Camera price 'collapse' alert - 'a grim situation'

Started Sep 16, 2008 | Discussions
tweedle Veteran Member • Posts: 4,480
Camera price 'collapse' alert - 'a grim situation'

Japanese equity researchers at NikkoCiti, Tokyo, just issued an 8-pages Industry Focus report on precision equipment. The report has a thing or two to say about the digicam industry as well, such as:

  • Price crash to be expected at year's end (holiday season)

  • Grim looking perspectives for anyone but the big guys (first tier vendors)

This is only a few snips for your information and possible discussion. Please note that the views quoted are from an independent industry analyst, and your personal view might differ.

Digicam vendors appear likely to enter the year-end shopping season
holding excess inventories.

... in addition to digicam demand having started to slow even in
Europe and Asia as well as in the US, we understand the brakes have
newly been put on laser printer shipments to the US and Europe.

The possibility has emerged that digicam vendors could end up reaching
the year-end selling season while still holding excess inventories of
spring and summer models. As a result, we sense there is a risk that
prices could collapse more than envisions.

First-tier makers with considerable brand power and name recognition
have room to gain more market shares in developing countries, where
they have been behind Korean and Taiwanese competitors, and their
SLR shipments remain strong.

However, we think second-tier vendors—for which neither of the above
benefits hold true—are likely to fall into a grim situation.

A few snips about the basic economics:

... yen strengthening both against dollar and euro is accelerating, and
that the economic slowdown—which started in the US—is widening
and increasing the possibility that final demand may remain weak even
in 2009. These negatives are likely to have a notable impact on imaging
earnings

... further yen strength—even greater than our assumptions for October–
December and beyond (¥100/$ and ¥160/€), which is more conservative
than the companies’—is inevitable. This is likely to be especially bad for
imaging stocks, where weak yen benefits have been offsetting sluggish
US business and rising materials costs

(For the full report, you will have to subscribe)

Photato
Photato Senior Member • Posts: 2,530
Interesting....

It looks like is going to be a buyers market.
Time to buy for those still keeping their jobs !!

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Thom Hogan Forum Pro • Posts: 13,659
Re: Camera price 'collapse' alert - 'a grim situation'

tweedle wrote:

Digicam vendors appear likely to enter the year-end shopping season
holding excess inventories.

We already saw that first in Japan, now it has spread to other Asian markets and the US. Not sure about Europe.

... in addition to digicam demand having started to slow even in
Europe and Asia as well as in the US,

The dollar is shifting again, now tending to gain against the yen and Euro. This has got to be shifting optimal regional sales levels. At one point, Europe was where you wanted to sell the most. Not sure where it is today--it might have shifted back to the US. The question is this: where did you put your inventory?

The possibility has emerged that digicam vendors could end up reaching
the year-end selling season while still holding excess inventories of
spring and summer models.

"spring and summer models." Gee, we're now in the fashion industry. And you suffer the same problems when you are. Get ready for Canon Outlet Stores.

First-tier makers with considerable brand power and name recognition
have room to gain more market shares in developing countries, where
they have been behind Korean and Taiwanese competitors, and their
SLR shipments remain strong.

A very accurate statement (if you read "developing" broadly; e.g., "not EC8"). Note that Nikon has been introducing new subsidiaries and pushing aside distributors (Australia, India, and Russian are the three big announcements there). There's another aspect of this: you can push older, less expensive equipment into these markets. Thus, if you overbuilt, say, Nikon D40's for Japan/US/Europe demand, you push that inventory into the remaining parts of the world.

However, we think second-tier vendors—for which neither of the above
benefits hold true—are likely to fall into a grim situation.

Yep. Especially true if you use distribution instead of subsidiaries, as what happens is that a distributor with excess inventory doesn't order new products (they can't--until they get their money back from the inventory investment, they don't have new money to invest in new inventory).

... further yen strength—even greater than our assumptions for October–
December and beyond (¥100/$ and ¥160/€), which is more conservative
than the companies’—is inevitable.

