How To Buy A Digital Camera

Digital cameras have found their groove. After several years of fits and starts, digital camera technology has finally hit the sweet spot of price and quality necessary for it to really take off. The bad news is that the intense pricing pressure already has begun siphoning profits from this emerging category.

One consumer electronics industry insider confided to DSN Retailing Today that manufacturers are beginning to complain about digital camcorders and cameras selling below cost. Not the outdated models, but new ones packed with the latest features, proving once again the industry's propensity to commoditize itself right out of the profitable early adopter arena and into the low-margin mass market.

Companies at the Photo Marketing Association's annual convention last month showcased new digital cameras for 2002 that go up to four mega-pixels and will sell for $400 or less.

Digital cameras are now sporting additional features that make it easier to get images out of the camera and into a computer or onto photo-quality paper. Kodak's new Easy Share even offers onetouch transferring and, at $399, goes directly to a mass-market audience.

Even Canon is getting more aggressive in its quest to capture market share, with four digital models positioned to "strengthen Canon's presence with entry-level digital cameras," explained Chuck Westfall, assistant director of the technical information department. To this end, Canon is launching four new full-featured, high-resolution digital models for less than $299. The A100 Power Shot will debut for approximately $200, the first time Canon has offered a unit in this price range.

With such an array of product clearly targeted to the mass market, it should come as no surprise that retailers are responding en masse. Wal-Mart has been selling low-resolution digital cameras since the early days of digital imaging. Target was slower to get into the game, but once it did, the retailer went after this market full throttle--not only stocking a full selection of digital cameras and camcorders, but expanding accessories, components and related home office and printing devices, as well.

A visit to one of Target's newest stores, opened earlier this month, revealed even more extensive participation in this category. The CE department has expanded well beyond the corner it once occupied and now extends to nearly the center of the store, with some related home office equipment and supplies running parallel across the aisle.

Printers and ink cartridges may seem unrelated to digital imaging, but at the moment they are ringing up high-margin profits and providing consumers with one of the only viable options for making prints from digital images. Savvy retailers are recognizing this and are more aggressively pursuing the digital accessory market. Because for all the talk of getting consumers to make prints from digital images at traditional photofinishing destinations, the majority are staying home and attempting the process themselves.

"While digital camera owners are printing photos, they are primarily doing so at home," according to a new study from Fujifilm. "They print at home because it is the most convenient printing location."

Fuji's "Digital Camera Retail Printing Study," which was released last month in conjunction with InfoTrends, surveyed both current digital camera owners and those intending to purchase one in the next 12 months.

Approximately 85% of camera users print photos captured with digital cameras, and 94% print most often at home. A staggering 97% of digital camera users own a color printer, according to the study, making this a profitable group to target with accessory sales.

But the real money will be made when the industry can figure out how to make digital print services interchangeable with traditional photofinishing procedures in the minds of consumers. And all signs point to a confluence of events, making now the right time to really address all the issues surrounding the problem.

First, as prices go down and quality goes up, digital imaging will go mainstream, essentially giving massmarket consumers a product capable of producing high-quality prints. These are the very consumers least likely to have the knowledge, experience or familiarity with software and other technology needed to print from home.

Second, the time to establish a retail location as the source for printed images is before digital camera owners invest in the equipment and become accustomed to printing at home. In other words, that time is now. "Before these future digital camera owners follow the trend of printing photos at home, retailers need to educate these consumers," said the report. "Retailers can let these future digital camera owners know that they provide high-quality, no-fuss photofinishing services."

But retailers need support in this area, and consumer education has been a missing component. Last fall, Fuji rolled out its retail education program and this study is apparently designed to support the need for it. This year, Kodak finally will begin to incorporate digital printing services with its advertising message. With the two largest players in the film and photofinishing market stepping up promotional activity, retailers can hope to see some positive results.

Finally, retailers need to provide consumers with easy to use, easy-to-understand means to print digital images. Given the array of options on display at PMA, it seems a solution will soon exist for just about every retail scenario and need.

"Everyone's trying to address the kiosk and printing issues," said Monica McKane, account manager for NPDTechworld. "They're trying to get printing back into the retailer, so the retailer can make some money." Digital minilabs were certainly being touted, but the real focus is on the kiosk.

"This is the PMA of the kiosk; we're coming, everyone's coming," said Chris Sluka, an Olympus spokesman. "The increased number of players in the market is good for the whole industry to raise consumer awareness." Even nontraditional photofinishers such as Olympus are offering kiosk solutions, in this case a Gretag-manufactured unit that bears the Olympus name.

Most units could be configured to each retailers' needs. Many could be networked into a system to transfer images to a minilab or Internet account; several could print directly from the floor unit; and some were flexible enough to be used with equipment from competing manufacturers, lowering retailers' initial investment by bypassing the usual requirement of owning a closed system or upgrading all new equipment at once.

Kiosks seem to appeal to consumers, as well. According to the Fuji study, 67% of respondents said they would prefer to operate a self-service kiosk to make prints; 79% said this would be preferable in order to have more control over final results; 77% wanted the ability to get prints immediately; and an equal 77% said the convenience of 24-hour processing is appealing.

Herein lies an opportunity. By establishing early on digital print services nearly identical to those of traditional film processing, retailers and manufacturers can avoid the need to operate within conflicting parameters. As consumers become more familiar with digital imaging, they also become aware of its ability to provide instant gratification. Push a button, and see an image.

The idea that a printed version should be available with just one click isn't far behind. The consumer research indicates the majority would be comfortable with a system that closely mimics the overnight and one-hour processing available today, but the longer it takes to offer that very experience, the more likely consumers will come to have higher expectations--expectations that could prove to be more complicated and costly to retailers than if they had acted faster.

In the Fuji study, 92% of respondents who plan to buy a digital camera within the next 12 months said they plan to print their photos. When asked what retailers should offer in order to be the preferred place to make prints, 72% said retailers should make it as easy to get prints from digital cameras as it is from film cameras, and 69% said digital prints should cost the same as film prints.

To not do so is to risk losing this business completely, even as more consumers switch over to digital cameras. In fact, 19% of digital camera users in this study said they have replaced their film use completely and 43% have experienced a decrease in the amount of film they use. But perhaps the most chilling bit of information to be taken away from the study is this: 24% of digital camera users believe 100% of their photos will be taken digitally someday. The median time frame cited is two years.

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