusion

Finally, we must ask‚ is there a need—and room—in the marketplace for so many formats? Adorama's Cahill believes so.

“The need for different sensor formats still exists because the consumer has different needs. Some consumers prefer compact, lightweight camera bodies [especially for travel], and enjoy the crop factor of a smaller sensor. But many professionals still prefer a full frame, high-resolution sensor because they don't want a crop factor (ultra wide-angle lenses are often a necessity) and choose to shoot in RAW, and ultimately deliver the largest file size possible. Some of the mid-range cameras though, are so feature rich and affordable, it's not uncommon to see a pro reach for a camera in that category,” concludes Cahill. “It just depends what's on that 'must-have' list for features when they're shopping.”

New Image Sensor Hailed

According to a recent CNET report, a new type of image sensor that's been flipped front to back is said to use pixels more effectively, yielding more detailed images.

According to the report, the new sensors use a technology called backside illumination, and chipmakers, including Sony and Samsung, are out front to build them into a variety of cameras. And though it's a premium feature today, it's spreading rapidly across the market.

“It's more aggressive than we expected even two years ago,” Yole Developpment analyst Jerome Baron said in a talk at the Image Sensor Europe conference in London last month.

As many in the imaging industry already know, image sensors are special-purpose, light-sensitive chips packed with complicated technology. But backside illumination, or BSI, is actually easy to understand once it's explained: the sensor is essentially flipped around so the light it's detecting isn't partially blocked by the electronics. What used to be the back of the sensor is now facing outward toward the light.

The advantage, illustrated among other places in the iPhone 4 camera, is better light sensitivity. That opens up new options for camera makers, one of which is to offer more pixels without degrading how well each pixel works, yielding more detailed photographs. Another option is better image quality with the same number of pixels, something that's useful when taking photos or videos in dim indoor light. Stay tuned on this one – we'll update as more information becomes available.

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