I'm not fully seeing this, though I tend to concur that the dollar will continue to be weak against the yen. You may remember that I was predicting that we'd be down to 96 yen to the dollar at this point. But there appear to be some interesting side factors that keeping the yen/dollar rate in a narrower range than anyone seemed to be predicting. Oil pricing is one such factor, as it is done in dollars.

-- hide signature --

Thom Hogan
author, Complete Guides to Nikon bodies (18 and counting)
http://www.bythom.com

philbarton Senior Member • Posts: 1,618
Re: Camera price 'collapse' alert - 'a grim situation'

tweedle wrote:

Digicam vendors appear likely to enter the year-end shopping season
holding excess inventories.

... in addition to digicam demand having started to slow even in
Europe and Asia as well as in the US, we understand the brakes have
newly been put on laser printer shipments to the US and Europe.

The possibility has emerged that digicam vendors could end up reaching
the year-end selling season while still holding excess inventories of
spring and summer models. As a result, we sense there is a risk that
prices could collapse more than envisions.

First-tier makers with considerable brand power and name recognition
have room to gain more market shares in developing countries, where
they have been behind Korean and Taiwanese competitors, and their
SLR shipments remain strong.

However, we think second-tier vendors—for which neither of the above
benefits hold true—are likely to fall into a grim situation.

===========

Look at the announcements today via Google News re HP, Dell and Best Buy. Hoya already has excess inventory, and on Amazon the K20D (now placed as #25) finally hit the $1000 price mark. Check the discounts on the lenses.

As Samsung itself noted, competing in DSLR's with (C) and (N) and (S) may be mission impossible, particularly in terms of attracting non-legacy buyers with diminished publicity and retail channels.

philbarton Senior Member • Posts: 1,618
Re: Camera price 'collapse' - some important points here

Thom Hogan wrote:

The dollar is shifting again, now tending to gain against the yen and
Euro. This has got to be shifting optimal regional sales levels. At
one point, Europe was where you wanted to sell the most. Not sure
where it is today--it might have shifted back to the US. The question
is this: where did you put your inventory?

(With the problems amongst U.S. financials, and Europe's needs to adjust interest rates, and Labour's growing U.K. problems, trying to forecast exchange rates is very difficult - adding complexity in terms of forecasting of camera sales for the lower-tier makers, who don't have the flexibility of (N) and (C), and the marketing power of (S). Samsung could compete here, but not via the PK mount APS-C's.)

================

First-tier makers with considerable brand power and name recognition
have room to gain more market shares in developing countries, where
they have been behind Korean and Taiwanese competitors, and their
SLR shipments remain strong.

A very accurate statement (if you read "developing" broadly; e.g.,
"not EC8"). Note that Nikon has been introducing new subsidiaries and
pushing aside distributors (Australia, India, and Russian are the
three big announcements there). There's another aspect of this: you
can push older, less expensive equipment into these markets. Thus, if
you overbuilt, say, Nikon D40's for Japan/US/Europe demand, you push
that inventory into the remaining parts of the world.

(Nikon attained lower costs thanks to larger production runs, and if you go into an office supply chain store, you can find low-end (C) and/or (N) as impulse buys alongside the P&S's. Pentax, for example, does not have the volume for those outlets, and never will. Competing as a commodity producer requires financing and production capability, and the ability to pop out new models as the market shifts. Canon did the XSI and 1000D, seeing the activity in the sub-$1000 tier, Nikon seems to have hit some sweet spots by moving up-market. Where's the Pentax opportunity, without the ad budget and the distribution channels?)

OP tweedle Veteran Member • Posts: 4,480
Re: Camera price 'collapse' alert - 'a grim situation'

Thom Hogan wrote:

Tweedle wrote:

The possibility has emerged that digicam vendors could end up reaching
the year-end selling season while still holding excess inventories of
spring and summer models.

"spring and summer models." Gee, we're now in the fashion industry.
And you suffer the same problems when you are. Get ready for Canon
Outlet Stores.

Good observation. Only the leanest and meanest organisations will be able to handle logistics of this kind.

First-tier makers with considerable brand power and name recognition
have room to gain more market shares in developing countries, where
they have been behind Korean and Taiwanese competitors, and their
SLR shipments remain strong.

However, we think second-tier vendors—for which neither of the above
benefits hold true—are likely to fall into a grim situation.

Yep. Especially true if you use distribution instead of subsidiaries,
as what happens is that a distributor with excess inventory doesn't
order new products (they can't--until they get their money back from
the inventory investment, they don't have new money to invest in new
inventory).

Good point. And again, when the going gets tough, only the ones with the tough logistics get it going...

OP tweedle Veteran Member • Posts: 4,480
Re: Camera price 'collapse' - some important points here

philbarton wrote:

Canon did the XSI and 1000D, seeing the activity in the
sub-$1000 tier, Nikon seems to have hit some sweet spots by moving
up-market. Where's the Pentax opportunity, without the ad budget and
the distribution channels?)

A K1D model (upper-end enthusiast level) and a K1000D model (lower-end entry level) seem to be in the pipeline.

But ... will Hoya command the sales and marketing logistics to get the Pentax bodies across the counter to the consumers in siginificant volumes, I wonder?

philbarton Senior Member • Posts: 1,618
Re: Camera price 'collapse' alert - 'a grim situation'

Thom Hogan wrote:

However, we think second-tier vendors—for which neither of the above
benefits hold true—are likely to fall into a grim situation.

Yep. Especially true if you use distribution instead of subsidiaries,
as what happens is that a distributor with excess inventory doesn't
order new products (they can't--until they get their money back from
the inventory investment, they don't have new money to invest in new
inventory).

(I don't see anyone needing to resort to channel-stuffing, which Bausch and Lomb got clobbered for some years ago - and there are anti-dumping rules and other barriers. No one wants to hold inventory at this point beyond what's moved in the past month, plus some display samples. The majors can move existing inventory around and discount once-popular old models as spare bodies; but Pentax lacks the options. As it is, dealers wonder why they need a minor brand relative to today's markets; and both (N) and (C), as well as (S), have some nice megazooms and other compacts to flesh out the displays)

======================

... further yen strength—even greater than our assumptions for October–
December and beyond (¥100/$ and ¥160/€), which is more conservative
than the companies’—is inevitable.

I'm not fully seeing this, though I tend to concur that the dollar
will continue to be weak against the yen. You may remember that I was
predicting that we'd be down to 96 yen to the dollar at this point.
But there appear to be some interesting side factors that keeping the
yen/dollar rate in a narrower range than anyone seemed to be
predicting. Oil pricing is one such factor, as it is done in dollars.

(With the current set of upsets, including FNMA, Merrill, AIG, Lehman, et al - no one knows the value of the underlying assets. Office space overseas is going begging, and more buildings are due for completion. There's plenty of inventory in cameras out there as well, and the minor bump from tax rebates is over. Japan seems to be going into a recession, and the P.M.'s resignation after a year adds to the confusion. The price of oil is tied to the dollar, and of course to worldwide demand, which has slackened. This is hurting the Russian economy right now, which is based on oil revenues. The Saudis have diversified, while the Nigerian rebels are busy trying to blow up pipelines. The Georgia mess has harmed their potential investment opportunities, and Ukraine seems to be flying apart.

Trying to figure out exchange rates is something I'll leave to the traders; but a higher yen makes Japanese cameras more expensive)

=========

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Thom Hogan
author, Complete Guides to Nikon bodies (18 and counting)
http://www.bythom.com

philbarton Senior Member • Posts: 1,618
Re: Camera price 'collapse' - some important points here

tweedle wrote:

philbarton wrote:

Canon did the XSI and 1000D, seeing the activity in the
sub-$1000 tier, Nikon seems to have hit some sweet spots by moving
up-market. Where's the Pentax opportunity, without the ad budget and
the distribution channels?)

A K1D model (upper-end enthusiast level) and a K1000D model
(lower-end entry level) seem to be in the pipeline.

But ... will Hoya command the sales and marketing logistics to get
the Pentax bodies across the counter to the consumers in siginificant
volumes, I wonder?

-- hide signature --

I assume whatever's coming now was in the lab when Hoya closed the deal. Getting Hoya to spend on NEW stuff, aside from lenses, is another question entirely. They already passed on that option, and expected Pentax cameras to fund themselves. They've helped by cutting costs, but at some point you run out of options; aside from letting others do the manufacturing, and becoming another Vivitar, providing engineering expertise.

Pentax already knows that they cannot deliver in volume, or stock the old channels. The ad budget is minimal. What they have is word of mouth and legacy owners, and hopes for nice reviews in Consumers' Reports, etc.

Delivering in volume will be Panasonic's problem with the new G1, as they've raised the roof on expectations.

Rriley
Rriley Forum Pro • Posts: 21,846
Re: Camera price 'collapse' - some important points here

philbarton wrote:

Delivering in volume will be Panasonic's problem with the new G1, as
they've raised the roof on expectations.

they are batch producers and wouldnt have got the G1 on the line yet. The models in existence would likely have been a test batch or hand built. Since they are quite simple builds i wouldnt expect more than a few months time reserve. Panasonic have a fascinating capability in industrial muscle, their only issue is timetabling the slots v/s other products.

They also offer a lot in hub and regional/forward warehousing necessary to streamline the channel. Panasonic turn out a lot of gear all around the world, they should have a lot of spare capacity in a slowing economy.

But if the US crashes, and it just might, all this wont matter a hill of beans for any of them.

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Riley

in my home, the smoke alarm is the dinner bell (only if you cook RAW food)

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Thom Hogan Forum Pro • Posts: 13,659
Re: Camera price 'collapse' alert - 'a grim situation'

philbarton wrote:

(I don't see anyone needing to resort to channel-stuffing,

Not the type normally associated with the major abuses, as in the quarter-ending-bump-the-numbers-at-any-cost kind.

However, we've seen two less severe kinds of channel push here in the US. First, there's the classic "take three of these to get one of those" move. Basically you tie your slow inventory items to the fast moving ones. To avoid legal issues, this is usually a "voluntary" program ; ). The second method is a relative of what we just saw with the D80: dealer re-pricing guarantees. Essentially the maker continues to push down inventory they know to be out-of-date and probably unsaleable at the current price, then rejiggers the price when the replacement product comes, which keeps the dealer from complaining that they've been had. The goal is to get the inventory on the shelves before the replacement hits in the hopes that some will move and the rest will move with the right lower price.

The Big Box stores are now wise to the latter trick. You'll notice that they have a "tendency" to run out of old product inventory long before the new models hit the shelves.

-- hide signature --

Thom Hogan
author, Complete Guides to Nikon bodies (18 and counting)
http://www.bythom.com

OP tweedle Veteran Member • Posts: 4,480
Re: Camera price 'collapse' alert - 'a grim situation'

Thom Hogan wrote:

The Big Box stores are now wise to the latter trick. You'll notice
that they have a "tendency" to run out of old product inventory long
before the new models hit the shelves.

That explains a lot of the debate in these forums about big box store X discontinuing camera model Y after only 9-12 months.

Such practice puts a lot of pressure on the manufacturers to make the stuff moving in only a very few months.

Another reason why the bigger corporations with much stronger and flexible sales and marketing logistics/muscles have a leading edge.

Thanks for the perspective!

philbarton Senior Member • Posts: 1,618
Re: Camera price 'collapse' - G1 pricing and date in Japan

Rriley wrote:

philbarton wrote:

Delivering in volume will be Panasonic's problem with the new G1, as
they've raised the roof on expectations.

they are batch producers and wouldnt have got the G1 on the line yet.
The models in existence would likely have been a test batch or hand
built. Since they are quite simple builds i wouldnt expect more than
a few months time reserve. Panasonic have a fascinating capability in
industrial muscle, their only issue is timetabling the slots v/s
other products.

They also offer a lot in hub and regional/forward warehousing
necessary to streamline the channel. Panasonic turn out a lot of gear
all around the world, they should have a lot of spare capacity in a
slowing economy.

But if the US crashes, and it just might, all this wont matter a hill
of beans for any of them.

============

What everyone had to play around with were prototypes, and the lenses would need to be ready to sell with the camera - the adapter could wait, actually, because dealers want those new lenses to sell with the camera. They want these to get to dealers while they're "hot", and people think that they're priced like a big megazoom.

Here's some added info:

http://www.engadget.com/2008/09/12/panasonics-lumix-g1-worlds-first-micro-four-thirds-camera/

Update: In Japan, the G1 will go on sale on October 31st. The body alone is expected to cost ¥80,000 (about $750 tax inclusive) on up to ¥120,000 (about $1,200 tax inclusive) with bundled LUMIX G Vario 45-200mm F4-5.6 MEGA OIS lens.

This will NOT be a cheap system. The "body alone" option is like the "stripper" at the car dealer.

philbarton Senior Member • Posts: 1,618
Re: Camera price 'collapse' alert - 'a grim situation'

Thom Hogan wrote:

philbarton wrote:

(I don't see anyone needing to resort to channel-stuffing,

Not the type normally associated with the major abuses, as in the
quarter-ending-bump-the-numbers-at-any-cost kind.

However, we've seen two less severe kinds of channel push here in the
US. First, there's the classic "take three of these to get one of
those" move. Basically you tie your slow inventory items to the fast
moving ones. To avoid legal issues, this is usually a "voluntary"
program ; ). The second method is a relative of what we just saw with
the D80: dealer re-pricing guarantees. Essentially the maker
continues to push down inventory they know to be out-of-date and
probably unsaleable at the current price, then rejiggers the price
when the replacement product comes, which keeps the dealer from
complaining that they've been had. The goal is to get the inventory
on the shelves before the replacement hits in the hopes that some
will move and the rest will move with the right lower price.

The Big Box stores are now wise to the latter trick. You'll notice
that they have a "tendency" to run out of old product inventory long
before the new models hit the shelves.

========

Some good marketing info for those who don't understand how the game is played. If you have no new model to displace what's there, and "what's there" is selling, the dealers can take spiffs, quantity discounts, price guarantees and the rest - because they can sell the lenses to current owners.

Panasonic, in terms of branded DSLR's, does not have a lot to displace. The plan here IMO would be to GAIN net shelf space due to the word of mouth (which is perfectly legit - "brand extensions" are used for the same purpose by Tide).

When the second model of this new form factor arrives, they'll have to find a way to move the "NOT cheap" first model - and I'm not expecting a cheaper model to magically appear, either, like Canon does.

I think that, for someone who would also consider a DSLR, and does not need all the software tricks, Panasonic will have a "sticker shock" problem. Watch the pricing, after the hullaballoo dies down. D300, for example, has been solid as a rock in terms of its price, and has finally dipped just a bit. On the other hand, the FZ-18, which was around $300, is not back up to $350 - why, I don't know. Perhaps those looking at the FZ-28 are not impressed, and are asking for the FZ-18.

It's one thing to top someone else's act; and another to top your own.

philbarton Senior Member • Posts: 1,618
Re: Camera price 'collapse' alert - 'a grim situation'

tweedle wrote:

Thom Hogan wrote:

The Big Box stores are now wise to the latter trick. You'll notice
that they have a "tendency" to run out of old product inventory long
before the new models hit the shelves.

That explains a lot of the debate in these forums about big box store
X discontinuing camera model Y after only 9-12 months.

Such practice puts a lot of pressure on the manufacturers to make the
stuff moving in only a very few months.

Another reason why the bigger corporations with much stronger and
flexible sales and marketing logistics/muscles have a leading edge.

Thanks for the perspective!

=========

Big-box stores are zealous about "turns", and will not put up with "dead" shelf space. If it does not sell, they don't want it. That's one reason that it's now hard to find film; plus the freshness date issue.

WalMart is really vicious about this - if you want shelf space, it had better sell.

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